teavanaTwo retail specialty tea concepts have become public companies since 2011.  One was Teavana, now owned by Starbucks, and one very recently joined the stock exchange: David’s Tea, headquartered in Canada, with stores and growth aspirations in the United States as well.  Most consumers in this country have probably never heard of David’s, and many have still not heard of Teavana.  It’s amazing, then, that tea concepts were able to draw such attention from market investors.

This was a major vote of confidence in the viability of tea retailing from people willing to put their money on the ‘tea horse’.For anyone into, or contemplating getting into, specialty tea retailing, it is interesting to look at these IPO’s.  In their prospectus information, the two companies give insights that can be helpful to smaller retailers, such as per store sales and net profit.  These provide a yardstick to measure your own numbers.   One chain has a significantly higher net profit than the other.  Each has stellar per store sales.  It’s worth reading the prospectus of both if you are in or thinking of entering the tea retail store niche or if you just enjoy reading about successful businesses.

Until these two companies came on the scene (Teavana in the late 1990’s), loose/specialty tea was more or less a subculture in this country, almost an underground, word-of-mouth experience.  Most tea retail shops had either a very Asian aesthetic or a British, frilly afternoon tea theme.  A few modern specialty tea retailers, like Argo Tea in Chicago, began to pop up in the early 2000’s but stayed local or regional and privately owned.  There was nothing but a good upward trend in loose tea sales to indicate that anyone would or could make an international retail thrust with tea as a theme any time soon.   What a few short years can do!

davidsteaBoth of these public companies appear to be going in the direction of tea cafe with the inclusion of tea-friendly foods/desserts.  This will take Teavana down a different path than the ‘mall store’/non-cafe model it began with and which made it so successful.  Starbucks, more than anyone, knows how to make a cafe concept successful, so it will be educational to see how they move forward in this regard.  David’s seems to be less aggressive in the food area and I have read articles where the major shareholder and co-founder of David’s implies the company wants to be seen more as a store than a cafe concept.  In the food business, labor and waste are two things that can be problematic.  I was interested to read about the Milk Bar concept in New York, part of David Chang’s  Momofuku restaurant empire, which has been a real phenomenon in the bakery cafe niche, and what they have  done to deal with these areas  and how that could be translated into tea stores.

One problem self-funded independents have in any retailing niche is location, both because of the expense of great locations and the exclusion clauses written into competitors’ leases keeping them out.  This has been solved for many artisan companies by staying away from the suburban malls and plazas and going into trendy downtown areas of major cities, where individually owned buildings provide respite and where young Millenials gravitate, a perfect demographic for unique artisan businesses.  There, fledgling companies can gain a loyal following, social media word-of-mouth, and begin to build brand identity, like Stumptown Coffee, Philz Coffee, or Intelligentsia, and thereby attract funding to scale.

At any rate, I find it exciting to see tea becoming more and more recognized in its own right, instead of a sidekick for coffee.  I love that it is possible for tea to be a viable stand-alone retail concept.  Do you have tea retail aspirations?  I’d love to hear about them and your thoughts on the future for this incredibly exciting niche.

However ‘pure’ and artisan our vision of what specialty tea might be, large multinationals are already looking at getting into tea retail chains (evidenced by Unilever’s purchase of T2 out of Australia–an interesting story in itself), and more most likely will be following the successful IPO’s of Teavana and David’s, and all will be poring over mountains of statistical data and demographic surveys in their corporate quest for dominance of the niche.  I love the new TV commercials for a bottled ice tea that show it as simple, almost innocent in its purity.  Who could guess that it is owned by the largest beverage company in the world, Coca-Cola, with fifteen of their many, many brands each already reaching a billion dollars in sales?

Specialty tea has officially joined the major leagues.