Kansas City startup is shutting down. Its founder blames a St. Louis corporate giant
Owing at least partly to the fact that he was once homeless, Luke Einsel is a scrappy businessman, with a high tolerance for risk and a nose for a profitable niche.
Over the last decade, he built an Overland Park smoothie stand into Smart Beverage, a 15-employee company that supplies schools, hospitals and other large institutions with healthy drinks. Along the way, Smart Beverage acquired several competitors, purchased every single 7-Eleven slushie machine in Mexico, and raised several million dollars from investors. In 2019, Kansas City officials lured Einsel’s Kansas-based company across the state line with tax incentives, paving the way for it to move into an 18,000-square-foot warehouse at the former Richards-Gebaur Air Force Base.
All that promise and optimism seems like a distant memory these days. Einsel is winding the company down, he told The Star, his eyes sunken and his hair and beard grown long one afternoon earlier this spring.
He attributed the demise to Ronnoco Coffee, a St. Louis-based company best known for supplying java to Midwestern gas stations.
When Einsel rebuffed Ronnoco’s efforts to acquire Smart Beverage, he said, the company targeted his employees, filing noncompete lawsuits that tied them up in court for more than a year, prevented them from working for Einsel and saddling them with sky-high legal bills.
“They put a boat anchor around these workers’ necks,” Einsel said. “They lost every lawsuit, but that wasn’t the point. The point was to put me out of business.”
Attorneys for Ronnoco declined to comment, and the company did not respond to a request for comment.
Starting up
A Kansas native, Einsel lived in Greensburg and Hays before moving to Las Vegas when he was 20 years old. He hoped to work in casinos or the service industry but found when he arrived that many of those jobs were closed off to him because he wasn’t yet of drinking age. He fell into homelessness, an experience he wrote about last year for the website Medium.
Drowning in debt and living out of his car, Einsel was arrested in 2005 after stealing a Yellow Cab at gunpoint and leading police on a 45-minute chase that ended with four people injured. He received probation with a heavy suspended sentence.
“I was desperate and really pretty out of it mentally,” Einsel said. “Did I screw up? Absolutely. But I took responsibility for my actions. And I transitioned from it. I moved back to Kansas and put myself through Washburn University while working at a restaurant. And two weeks after I graduated from college, I started this business.”
Smart Beverage, originally called Thirsty Coconut, started out in 2011 as a retail operation, selling smoothies from a kiosk at Oak Park Mall. Einsel then pivoted the business to renting smoothie machines to private parties and corporate events.
But it was the Healthy, Hunger-Free Kids Act, championed by former first lady Michelle Obama, that really jump-started Einsel’s company. The program, which was signed into law in 2010 and took effect in 2014, required school lunch programs to replace Snickers, sodas and other sugary foods with fruits, vegetables and grain-rich options.
Smart Beverage started seeking out contracts with school districts to provide them with federally compliant fruit products: juices and smoothies, and the machines required to make them.
“At our peak, we were working with about 1,000 schools in 22 states,” Einsel said. “Liberty, Lee’s Summit, Independence, KC, Olathe, Paola, Bonner Springs — we worked with just about every school district in the area. We were doing business with districts in Oklahoma, Arkansas, Illinois, Iowa. We had a hub in Phoenix because we had hundreds of school accounts in Arizona and New Mexico. Schools were our sweet spot.”
Anticipating further growth, Einsel in 2019 spent nearly $7 million to purchase every single juice-smoothie dispenser 7-Eleven owned in the country of Mexico, hauling 3,200 machines across the border on 16 semis. Einsel planned to refurbish the machines and put them to use as Smart Beverage expanded into new markets and industries beyond schools.
Two things derailed Einsel’s plans the following year. One was the pandemic. The other was that Ronnoco Coffee acquired 80% of Trident Beverage.
In 2014, Einsel had signed a distribution deal with Trident, a Texas-based maker of a 100% fruit juice product called Juice Alive. Smart Beverage bought Juice Alive concentrates and then sold them to the schools and other institutions that made up Einsel’s customer base.
