Baltimore tea-making startup raises $1 million to take on U.S. beverage market

Published 12/11/18 on Baltimore Business Journal

 

A Pigtown-based startup that markets high-caffeine, energizing tea blends has raised $1 million in new funding.

Zest Tea’s new round was co-led by the Lord Baltimore Capital Group and the University System of Maryland’s (USM) Maryland Momentum Fund, which each contributed $300,000. It is the fourth local startup to receive an investment through the Momentum Fund, which was launched in 2016 to enable the university system to invest in and support promising commercial opportunities coming from research and intellectual property at USM campuses.

MF Fire, a Baltimore wood stove manufacturer, received the first investmentfrom the fund in November 2017. This year, USM has also invested in local medical device company NextStep Robotics and aerospace tech firm North American Wave Engine Corp.

Zest Tea was co-founded by University of Maryland, College Park alumnus, James Fayal. His company creates teas that have as much caffeine as a cup of coffee, but minimize jittery effects and the “crash” that can often experienced with consuming caffeine. The company has secured more than 2,000 shelf placements for its products to date, at grocery retailers like Walmart and Safeway.

This year, Zest Tea also launched a new line of canned, ready-to-drink flavored teas, which it hopes to distribute through convenience stores like 7-Eleven. The company will use the new funds to grow distribution in the mid-Atlantic and New York metropolitan markets.

“One of the biggest hurdles for new beverage companies is building a strong ground game to demo and merchandise the product on shelves in order to increase sell through,” Fayal said in a statement. “This round…gives us the ammunition we need to compete against the well-capitalized incumbents in the tea and energy drink markets.”

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Fayal has said the company hopes to do more than $5.8 million in sales next year. The startup is working to gain traction in the U.S. wholesale tea market. Market research firm Statista noted sales in that market totaled about $1.84 billion in 1990, and has grown to about $12.5 billion as of 2017.

“The product is beautifully branded, and the founder, James Fayal, is one of the most impressive startup CEOs that we have encountered,” David Wise, director of the Maryland Momentum Fund, said in a statement.