The Austin entrepreneurs behind Sway Water are back with an instant coffee company, and they're applying lessons learned from their last consumer packaged goods venture.
Sway Water LLC halted production in 2019 of its flavor-infused bottled water after facing difficulties in the CPG realm. But the folks at parent company Ka Foods LLC have launched a new product: Slow Ride instant coffee. Ka Foods is also acquiring Nashville-based Everly, a drink mix company, and moving that headquarters to Austin.
During the pandemic, Kate Herling, a Sway co-founder and now co-founder and CEO of Ka Foods, realized she had no time to make coffee while caring for a newborn. She also could not find reliable, high quality instant coffee at an affordable price. This inspired her to talk to Albert Swantner, another Sway and Ka Foods co-founder, about banding back together.
Herling had already started a drink mix company under the brand Tandem (although that name will be phased out as Ka Foods absorbs and elevates Everly). Swantner used his connections in Vietnam to find a suitable coffee farm to source and manufacture Slow Ride. Now they are spearheading a full launch.
Initial distribution to test the market occurred online last year. The company’s first batch had about 500,000 packets and has almost sold out. A full line up, double the size, will go out in April.
CPG economics
It became apparent to Herling and Swantner that they could achieve a higher profit margin with instant coffee than with flavored water.
When it came to water, they needed a much higher volume of supply to be able to sell at a low consumer price. Bigger brands with deeper pockets could offer discounts and ride on slim margins for a long time, but Sway could not, Swantner said.
The profit margin was more than 50% for the first batch of Slow Ride, according to Swantner. He expects profits to grow as the company orders larger quantities and ships out more coffee. After bringing Everly into the fold, Swantner predicted Ka Foods will be making a little less than $1 million annual revenue.
Besides Herling’s motherhood "aha" moment, instant coffee is an inherently friendly e-commerce product; it is light and easy to ship. With glass water bottles, the team ran into trouble with shipping and having bottles break. It made it very difficult to build an online presence as customers would be upset about getting broken glass.
Ka Foods started distributing Slow Ride online and found that was an easy way to connect with customers. The company can speak directly with the consumer and even ask about what new flavors they would like to taste. Being online also helped the team figure out customer demographics like location without the need to rely on the grocery store as a middle man. About half of Slow Ride sales are on Amazon, with the other half through its own website.
Eventually, the company hopes to get its products into retail stores to complement online sales.
Herling also noted that it took many tries to find the right production partners who are transparent. Ka Foods previously had a co-packer go out of business a day before Sway was supposed to do a production run.
This time around, Herling and Swantner are trying to pick partners that are viable and reliable. After the instant coffee is manufactured in Vietnam, a third-party logistics firm in Austin handles distribution.
The two are being careful with how they spend money — they have self-funded $250,000 into the business, including some contributions coming in through their partners.
alphabetical order
| Rank | Prior Rank | Company name |
|---|---|---|
1 | 1 | Austin Impact Accelerator |
2 | 2 | Austin Technology Incubator @ UT Austin |
3 | 3 | Capital Factory |
