New York, April 2 - Private-equity firm Catterton Partners recently signed an agreement to buy a stake in privately held ready-to-drink tea company Sweet Leaf Tea for $18 million.
Sweet Leaf Tea is still a very small beverage company, but the deal highlights the interest that non-carbonated soft drinks have drawn. Sales of ready-to-drink tea have risen even as sales of traditional sodas have been in a slump.
Private-equity firms have been looking harder at the tea business due to growing interest both by consumers and the large beverage companies.
Coca-Cola Co. (KO) Chief Operating Officer Muhtar Kent has said the company would like to grow its presence in the ready-to-drink tea market. In early February Coca-Cola agreed to buy a stake in bottled tea company Honest Tea.
Coke's deal with Honest Tea "demonstrates the desire for small growing companies in the ready-to-drink tea category," said Charles Collier, director of the private equity practice at The Hale Group, a strategy and research consulting firm dedicated to the consumer sector.
Sweet Leaf's founders will continue to hold a stake in the company as will Freestone Partners, a venture capital firm. Clayton Christopher, founder and chief executive of Sweet Leaf, said the new funds will be used to expand the company nationally and get the company's products a larger presence. A significant portion of the proceeds will be used for consumer marketing, he said.
Sales of ready-to-drink teas rose 20.5% in retail stores in 2007, according to trade publication Beverage Digest.
Sweet Leaf's existing management team is expected to stay in place.
According to the company's Web site, the company also sells lemonade.
Catterton is a consumer-focused private-equity firm with more than $2 billion under management.