“I’d invested tremendously — millions of dollars — in this partnership (with Trident),” Einsel said. “Their product was our single biggest revenue stream. So when the deal with Ronnoco happened, it was a major event to us. We didn’t know if we still had a valid contract to distribute these products anymore.”
Einsel says John Walker, the CEO of Trident Beverage, who stayed on after the acquisition, encouraged him to sell his largest customer to Ronnoco. Einsel says that after he declined, Walker suggested Einsel sell his machines, or possibly the whole company, to Ronnoco.
“They essentially came to me and said, ‘We’re the big dog, it’s cute what you built, but here are the things you need to do if you want to continue working with us,’” Einsel said. “And the terms they were offering were all terrible. The prices they were throwing at me wouldn’t even cover my debt service.” (Walker did not respond to requests for comment.)
In May 2020, the talks between Einsel and Trident/Ronnoco collapsed, resulting in the termination of Smart Beverage’s deal to distribute Juice Alive.
What happened next is disputed in multiple lawsuits in Missouri and Texas.
‘They just wanted to bleed me dry’
Kevin Castagna started working for Trident Beverage in 2016. Based in Fort Worth, he was a territory manager, which meant he was often on the road going to and from places like Lubbock, Waco and Texarkana.
“My job was to service the machines, handle deliveries, maintain the accounts we had with customers in our region,” Castagna said.
He was paid $12 an hour, plus commissions.
“I ended up making about $30,000 to $35,000 a year,” he said.
Part of Ronnoco’s strategy after acquiring Trident was to sell its coffee to the schools where Trident already had juice contracts — to put its coffee machines in the teachers’ lounges. Making those sales fell to people like Castagna.
Castagna and others at Trident knew juice and schools. They didn’t know anything about selling coffee, and they quickly found that the schools weren’t particularly interested in buying Ronnoco’s products. Castagna’s commissions suffered.
So in July 2020, he went to work for Einsel. Einsel also hired two other former Trident employees, Charles Peoples and Jeremy Torres.
After its relationship with Trident soured, Smart Beverage had partnered with one of Trident’s competitors, Barfresh, on a distribution deal. It put his company in business in 22 states. Einsel began making plans to set up new warehouses to accommodate the new business and new territories. He felt his company was on its way to weathering the twin challenges of the pandemic and the loss of Trident’s business.
“Then the lawsuits started flying,” Einsel said.
In September 2020, Ronnoco sued Peoples in the U.S. District Court of the Eastern District of Missouri, saying that by going to work for Einsel’s company he had violated the Missouri Uniform Trade Secrets Act and a noncompete agreement he’d signed after Ronnoco’s acquisition of Trident. The company sought an injunction that would prevent him from working in Texas for Smart Beverage, which was now a competitor. Four months later, Ronnoco filed similar lawsuits against Torres and Castagna.
Ronnoco, which since 2012 has been owned by a private equity firm called Huron Capital, lost each case.
“Ronnoco argued, essentially, that these employees’ new employer — Smart Beverage — competes with Ronnoco,” said Mark Molner, attorney for the employees. “So the question was, what does Smart Beverage sell? They sell juice to schools and bars and that’s about it. So they couldn’t get them on that. So then they tried to expand that to say that any beverage is competition. So we said, Can they work for Coke or Pepsi? Can they work for the county water system? Wendy’s sells beverages: Can they work there? It’s like, if that’s the standard, tell us where these hourly employees are allowed to work?”
The judge ultimately ruled that the noncompetes were not enforceable due to the fact that Trident was not 100% owned by Ronnoco. But those rulings in favor of the employees came a year after the judge granted injunctions that prevented all three men from working for Smart Beverage. Castagna said the litigation forced him to “cut back on a lot,” including downsizing from a house to an apartment.
