We’ve all heard of the Amazon effect, and almost no business is immune, including the tea business. While it is platform to sell various types of tea, in 2017 Amazon announced it would enter some snack and ready to eat food markets, including selling their own house tea brand. What does this mean and what are the implications for the tea industry?
FIRST – WHAT ARE THE TEAS?
Marketed as the “Wickedly Prime” brand, these are a collection of teas covering all the bases – black, oolong, herbal, and even matcha. Other than matcha these teas are sold in 15 count boxes of sachets.
BAGGED TEA?
Bagged tea is often looked down upon as inferior tea, and for the huge mega brands, this is and continues to be true. The reason is that fannings or dust grade tea is used, which is a lower quality compared to what the loose market enjoys. However, some loose tea can also be put in bags for convenience sake, and this is exactly what Amazon has done.
BAGGED LOOSE TEA LIMITATIONS
In general, only certain types of loose teas can be put into bags. These are usually simpler blends, ones without lots of larger chunks, nut slices or types of tea that grow and expand significantly (think some of the pearl style teas and oolongs) as well as the rare and exotic types that are long whole leaf styles. Manufacturing typically makes it economically infeasible to have a very large selection. Loose tea can be blended in small or large quantities. But the production commitment is higher with bagged teas, so whatever you are going to bag, it needs to be a good seller.
A popular blend like Snowflake tea with lots of chunky and random shaped ingredients along with nuts are not tea bag friendly.
In theory, you could start a tea company in your basement without any raw materials. You can develop a blend and contract the bagging process out to someone else. This is the same as what Apple does. They design the iPhone in California, and then the actual manufacturing gets done at Foxconn over in China.
When contracting out you can send your raw materials directly over to the bagging company, or many of them have a variety of ‘house’ ingredients you can arrange in any way you like and then settle on a formula. They take care of the rest – including all the packaging. The barrier to entry is very low when it comes to making a custom tea product. The only limitation is if you can meet the minimum runs that most of the contract baggers require – which can vary greatly, but 40,000 bags are usually the starting point depending on the tea. With those minimums, it’s very difficult to have an enormous selection of bagged teas, especially when you are looking at rare and exotic teas. For this reason, the major loose leaf tea blenders only make about 10% of their teas available in bagged form.
Back to Amazon – for a company of that size, it is pretty easy to get a tea blend ready with a few phone calls. This is also the model that Trader Joe’s uses. Trader Joe’s doesn’t have its own massive manufacturing and R&D facility. Much of their products are simply rebranded products from other companies. The very notion of a brand is shifting rapidly. Old brands that have spent billions on developing their name are seeing market share eroded by store brands.
THE COST
Cost wise, the Wickedly Prime tea runs for roughly $16 per 45 bags. (they usually sell 3 boxes at a time). The total weight is about 4.8 ounces total. Each box weighs 1.6 ounces, so just doing the math each bag has about a tenth of an ounce of tea in it. Instructions call for 8 ounces of water. Bagged tea usually costs more overall, and in this case, it comes out to be 35 cents a serving. Keep in mind that a lot of tea drinkers like me like to down 16 ounces at a clip. A 45-day supply would really be just over 3 weeks. Which is just about what a typical 4-ounce bag of loose tea will last if you drink about 16 ounces of it per day. The loose tea equivalents of the amazon blends I see typically range from $8-$12.
IS IT GOOD?
Like any food product, the reviews vary. Overall, they are meant to please a general audience and they seem to be doing just that with crowd-friendly blends.
MATCHA…IS THE EXCEPTION
The flavored matcha is the one area we would be cautious of. The reason? The ingredients:
GREEN TEA MATCHA POWDER, TAPIOCA MALTODEXTRIN, SILICON DIOXIDE, NATURAL FLAVORS.
In general, a good quality flavored matcha should not have anything besides the tea and natural flavors.
PRODUCT SUPPORT
With a big company like Amazon, forget about getting a lot of information or asking questions. As you can see below, the questions are answered by other users, NOT Amazon themselves. If you need questions answered about the source, ingredients or anything important, you’ll have a hard time.
Question:
Is this tea Fair Trade certified?
