In November of 2009, contributor to this blog, Charles Cain, told us he had discovered the “Starbucks of Tea,” a race that seemed to be taking shape in the industry. And, he said, it was . . . Starbucks.
That was so Charles. I have enjoyed watching Charles’ career since opening my first tea-centric concept with a partner in 2007 – and reading his bold, controversial, and educated musings on the tea industry. When he revealed his discovery, he was not a Vice President at Starbucks. Now he is. Turns out, Charles was right.With Starbucks’ big-time, $600+ million dollar foray into the world of loose leaf tea retail stores, all of us who believed there was a huge future for loose leaf may feel vindicated. Should we also feel threatened? To answer that, just look at the artisan coffee retailing industry. It might give us some idea the direction things will be going.
We closed our second tea retail concept – after four-and-a-half years – last January. It was not like the first concept, and should we reopen a bricks and mortar in the future, it will not be like the second, either, even though we had 5 star Yelp rating across the board the entire time. Why? We learned what worked and what didn’t. Even Starbucks is changing the concept they initially brought to trying out a cafe concept for tea. Argo, and others have used this model for years, with tea-infused/themed food items and specialty tea beverages. Why not? They certainly know how to make that kind of concept a success!
What I’m thrilled about is that Starbucks bought into a loose leaf retail chain at all. With all the RTD, bagged/sacheted, and now tea pods, flooding the market, I am assured that we “loose leaf-ers” don’t have to question loose leaf as a viable retail concept, cafe or otherwise. We just have to do it smart and better and be funded enough to give it legs. Look for new Starbucks bottled tea specialty drinks, tea pods, etc. Still, investing hundreds of millions of dollars into a “niche” isn’t done carelessly . . . even by a giant. There’s gold in them thar’ loose leaves!
And then, there are all the ancillary areas of opportunity: servicing the burgeoning loose tea industry retailers, wholesalers, foodservice, etc., in any number of creative ways. We’re seeing innovations in several areas regarding loose tea. A large smoothie chain purchased a small loose tea company via a Shark Tank connection a couple of years ago. There are at least two loose tea chains out there who have venture capital investment and very savvy boards and management teams. Then, like the Intelligentsias and Stumptowns of coffee, the “upscale” micro-chains with devoted followers known for their “coffee snobbery,” we have at least one such in the loose tea industry already, based in Northern California.
Rather than roasters, the tea industry focuses on blenders who know how stiff the competition is getting for the best artisan teas and herbals and the most delicious blends. We have our own publications, our own annual trade show(s). The Milk Board (Got Milk?) just highlighted tea as a ‘hot’ beverage trend. Have you seen what’s featured on a number of the covers of Specialty Coffee magazines the last few years? Hint: It has three letters and starts with “T.”
These are exciting times for the loose tea industry! Aren’t you glad you’re part of it?
You are so right Diane. There is still much opportunity in the tea industry. Now the issue of huge sums of money does make it harder for the little guy or gal I’m afraid. Ultimately I believe innovation will rule.
I hadn’t seen that Shark Tank episode. I’ll have to search for it. The show is a blast!
Oh, Diane… are there 7 short fellows marching behind you whistling while they work heading out to the tea “mines”? There are many points of view about the tea business in the U.S. that are open debates but there are 3 things that it would be perilous to ignore:
1. The tea industry (us included) continues to sell the “big times for tea are just ahead” story while ignoring incovenient facts: sales, store closings, needle barely budging on % of tea vs. coffee drinkers and other real world data (not cherry-picked data). Yes, the appeal of tea is improving and is more successful but it has not gotten anywhere near the predictions that were made 3-5 years ago. Blame it on tea, blame it on the general economy but the rose colored glasses need to come off and the industry needs to look at other ways to solve challenges rather than hoping dynamic growth will make it all better.
