Mr. Green Tea is a second-generation gourmet ice cream company that got its start in Keyport, NJ, a half-century ago. Primarily selling wholesale to Asian restaurants, flavors include the kind of gourmet ice cream found in upscale Japanese restaurants like green tea, red bean, and ginger. Santo Emanuele began Mr. Green Tea in 1968 with his eldest son, Richard. After Santo passed away, Richard took over the business and enlisted his son, Michael, to help.
Richard and Michael had generated $2.5 million in Mr. Green Tea sales the previous year but were struggling with making plans for the future of the company. Michael wanted to take the company to new heights, while Richard wanted to play it safe to keep what they had built up.
Mr. Green Tea Looks to The Profit
The Profit Season 1 Episode 5
The Profit host Marcus Lemonis felt Mr. Green Tea had great potential and felt the gourmet ice cream company had what it took to become a $50 million enterprise. To reach this lofty goal, the father and son team would need to be more willing to make changes and introduce new flavors to attract and keep more customers.
Marcus arrived at Mr. Green Tea offices to meet Richard, Michael, and the rest of their team. Michael, the VP of Mr. Green Tea, explained to Marcus that their gourmet ice cream was outsourced to a co-packer, who was paid a 20% margin of their sales. Richard said that although they saw a 20% annual growth average, but felt the reason they were not growing more was because of their inability to fill orders. Going through a co-packer limited the time available to get orders filled, which was inhibiting their expansion goals.
Richard is a conservative businessman who was nervous about the prospect of opening a new facility to make Mr. Green Tea ice cream themselves, while Michael was worried that they would get taken out by a more prominent, more progressive company if they were not as profitable as they could be.
While being shown the kitchen area, Marcus sampled the product. He expressed his thoughts on the fact that after 50 years in business, Mr. Green Tea was still offering just three flavors – green tea, red bean, and ginger. He felt the best way to expand the appeal of the company was to introduce new flavors to give customers a broader selection to choose from. Richard balked at the idea, noting that adding a new flavor would be a costly venture after having to purchase new ingredients and test any additions to their product line. He claimed the process could cost them up to $10,000.
Part of the reason Marcus has had so much business success in his career is that he is a numbers guy, always thinking of business in terms of how the math would work. For his part, Michael has some grand ideas to improve the company but was not paying attention to how the numbers would break down.
Next, Marcus sampled the mochis, individually wrapped ice cream balls with a rice flour coating. They are delicious and compact, attributes Marcus felt it would be ideal to market at retail outlets and stores. The operations manager then took Marcus through the daily operational process at Mr. Green Tea, including the freezers and the three trucks used to collect their ice cream from the co-packer.
Michael explained that they needed capital to build a new facility so they could make their own product and quadruple the amount of ice cream they could produce. The group trekked out to the property where they were hoping to build their new facility. The building had sustained damage in a recent storm, and Richard was afraid it would cost too much to fix it up to working conditions. Michael was not worried, stating he could refurbish the building and prepare it for their needs. Marcus agreed with Richard that the building was a mess, but felt it could be brought to proper working order.
Marcus felt the operations process at Mr. Green Tea was broken and ineffective because they were giving away such a high percentage to the co-packer making their ice cream. He offered Richard and Michael $600,000 in exchange for a 35% equity share in the business. When Richard said he needed more time to think about it, Marcus showed them the $600,000 check and left the room to let them talk it over. Michael was excited about the chance to expand their business, but Richard was not pleased about the prospect of giving away such a high percentage of their business, and he walked out.
Michael was hungry to expand their business and grow their family company with his father and told Richard that he was stifling the progress of the business and stifling its growth potential. Richard confessed to Marcus that he was taken aback by how quickly a deal was presented to him and that it took him back a bit, and was worried that the day-to-day operations of the business would change. After Marcus assured Richard that they would not, Richard eventually shook on the deal.
Of course, Marcus would also need to take complete control of the operations for a full week, which Richard begrudgingly accepted. Marcus told him his goal was to build the new facility, expand the product line, and make Mr. Green Tea a huge success. He also wanted the father and son to work on their relationship for their own wellbeing and for the good of the company.
Michael shared an idea for a gelato company he had been toiling with called Solo Gelato, where they would sell just one bold flavor of gelato. Marcus liked the concept; Richard was characteristically hesitant. Marcus liked the name Keyport Creamery, and so did Michael. Richard remained silent and sullen.
Marcus helped Michael negotiate a deal with the bank to purchase the property for the new facility and worked to convince Richard this was the best course of action. Marcus patiently went over all the numbers with Richard, who eventually came on board and agreed with the purchase of the property for the new facility.
Mr. Green After The Profit
Richard and Michael made a return appearance on The Profit two years after their Marcus first came into their lives. Mr. Green Tea’s product line had been expanded, adding flavors like black sesame, chai latte, and fortune cookie. The father-son team had seen a significant increase in ice cream sales and the value of the company since the attention garnered from their initial appearance on The Profit, netting upwards of $5 million in sales. However, the ongoing tensions between the two Emanuele generations in a family feud continued to threaten the health of their business and their relationship. Marcus returned to check on the status of business operations and to see what he could to ease the ongoing issues between Richard and his son.
The happy reunion and good feelings when Marcus began his visit quickly devolved into a dispute about the process and cost for the testing of four new flavors. Mr. Green Tea nets in the neighborhood of $400,000 a year of profit, Marcus noted could be much higher if not for the product and labor costs of developing flavors to add to their product line.
In a review of the company’s finances, Michael asks for a cut of the business after working for Mr. Green Tea his entire career, reminding Richard that his mechanical engineering degree can land him a higher-paying and stress-reducing job in no time. Marcus met with Richard privately to address his concerns about his son getting a cut of their family business. After admitting he would toss his son out if he wanted to get out, Richard is convinced Michael’s efforts will more than makeup for a “taste” of the equity. Marcus eventually sets up a plan where Michael’s equity is tied to the company’s profits or losses can earn him up to a 5% share of the business.
Sales exploded after their second appearance, and Mr. Green Tea has added walk-in locations, increased nationwide shipping distribution, and built a strong social media presence, a crucial element to modern marketing efforts. Most recently, Mr. Green Tea partnered with Key West Lime Pie Company.
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