Organic Avenue Was Bought By New Owners For Basically Nothing

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After countless months of losing profit, Weld North, the owner of New York City’s struggling juice chain Organic Avenue, managed to sell the company to investment firm Vested Capital Partners in a cashless deal of stock options, Racked has learned.

Sources that worked closely with investment firms looking into buying the company in the winter tell Racked Organic Avenue was "bleeding so much cash," no one wanted to take over the struggling business. Weld North was ready to shutter Organic Avenue’s operations in December, until Vested Capital Partners, who officially took over as owner June 30th, stepped in with a special stock warrant. The stock option, one source says, is only exercisable if Vested Capital Partners is able to successfully turn the business around and sell it off.

Sources also confirmed to Racked that Organic Avenue’s CEO, Anthony Tomaro, has been let go in an attempt to cut costs.

The 15-year-old juice chain, which was bought by Weld North in 2013, has been in visible trouble for quite some time. Last year, Organic Avenue closed two of its stores, leaving its store count at 10; the company also killed plans to open several new downtown locations in 2015.

This past January, it laid off a third of its staff, citing "economic troubles," and multiple sources confirmed to Racked that Weld North, which owns a 95% stake in the company, was frantically shopping around for a buyer.

The company initially piqued the interest of several buyers — including Marcus Antebi, the founder of juicing giant Juice Press — but its asking price was too high. It's believed that Organic Avenue’s operational losses were at about $600,000 a month between all its stores by May 2015; it lost a whopping $1 million during its worst month, January 2015, including private equity fees to Weld North. Out of the company’s ten locations, only three are profitable, sources say, because of poor location choices.

Image: Driely S. for Racked

Racked was told that most of Organic Avenue’s losses came from waste. Its foods and juices come with a short shelf life, and must be tossed after three days: it’s not uncommon to walk by an Organic Avenue at closing time and see bags and bags of untouched food being tossed.

"Overall, the juicing industry does not have a sustainable model," reports one of Racked’s sources. "They all think it’s a quick service mode with transparency but the economics don’t work. We’re going to see a lot of consolidation in the next two to three years."

Organic Avenue, of course, is not the only juice company struggling with monetary losses from food waste. As Liana Sugarman, the founder of boutique juice brand LuliTonix told Racked last month, "You're dealing with temperature-sensitive products that are excited to go bad. They want to die!" Top that off with the oversaturation of the juice market — New York brands like Juice Press and Juice Generation are rapidly expanding, LA companies are crossing the coast to open spots in New York, and companies like Clover Juice and Juice Served Here are expanding into national shipping — and it’s easy to understand why Organic Avenue has experienced such business woes.

Racked sources say that at one point, Weld North, was looking into investing in machinery that would treat its juice with high pressure pasteurization. Such equipment would have cost the brand anywhere from $3 to $5 million, and so the company eventually decided against it.

Plans to turn operations around are already under way at Organic Avenue. One source says the company, under Vested Capital Partners' leadership, is starting to look into outsourcing HPP procedures at a factory in California so it can expand its national shipping program. Racked sources add that Tomaro’s absence from the company will be beneficial. He was originally Organic Avenue’s CFO for a year before the company forced him into the CEO position in December of 2014. Tomaro was ultimately not the right person to "manage such a struggling brand."

Both Organic Avenue and Vested Capital Partners did not respond to email requests for comment.