Peoples, who was fired by Trident and has been struggling with health issues related to COVID-19, told The Star he spent his life savings, “a little over $70,000,” defending himself in court against Ronnoco. (The judge denied Peoples, Castagna and Torres’ motions for attorneys fees, meaning that they, rather than Ronnoco, are responsible for covering their legal costs.)
“If you fire an employee, how do you have any rights to what he does after that?” Peoples said. “They just wanted to bleed me dry. And they did.”
“Charles lost even though he won,” said Patricia Williams, a St. Louis-based attorney who represented Peoples in his lawsuit. “If a lawsuit takes a year to resolve — by that time, the noncompete would have dissolved on its own. Ronnoco essentially got the benefit of a noncompete even though the judge ruled against them. And so here’s Charles left with a mountain of legal fees, a family, a mortgage. I don’t know if he’ll ever really recover from this.”
John Comerford, the Dowd Bennett attorney who represented Ronnoco on the lawsuits against Peoples, Castagna and Torres, declined to comment on the record.
Glass half empty
In October 2020, Trident also sued Smart Beverage in the U.S. District Court in the Southern District of Texas, alleging violations of the Texas Uniform Trade Secret Act, unfair competition/common law theft of trade secret, tortious interference with prospective contracts, and breach of contract.
Among other things, that lawsuit accuses Einsel of “using Peoples to secretly compete with” Trident for contracts — essentially, that Einsel was able to underbid Trident on contracts using Peoples’ inside information. It also says Einsel didn’t disclose his status as a convicted felon on a recent Texas school contract bid.
Einsel has filed a counterclaim in that suit, saying that Ronnoco Coffee and Trident Beverage “engaged in a conspiracy” to damage Smart Beverage’s business after he rebuffed their efforts to buy him out.
“The desired end result,” the lawsuit says, “was to either bankrupt Smart Beverage and purchase its machines from a bankruptcy trustee or to artificially deflate the market value of Smart Beverage such that they could purchase the company and its assets at a fraction of its otherwise fair market value.”
Einsel told The Star that his staff filled out the “60-page application” on which his status as a felon was omitted.
“It’s not something I’d ever talked about,” Einsel said. “It hadn’t come up in 10 years of doing business. I put it in the past and moved on. Why look back?”
He said he believes Walker used the noncompete lawsuits and his criminal history to undermine him to his customers.
“They showed up at these schools and said, ‘Look at this lawsuit, look at this police report, is this who you want to be doing business with?’” Einsel said. “Never mind the fact that (the Las Vegas incident) was 17 years ago or that they ended up losing all those lawsuits.”
The net effect was to scare off his customers. When it came time to renew or re-bid for contracts in 2021, Einsel said, many were no longer interested in Smart Beverage’s services.
“Schools are a very sensitive environment,” Einsel said. “It’s taxpayer money and it’s children. You want a safe situation. So if they’re hearing that I’m some kind of rogue madman with a troubled past and, by the way, here’s all these new lawsuits against his company filed by a reputable St. Louis law firm — it makes it look like my company is doing something really underhanded. So why not just go the safer route with a different company?”
When the school contracts dried up, Smart Beverage’s partnership with Barfresh evaporated. “They anticipated all this volume from us, but it wasn’t there,” Einsel said. “It caused friction. And eventually it was no longer viable for them.” Barfresh’s local attorney, Geoff Hetley, declined to comment on the record.
Einsel said Smart Beverage will “almost certainly” have to file for bankruptcy soon.
“The bank has called in our SBA loan,” he said. “We’re looking at losses of safely between $4- and 6 million. The business just isn’t viable after all this. The only way we’ll be able to pay back our investors is to win this lawsuit in Texas.”
He said ordinary citizens should be concerned about the implications of what his employees went through over the past few years.
“Think about it,” Einsel said. “By denying my employees attorneys fees, Missouri has set a precedent where a company can drag innocent, low-wage employees through federal court for more than a year, lose the case against them, and at the end of it all, a judge rules that these workers who make $15 an hour still have to pay tens of thousands of dollars in legal costs. How is that remotely American?”
