Ypsilanti business stalled as fermented tea regulation battle wages over alcohol content
Tom Perkins | For AnnArbor.com
Filling up a pantry converted into a walk-in cooler at Rachel and Tarek Kanaan’s Ypsilanti home are 100 cases of ready-to-sell Unity Vibration Living Kombucha Tea. But when those cases will move to store shelves remains in question.
The Kanaan’s Unity Vibration is one of the small businesses many believe will play a significant role in turning around Michigan’s economy, but since July the once rapidly expanding operation has been shut down by a lengthy regulation process.
Over the summer, agencies at all levels began determining how to classify and regulate the relatively new but increasingly popular fermented tea. It contains 0.5 to 2 percent alcohol, and its status has been changed from “non-alcoholic” to “alcoholic.”
While that slow process takes place, the Kanaans are on financially shaky grounds and unsure how much longer they can sustain the business without any revenue.
In August 2009, $20,000 in retirement savings went toward renovating the Kanaans kitchen to meet Michigan Department of Agriculture standards and purchase the necessary stock and equipment. It also helped the parents of four, who brew from home, support their family as business picked up.
Their tea swiftly moved off shelves at over 20 different mom and pop grocers, Whole Foods and was a favorite at the Ann Arbor Farmer’s Market.
But it was brought to the Food and Drug Administration's attention that kombucha tea contains more than the 0.5 percent cap that is the limit on beverages labeled non-alcoholic. All kombucha tea brands nationally were pulled from store shelves, production halted and the regulatory journey began.
The succession of hurdles the Kanaans have cleared in recent months has depleted their savings, just as they were on the cusp of making solid profits.
“The last month of sales - we were just about to do it,” Tarek Kannan said.
“Financially, we’re living at the end of our retirement savings, so we’re ready to start making money. We’ve had to make so many phone calls, we told our story and we keep calling and reminding people that we’re fighting for our lives and fighting for our business.”
Kombucha tea is a fermented raw health drink that has a longer history in Russia and China, but was only relatively recently imported the United States. Its popularity increased significantly in recent years, and Unity Vibration is one of the new companies benefiting.
The organic tea is made from a living yeast and bacteria culture placed in water with sugar and different types of tea. The yeast produces the alcoholic content on which the bacteria feeds. Unity Vibration then adds fresh fruit juice from local farms.
After a fermentation period of 22 days, the process yields a unique, tart tea not too unlike sparkling apple cider, and it's known for being stocked with probiotics, beneficial acids, vitamins and minerals.
But kombucha tea also has very low levels of caffeine, which also presented an unforeseen regulatory problem in Michigan.
Tarek Kanaan said the effects of the caffeine and alcohol are negligible. He first tried kombucha tea around five years ago and immediately felt the positive effects. He described it not as an alcohol buzz or caffeine high, but “like your body is getting something healthy that it needs.”
Rachel Kanaan said she noticed it aided in digestion, and the vitamins, minerals and enzymes contribute to her overall health.
“I feel stronger, I feel like it helps build my immune system and helps me not get sick as much,” she said. “I start feeling more vibrant.”
In 2007 Rachel Kanaan brought home a culture and the husband and wife team started brewing their own teas. The name in part is derived from them coming together and creating the tea. Rachel Kanaan, who is Buddhist, said the name and the larger 25 ounce bottles also speaks for their desire for people to share the experience of drinking one. Friends and family loved the drink, requested more, and the business naturally evolved.
Tarek Kanaan worked for 10 years as an engineer at GM and Ford, then as a social worker for several years. Rachel Kanaan still occasionally works as a massage therapist, but their focus lies entirely on Unity Vibration. Less than a year into seriously starting a business, all indications pointed toward success.
By July 2010, the Kannans were selling around 80 cases of 12 bottles monthly. They didn’t use a distributor, and one 25 ounce bottle sold for between $8 and $10. A case went for $66, meaning they were grossing $5,200 monthly.
Tom Perkins | For AnnArbor.com
Then the FDA stepped in. Whole Foods was the first to pull all brands from the shelves and others quickly followed.
The first agency that needed to consider Unity Vibration was the United States Alcohol Tax Tobacco and Trade Bureau. The Kanaans quickly got their samples to the agency, but it was the first the TTB had encountered the tea, and no one knew whether to classify it as a beer or wine.
The days turned into weeks, so the Kanaans contacted Representative John Dingell’s office and explained the situation. Dingell’s office began making calls along with the Kanaan’s regular pleas for a swifter decision. Now, the tea is - in regulatory terms - a beer.
That took Unity Vibration to the next stop in their regulatory journey, the Michigan Liquor Control Commission. The LCC informed the Kanaans they would first need an alcohol distributor, which is required by law in Michigan.
Although their new status as a “beer” exempted them from selling at farmer’s markets and certain stores, it does provide them with access to a distributor with thousands of clients statewide and partnerships nationally. That could be the one blessing out of the ordeal, Kanaan said.
The LCC then informed the Kanaans the City of Ypsilanti would need to okay a home microbrewer’s license. Again, it added another several weeks onto the process, but Tarek Kanaan said the city officials he contacted - Mayor Paul Schreiber, Council Member Pete Murdock and Council Member Brian Robb - helped move the process along quickly.
On Nov. 8, City Council unanimously approved the license. But that celebration was short lived. The following morning, the LCC told the Kanaans that the drink contained alcohol and caffeine, and Michigan had just passed a ban on drinks like Four Loko that contained high levels of liquor, taurine and caffeine.
“This is the antithesis of those drinks,” Tarek Kanaan said.
Now the Kanaans are waiting to hear back from the LCC on how they will classify Unity Vibration Living Kombucha Tea so that it is not placed in the same category as Four Loko.
The waiting grows harder and harder, and Rachel Kanaan says she and Tarek spend a lot of time meditating these days.
“We are feeling stressed out, of course, because we really have run out of money,” she said.
“We are waiting and hoping people understand our situation and that they have compassion and will help us. We know that if it’s meant to be, it will happen. It’s been a long road for us but we know that its supposed to be that way for whatever reasons.”
Other companies have sidestepped the regulation process by "de-alcoholizing" the drinks. But the Kanaans say it changes the taste and texture of the drink as well as eliminates many of the beneficial nutrients from the drink. They say they want their tea to remain authentic.
Once business resumes, Unity Vibration is ready to officially hire help, though a number of friends and family members pitched in their services just to help out in the past.
The ultimate goal, the Kannans say, is growing their own food and ingredients on their own farm and keep the company at home in Ypsilanti.