2. The comparison to specialty coffee growth is a particular blind spot. Our time is not 30 years ago when the expectations for a coffeehouse were realized. What people want is different, smartphones, tablets, social media, WiFi (or not)… all of these things and how they have changed the patterns of our lives did not exist when Starbucks and other coffeeshops were able to comfortably become the next big thing. If we knew what we did now about tea and you could transport the tea industry back 30 years into that growth period, things would be much easier. But we can’t, and the “model” for what the tea industry thinks customers want in a tea shop vs. what customers (in levels enough to be profitable) REALLY want remains a riddle.
3. At the very time we are trying to import a higher appreciation of tea into the U.S., some of the biggest tea drinking countries in the world are losing the tea habit to a younger generation that is less interested in tea. In many cases it is a lifestyle they no longer identify with or they are being seduced by all things western, including coffee. If the cultural home of tea is struggling to get people to embrace tea, how much growth can really be achieved in the U.S.? Moderate growth, yes, boomtown growth looks like wishful thinking so far.
We need to try harder to connect the dots, see what is really happening. Yes, the Shark Tank sale was exciting news but the purpose of that sale was to distribute and sell the teas nationally through the Jamba Juice chain, which has yet to happen). German teashop franchises came and died, Other “concept” teashops, cafes, “bars” – gone, gone, gone. We need to challenge ourselves to be sharper, more flexible and faster moving. But then, you already know that, tea ninja ;)
Thanks Michelle and Guy. Tea ninja? Rather than trying to respond to all Guy’s interesting points, I’ll just say that Starbucks (even them) spending so much money on a specialty tea chain and then starting to or experimenting with changing or converting the stores into a ‘cafe’ concept bodes well for the potential of loose tea. They’ve also bought a juice company and not grown it much to date but they’re always someone to watch in terms of where trends may be going. As you know Guy, experience can be the best teacher and we both have learned from feet on floor what did and didn’t work…and hopefully are thinking creatively in the directions that did. I saw a surprising number of high school and college agers in our store..more than I had ever expected. They were intensely into great tea. We saw alot of things that surprised us. Most business is follow the leader… but being outside the box, being radically unique in a way that grabs, surprises and delights/excites people is the golden ring entrepreneurs reach for.
Right now we are seeing the growth of gluten-free, vegan, raw, organic….health. Remember any successful vegeterian restaurant chains? I don’t. There was one that got going and fizzled/disappeared. Now Veggie Grill is growing like wild-fire spurred on by the desire for healthy food and because our lifestyles have brought about dietary-induced serious medical problems, and because Veggie Grill knows how to make and market the food with mass appeal.
Times they are a changing and in a good way for tea. By the way, one of the Sharks wanted badly to invest in another tea concept….home parties for tea, in the Canadian version of that show, and lost out to two other Sharks (or Dragons up there) who wanted it enough to put in even more. These ‘guys’ are not dumb and invest where they see great return and growth opportunities.
Michelle, so true!
I can’t believe I missed this post back in the day. In response to the industry skeptics and those who haven’t made it… The industry may not have grown in the ways that some predicted, but it has BOOMED over the past 10 years. The number of SKUs on the shelves of grocers has doubled and doubled again, and dollar sales have grown even faster. The number of online retailers has tripled and the online revenue has quadrupled and quintupled. And even the number of profitable specialty tea stores has increased. Sure, many have closed, but many have opened, and the average sales of those in business today is much higher than the average back when I joined the industry in 2004. Guy, in the time since you closed your store, your neighbor (Capital Teas) has grown from 6 to 13 outlets.
The future remains bright, though without question the rising tides create a lot of waves!
Yes, Charles! Where have you been hiding..it’s good to see you posting! And wait until you see what our 1 min. by the cup, no hassle, no mess, no waste commercial tea brewer can do! :) No, I haven’t forgotten. I’ve always been positive about tea and about the fact that once our brewer is out there in foodservice, tea will have yet another boost! Talk to you someday…hopefully soon..about that! :) No cleaning leaves out between infusions. As simple as pushing a button and setting a timer. But, I ramble. :) And I’ve been watching what y’all are doing in the Teavana concept stores re: brewing. Onward and upward specialty tea!