Answer:
It does not state Fair Trade on the box
By Robin B. on May 15, 2017
Answer:
It isn’t listed and personally I don’t care. It is so good and I don’t drink it with cream or milk or sugar or any sweetener on a paleo like diet and I’ve been losing weight steadily. This is quite good. Sorry can’t answer your carb question.
By PHT on July 11, 2017
Question:
What is the country of origin?
Answer:
Sorry, no idea. Love the hibiscus flavor though. Mango OK.
By Marion vonBeck on November 21, 2017
Question:
Is it just me or does the packaging seem extremely environmentally unfriendly?
Answer:
I do agree. Lots of paper and plastic!
By E Mo on November 1, 2017
THE CONCLUSION
For someone that is looking for a casual tea, there doesn’t seem to be anything wrong with the Amazon tea, except the matcha. It seems to be geared toward the less experienced tea person, or someone that values convenience over price. But if you are looking to expand your horizons to higher end teas, want detailed sourcing information, or get questions answered by someone knowledgeable, then the recommendation is to go to a reputable tea shop (online or local). At the very least, Amazon teas are a good stepping stone for a beginner, that eventually will graduate into the more premium market.
I think that is a more than fair review. Personally, I don’t like the package. I don’t like the responses from the questions. I don’t like that Amazon is taking over everything and I resent that they’ve impinged on my beloved tea. Why am I feeling so annoyed? I think it’s about a lot more than tea. Why can’t they just keep their hands off of tea? When will their grasp stop already?
Adrian Ricci wrote on facebook
Getting involved in so many different areas of business was never good for any company. Tea is a special drink which needs special attention and Teavana is a great example of that. Too bad that Amazon will hurt hundreds of small tea shops untill they realize that getting involved in this business was not worthy enough.
Wal-Mart did the same thing to small companies in the bricks and mortar world, and now even they have to contend with Amazon. Funny how what goes around comes around, even for 800 lb. gorillas. Who will start the next Amazon? Elon Musk?
I subscribe to some premium newsletters. They are not political, but take a non-biased approach to analyze long term political, economical, cultural trends. The purpose is to identify investment opportunities, but also filter out the noise. In the 90’s they declared the internet the modern version of the Gutenberg printing press. Shortly thereafter they also declared ‘death of the middleman’.
People demonized walmart for perceived destruction of smaller mom-and-pop businesses. Some of it was true, but there was a lot that wasn’t. Many businesses were already on the decline by then and just needed a catalyst to put them out of business. I would debate (I don’t like to use the term argue) people and point out that supermarkets did the same thing to independent butchers, grocers, etc. There was a day where you would spend the entire day shopping – get produce from one place, meat from another, fish from another, dry goods from another. The fact that Walmart was the dominant player in the big box wave, people painted a target on them. But I also asked, you don’t do the same with every other big box store – home depot, target, k-mart, etc? Their argument starts to break down because they only see what is going on now in front of them, and not what history has shown.
I also pointed out that they don’t demonize amazon when they are a far bigger threat to smaller businesses who do not change. But you don’t see giant amazon stores popping up, so it’s out of sight, out of mind – but the threat is very real. Jeff Bezos said once ‘your margin is my opportunity’ or something like that.
There is a huge disruption occurring right now, and it will take out a lot of smaller players. Specifically with the tea industry, one area that has a big target is the tea accessories area. If you are a mom-and-pop tea shop, the real issue is with pots, infusers and other accessories. The old model of buying from a general tea wholesaler, marking up and selling at your store is over. Some places sell WHOLESALE what you can buy on amazon retail (or close to it – maybe $1 profit). Don’t forget amazon takes a cut of every sale, so some of these vendors make virtually nothing.
There are also issues with quality. One brands tea charges like $11 for a pound of gunpowder green tea. Given shipping costs, amazon fees, he would have to be getting this tea for like $2-$3 a pound to make $2 in profit.
There is also a growing issue of people selling the exact same thing, but not under a particular brand or label.
Amazon, despite what is going on will not grow infinity. No company does, and with the Walmart, they actually started closing stores and are having a hard time competing with amazon on-line.
But the amazon effects does have implications for the tea industry. I saw someone at my store mention buying matcha whisks on amazon. Why? I was buying mine from a traditional tea wholesaler. Amazon was selling it for like a buck more than what my wholesaler was charging. I knew at that point I needed to go factory direct.This will also have a big impact on tea wholesalers as well.