I’ve been in the tea business for five years now as an importer, wholesaler, and retailer with both physical and online outlets. During this period, the number of physical stores has doubled, the number of online retailers has at least tripled, and the quality of tea available in grocery stores and cafés has improved dramatically.
Even with all this growth, the big question nagging those in our industry is simply, “where do you get YOUR tea?” Or more importantly, where will the average American get his/her tea five years from now?
What about the big grocers? They clearly have the greatest potential for spreading the joy of high-quality tea to the masses. Grocery store coffee has always been somewhat limited due to the fact that excellent coffees should really be consumed within a few weeks of roasting. Tea, on the other hand, is a seasonal product and, by necessity, must have a shelf life of at least a year. Grocers will likely follow a few steps behind the trend towards quality, so who will educate the customer and introduce premium tea the way Starbucks introduced premium coffee in the 90s?
There are an estimated 4,000 physical tea shops in the U.S. right now, up from less than 2,000 when I started studying this industry in 2004. Tea rooms (ranging from cafés to bistros to full-service restaurants with a tea theme) have accounted for a lot of this growth in the past few years and hundreds more are currently in the planning stages. Will tea rooms take business from coffee shops? There are more than 25,000 coffee shops in the U.S. Is there room for a doubling of specialty tea cafés or will existing café owners get wise and start serving higher-quality teas to complement their specialty coffees? What happens to the tea rooms if most cafés and restaurants embrace quality tea?
Many loyal tea enthusiasts have gone online to get access to better selection and pricing than is available in their local community. Will niche online retailers win out by creating compelling online shopping experiences? Will the big retailers take advantage of economies of scale and high margins to crush the “little guys”? Or will Amazon.com turn its eye towards specialty food products and crush even the big tea retailers the way they’ve crushed nearly everyone in the online book business?
Tea will always be more of a sensory-driven product than books, so maybe specialty tea retailers will lead the customer-education process. These would be shops focusing on loose-leaf teas and accessories instead of the cups of tea and pastries favored by the tea rooms. Teavana received venture capital backing and opened more than 100 retail shops (without seating) based on the assumption that this was the future of specialty tea.
The answer will certainly be some of all of the above. Business guru Peter Drucker once said, “The best way to predict the future is to create it.” That’s what I’m trying to do… but let me ask you, “Where do you get YOUR tea?”