One of the fastest-growing young companies in New Orleans also is responsible for giving the city a quirky distinction in the food and beverage world: Homegrown startup El Guapo Bitters & Syrups is the country’s only dedicated brewer of bitters, the botanicals-infused mixers that typically come in tiny bottles and are a staple of any self-respecting bar.
The company, which was founded four years ago by Christa Cotton in Gretna, is now preparing to move from its current 3,000-square-foot Uptown manufacturing site on Tchoupitoulas Street to 35,000-square-foot digs on Gravier Street in Mid-City, where it is building a state-of-the-art bitters brewing operation after pivoting quickly in the pandemic and seeing explosive growth over the past 18 months.
The move comes after Cotton raised more than $1 million in seed money from the NO/LA Angel Network, the New Orleans Startup Fund and other investors for a national expansion of her product line, which includes offerings such as Polynesian Kiss (passion fruit, guava, pineapple and coconut) and Love Potion (chamomile, hibiscus and orange blossoms under primary notes of rose, jasmine and lavender).
What is particularly remarkable about the funding milestone is that it comes so soon after El Guapo (Spanish for “the handsome one”) suffered a near-death experience when the coronavirus hit in spring 2020 and abruptly pulled the rug from under the company’s original business plan.
Cotton said she remembers the moment in March last year, when she got a call from a Costco buyer telling her that the months of hard work leading to a 24-store distribution deal would all be for naught. Her El Guapo pallets would have to be pulled from the Costco stores because of the pandemic shutdown. All the other retailers, as well as the bars and restaurants that were El Guapo’s main selling outlets, were in the same boat.
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“I went from thinking we had it made to having it all canceled and all this inventory I couldn’t sell. Also, school and day care was canceled, and I had a 1-year-old at home,” Cotton said. “So I started looking at bankruptcy sites thinking, you know, I was going to have to deal with the consequences. It was a very scary, tumultuous time.”
Then she and her colleagues noticed that sales on the company website had shot up during the first few weeks of the shutdown. The e-commerce part of the business had pretty much been an afterthought, accounting for no more than 15% of sales. But with the onset of the pandemic, sales had risen tenfold as people were doing their cocktail mixing at home.
Cotton and her staff scrambled to improve El Guapo’s website, focusing on a recipe blog and other direct-to-consumer features. They had to figure out a different way of packaging as they went from a business that was more than 70% wholesale to one that was 92% direct-to-consumer. They also had to find reliable shipping fulfillment at a time when Amazon was turning away new products. So they used its big competitors: the United States Postal Service, UPS and FedEx.
“Ultimately, we ended up tripling revenue last year, and when you’re a small company tripling revenue is a major accomplishment under any circumstances,” said Cotton, who didn’t want to put a dollar amount on sales but said volume was about 4,700 cases in 2020.
It was Cotton and her team’s response to the crisis that impressed Corey Tisdale, former CEO and founder of Baton Rouge-based outdoor equipment retailer BBQGuys. He is a board member of New Orleans Angels Investor Network and is the second-largest investor in El Guapo. He was also Cotton’s designated mentor when she went through The Idea Village’s entrepreneur accelerator program earlier this year.
“One of the things you like to see when you’re a potential investor is whether the founder is the kind of person [who] is going to get beat down by events,” Tisdale said. “Are they going to respond to something like Hurricane Ida by stopping everything until they’ve found a roofer, or are they going to sweep up and carry on and worry about a roofer later.”
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These days, El Guapo has a different challenge: How to manage its expansion now that it distributes to 49 states, as well as Canada, Australia and New Zealand, through deals with Total Wine, Whole Foods, World Market, Rouses Markets and others.
“Of all the difficult problems that businesses face, dealing with rapid growth is one of the better ones you have to face,” Tisdale said. “But it should not be underestimated and has been the downfall of many.”
Cotton, 34, is a Georgia native but has had a long association with New Orleans, where her father’s company, Victory Real Estate Investments, owned several properties, including the building currently housing Rouses in Kenner Marketplace and the Winn-Dixie grocery story in Belle Chasse.
Her father, Alton Darby, was the one who originally got the idea for craft distilling and brewing in the aftermath of Hurricane Katrina in 2005, when he was looking to diversify. Darby spotted an article in The Wall Street Journal about an operation in Kansas, hooked up with distillery designer Seth Fox and persuaded him to come to Georgia to help build what became, in 2009, Thirteenth Colony Distillery, Georgia’s first and still only legal distillery since Prohibition.
“This was before craft distilling had really taken off, and everyone had told him it was a mid-life crisis,” Cotton said. But Thirteenth Colony has gone on to win a slate of awards for its bourbon, rye and vodka, and is now distributed throughout the South.end print trim
Cotton said that being early in the game meant they had to work with Fox to design from scratch the equipment and systems to produce the spirits on the scale they wanted.
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“It’s come full circle now, and Seth is working with us designing our bitters brewing system at Gravier Street,” Cotton said. Most makers of bitters distill or blend, but the El Guapo brewing process means its products are alcohol free, which Cotton said is the fastest-growing segment of the market.
In 2019, London-based Diageo, the giant drinks maker with brands including Smirnoff, Johnnie Walker, and Guinness, bought Seedlip, a London maker of craft non-alcoholic spirits, which grew by 170% a year in its first three years. It was Diageo’s first foray into non-alcoholic drinks and was considered as an industry milestone for that emerging market segment.
The $1.1 million of funding that Cotton has secured, which is initially debt with an option to convert to shares in the company, is relatively small. But it is enough to move the already profitable company onto a higher plane. Cotton said she wanted to retain 100% of the company and turned down much larger offers that would have ceded both equity and some say-so over the company’s direction.
Economic boosters and area investors reckon El Guapo is on the right track.
“The company’s new facility will showcase the company’s innovative bitters brewing technique and help get their premier line into the glasses of drink enthusiasts around the world,” said Michael Hecht, CEO of regional economic development agency GNO Inc..
Mike Eckert, chairman of the NO/LA Angel Network, said, “We see great things coming from Christa Cotton and her team,” adding, This is an example of the New Orleans early-stage ecosystem finding alignment in that El Guapo – a New Orleans-based company – and NO/LAAN – a New Orleans-based investment group – came together to make this deal happen.”
El Guapo’s funding follows the recent sale to a Latin American group of Big Easy Bucha, another locally grown food and beverage startup whose owners went through The Idea Village and secured local venture funding.
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Tisdale, the Angels Investor Network board member, said it is important for the growth of the New Orleans entrepreneurial “ecosystem” that not all of the success are in the information technology world, such as big recent deals involving Levelset and Lucid.
He noted, too, that Cotton’s business is pioneering technology in the products she makes. But more important is that the character and skills she showed in turning last year’s crisis into a springboard for El Guapo means she’d likely be successful in any business.
“The more entrepreneurs like that we can stack in the local economy, the better,” Tisdale said. “We have a few hundred but we don’t have enough.”
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