A few weeks back I wrote about Cuyana an interesting social impact business model with a Quechua name. I recently came across another such company listening to a Good Life podcast. This one is called Runa which means “human being” in the native language of the Andes. It is a perfect name since Runa, is a Brooklyn, New York based agribusiness with a grounded human-centered approach to profitably and sustainably make a difference in the world. It does this by providing alternative livelihoods for indigenous Kichwa people in the Ecuadorian Amazon while at the same time providing the US market with a healthy new caffeinated beverage alternative called Guayusa. Runa has grown quickly from its small beginnings of importing the tree-leaf using personal luggage and doing homemade packaging and distribution to family and friends. Today it can now be found across the United States, most notably in the popular Whole Foods supermarket chain. In doing so its approach of bringing business ethic to social work has been praised by Richard Branson’s in his book Screw Business as Usual and its founders have even made their way onto Bloomberg TV. Read on to find out more.
WHAT IS THE BUSINESS ABOUT?
In its simplest form Runa is a beverage retail business that provides clean energy iced tea, boxed tea and loose leaf tea. However in reality it is much more complicated than that as it is a company that works all along the agribusiness value chain. To start with it works directly with local kichwa communities/ farmers in the Ecuadorian amazon to source its Guayusa which is harvested from trees that are grown under the shaded canopy of the rainforest. At the same time through its Runa Foundation – a separate legal entity, it reinvests in these communities to help provide its members with better livelihoods. The company then helps export the raw tea leaf products from Ecuador to the US. In the US it processes and packages the leafs into commercial products which are then distributed to retailers like Whole Foods, etc. They also do some e-commerce but mainly through Thirstmonger.com – a third-party vendor.
HOW DID IT START?
Runa was started in 2008 by two Brown University seniors who after having visited first hand some of the indigenous Ecuadorian amazon communities and seeing the tradeoff they are often forced to make between preserving their cultural heritage and local environment while also needed to earn cash and provide food for their families wanted to try to help. During those visits they discovered the communities drink a local tree-leaf tea variety called Guayasa. Something they had never heard of. They also discovered the taste was very good and it was filled with caffeine and theobromine – which in combination creates a balanced energy effect without any jitters, crash, or jolted buzz (such as with Taurine). Thus they thought their might be an opportunity to help the communities by bringing this tree-leaf to market. So instead of pursuing typical post Ivy league work opportunities like consulting and Fulbright scholarships the pair wrote a business plan for Runa. The plan wound up winning both the Brown University and Rhode Island business plan competitions and the rest is history.
WHAT IS THE SOCIAL NEED IT ADDRESSES?
Runa Tea and Runa Foundation work to address various social needs. First and foremost it works to provide the local Kichwa communities with sustainable alternative livelihoods to be able to put more money in their pockets in a way that discourages them from destroying their local eco-system and cultural heritage as they do so. Thus far Runa has created new opportunities for more than 2000 farmers and their families. On top of that they also provide community development work and education for the communities they work with. Investing $20K per year in community programs. Further they encourage reforestation of the Amazon by planting to date more than 150K trees. Finally and maybe most importantly they bring awareness of these issues to the consumers who choose to drink their teas.
WHAT IS THE BUSINESS MODEL?
- The main value proposition for consumers is high quality, healthy source of energy to drink in hot or cold formats. Essentially another alternative to existing coffee and team options. At the same time like any Fair Trade type organization they are offering consumers the pleasure of knowing by drinking Runa they are helping local farmers in the Ecuadorian Amazon.
- The main customers are the affluent and health conscious consumers in the US market. It is a growing segment and they are using the right channel; Whole Foods to access those customers.
- It is a retail business, so revenue streams are made by the sale of their products
- Costs should include importing raw materials, packaging and distribution as well as marketing and promotion and other overhead (labor and offices, etc).
- The key partners for such a business are the growing communities and the retailers/retail platforms they use to distribute and sell product
WHAT ARE SOME CONCERNS I SEE WITH THE MODEL?
- Competition – First of all this is an incredibly competitive space, e.g. there are many small-scale beverage companies producing a variety of healthy alternative beverages & teas. The key distinguishing factor for Runa is the product itself. Guayasa is supposedly a different type of tea which has better natural energy benefits than coffee or traditional teas. This is a key message but hard to sell. So to the extent that Runa will be able to distinguish itself on quality and on benefits to consumer versus alternatives is the extent to which I think it will be successful.
- Profitability – While the company is growing quickly they still don’t have the scale to diffuse the rather large costs of importing, processing, distribution and marketing required to make the product and the brand successful. THus the only way to be profitable is to be able to sell the product at a high premium, which I am assuming they are doing. This is good but eventually as more competition enters they will need to figure out other ways to keep profitability up.
- Scale – Next I am worried about scale, how easy will it be to scale the business which relies on a specific tree leaf from a specific community. I think to grow the company would have to extend into other categories and health drink varieties or risk not being able to grow.
- Partner risks – The key partners for such a business are the communities themselves and their continued buy-in and belief that Runa is helping and not using them. At the same time they rely heavily on existing distribution channels such as Whole Foods to build awareness for the product. Until the brand name is well-recognized they will not be able to negotiate much with retailers
- Despite these concerns I am a big fan of the business, its founders passion, and their approach to taking on a social issue with business acumen. Next time I am at Whole Foods I am definitely going to give their tea a try, I encourage readers to do so as well.
WHAT DO YOU THINK?