The Story Of A Tea Tycoon: Stephen Lee, Co-founder Of Wonder Drink

Katie Morell talks to the tycoon of Kombucha Wonder Drink about how he entered the tea market.
September 26, 2011

I am a tea person. I don’t drink coffee—the taste just isn’t for me. So about five years ago when a co-worker introduced me to Kombucha Wonder Drink, I perked up. She was (and still is) obsessed with the sparkling fermented tea drink and brought a new bottle into work every day. I remember going into her office and inspecting the bottle like a scientist in a lab, fascinated by the floating cultures and her claim that it lengthened her life.

“I’m a healthier person since I began drinking Kombucha,” she’d tell me.

Since then, I see Kombucha Wonder Drink everywhere—at festivals, grocery stores and natural food outlets. Determined to find out more, I did some research and learned that the drink is part brainchild of Stephen Lee, a Portland, Oregon-native who also co-founded Tazo Tea in the 90s and The Stash Tea Company back in the 70s—long before the U.S. jumped on the tea drinking wagon.

How did Lee become a tycoon of tea? I called him up to find out.

Entering the market

Back in the late 60s, Lee was working in the merchandising department at Sears, Roebuck and Co. when a natural food store opened in Portland. The natural food movement was just beginning and Lee became interested in the industry—specifically in tea. He quit Sears, and in 1972, with just $5,000 in his pocket, he and a few friends founded The Stash Tea Company.

At first, the company was focused on selling tea in bulk, but by the late 70s had grown into a consumer brand available in grocery outlets and mail order catalogues. Over the next 15 years, the U.S. market caught up to Lee’s obsession with tea and consumer brands starting popping up all over.

In 1993, Stash was sold to another tea company. Just a few months later, Tazo Tea was born. “By then, Americans were getting sophisticated about tea, and we thought there was room for a higher quality tea in the marketplace—so we upped the quality and came out a higher price point,” he says.

The idea worked and the company flourished. So much in fact, that Starbucks offered to buy Tazo in 1998. The deal went through in 1999 and consumers can now find Tazo Tea at most grocery stores and Starbucks cafes worldwide.

Meanwhile in the 90s, Lee and his colleagues were working in Russia on consumer tea brands to distribute locally. “I was overwhelmed with curiosity about the country and I got very attached,” says Lee. “It was the attraction of being there on the ground floor [soon after the fall of the Soviet Union] of a country that had emerging markets. There was a lot of opportunity to go in and develop something great.”

One day in Russia

Lee made around 19 trips to Russia between 1992 and 1998. On one occasion, a distributor invited him home for dinner. Once he arrived, Lee noticed the distributor’s mother hunched over a gallon jug in the kitchen.

“I went over to her and asked what she was doing,” Lee says. “She told me that she was making kombucha. I’d heard of kombucha in the 70s, but had never seen it in the U.S. market. It was an ancient tea drink and she showed me how to make it right there.”

Part the process was placing a culture into a jug, adding sugar and covering it with cheesecloth. A week later, the woman would take out the culture, split it in half, keep one half for herself and give the other half to a friend. As long as you kept the culture alive, production of the drink could continue.

“What really got me was that she told me she’d gotten the original culture in 1939 from her great aunt in Siberia,” says Lee. “I was so intrigued; she gave me half of her culture, I brought it back to Portland and tried it at home. I thought it could be the next exciting beverage in America.”

The start of Kombucha Wonder Drink

The late 90s were very busy for Lee. In 1998, Russia’s economy collapsed, which prompted him to withdraw from the market. And after the 1999 sale of Tazo Tea, Lee was looking for his next venture. Armed with his kombucha experience in Russia, he started raising money in 2000 for what would soon be Kombucha Wonder Drink. The following year, the beverage debuted in the natural food industry.

How did consumers like it?

“They loved it,” Lee says. “There had been a brands of kombucha in Portland and Southern California previously, but they didn’t survive. People knew about kombucha and they welcomed our drink. For those who didn’t know about it, we aggressively promoted our product and it worked.”

Although health benefits of the drink have not been documented, Lee says the drink has been consumed for more than 1,000 years and there are “claims that it cures everything and extends life,” he says.

Since the launch of Kombucha Wonder Drink, copycat companies have sprung to life and consumers can now find more than 30 brands of kombucha in the marketplace.

“Consumers really love the drink; kombucha is now a $300 million segment—I think it will reach $1 billion within the next 10 years,” he says.

Advice for entrepreneurs

Lee offers three pieces of advice for budding entrepreneurs:

  • “Do enough research on the concept you are considering to make sure it is viable.”
  • “Trust yourself—that is huge. Imagine all the great ideas that never got started.”
  • “Persevere.”