Thursday August 4, 2011 | 9 comments
Our research on specialty tea started in early 2004. It was extensive. It involved years – yes, years – of researching the opportunity, the market, the competition, the suppliers, the concept options, the locations, the recipes, and the product mix. It involved opening our first retail store in 2007, weathering a partnership breakup in early 2008, and starting over with a whole new tea business in mid-2008. That’s a lot of tea-related “stuff” in seven years. I guess you could say I’ve been on a wild ride … steeped in the tea world.
Mid-July was our third birthday at our concept store in Temecula, California. We’re still here. Sales are in double-digit growth despite the economy. The IPO of Teavana will bring attention to tea from new sources, including the investment community. It will bring new customers. It will provide new opportunities to any tea business that knows how to take advantage of them. We have to analyze our own business honestly. Are we ready?
The tea industry is a huge umbrella covering many specialty niches. Some will choose to “play by the numbers” only, and will go where the money is flowing fastest at any given time. Right now it’s attracting more and more players to the RTD niche. That involves shelf space, slotting fees, production problems, and fierce competition. Some are moving toward foodservice, which involves putting tea into pods or concentrates that fast-food and restaurant / hotel outlets can turn into something drinkable without much hassle – also a niche with strong competition from big players. Then there is the “tea / no cafe retail store / chain,” which is dominated currently by one retailer in the United States and two in Canada. This niche really has nothing proprietary I’ve seen – everyone can purchase and resell teas and merchandise. It also requires huge startup costs, especially for prime locations, and, in malls, usually long, tight leases with very well-funded lessors who will go after defaulters. There is the upscale, serious, gourmet-quality tea cafe / restaurant concept, such as the beautiful Samovar stores. This involves much labor, space, and intense quality to be successful. There are the coffee-house / snack modern tea concepts like Argo. And there are combinations of the above as well.
As tea businesses, all of us are finding our own place within the niches. Most of us are limited in dollar resources. That’s a good thing. It means that only the most determined, lean, productive, and motivated will survive, not necessarily the best in terms of product. From my own tea-retailing business experience, I’ve learned to be extremely careful about business relationships, contracts, and a number of things I had not experienced in prior businesses, such as retail leases and landlord / tenant relationships. Over the last three years of being completely hands-on in a concept store in a hard-hit area with a very tough economy, we’ve learned lessons about what works and what doesn’t and we’ve been brutal in terms of editing and adding to our collection. Charles Cain of Adagio is right now trying three types of locations to see which is most friendly to Adagio’s experience-centric concept. We couldn’t afford to put up three concept stores out of the chute but, after three years, we now have a good handle on where we want to go and how to get there. We have become a brand in our area and, through the Internet, are starting to gain recognition on a much larger scale. The last time I checked, if you Google “loose leaf tea,” we were on Page 1. And we didn’t pay anyone to get us there. “Loose leaf tea California” usually gets us into one or more of the top four spots on Page 1. That means we’ve been working our … well, we’ve been working hard!! Anyone can put in the effort because it’s free to do social marketing very effectively and aggressively. It just takes time, and sometimes time you really don’t think you have.
If someone comes into our store and says their dream is to open their own tea shop someday, that it looks like such fun, I can only hope that they also have a great pair of comfortable shoes, a good business head, a sense of humor, and a knowledge of margins, inventory, merchandising, marketing, accounting, and more. So many things involved in the tea business have nothing to do with loving tea. Is it even essential? Since I don’t know the owners of the leading companies, I don’t know. I suspect it is though. I know we do. More than just loving it, we are passionate about it. Possibly fanatical?
On this, our third birthday, an area business magazine did a nice story on us. Because of the new attention on specialty tea, we were also called by the county’s largest newspaper and they are doing a photo layout / story on us in the near future for the Business Section. If all of us who are growing a tea brand are alert and have done our homework, we can find a multitude of ways to profit from all the attention tea is getting and will be getting in the coming years.
Dreaming of starting your own tea business? The merry-go-round is spinning fast. Grab hold and jump on. It’s likely to be a wild ride!