The Giants of the Tea Industry

As the owner of two small tea importing companies, striving to grow and thrive each year can be a monumental task. As is the case with all segments of the business world, there is a distinct hierarchy. Some companies are huge. They span the globe and seem to have unlimited resources. Other companies work hard at putting out a great product, but are limited by real world logistics. We definitely fit into the latter category. With this in mind, it is always interesting to hear about those global tea companies who are working to spread the word about high quality teas. The emergence of Teavana in numerous mall locations over the years and their status as a publicly traded company indicates that there is a definite potential for the success of the upscale tea shop concept. The Teavana model is unique and although it is not a personal favorite of mine, it does show that there is a real interest in fine teas all over our country. With this in mind, several larger tea importing firms (Adagio, Argo Tea Cafe, Harney & Sons, David's Tea, Teavalon) have opened their own stand alone shops in various locations in the US.

With these tea shop expansions on their mind, it was no surprise that Starbuck's has recently made a big push to reposition it's Tazo Tea brand for extensive growth over the next few years. Recent moves inside the Starbucks corporate offices and the accelerating growth of highly profitable tea retail chains such as Teavana Holdings, suggests Starbucks executives believe the time is right to boost their investment in Tazo. This became evident last week, when they  hired tea retail expert Charles Cain as Vice President, Tazo Merchant and Operations. Cain, the former business development director at Adagio Teas, has opened two brick and mortar showcases in Naperville and Skokie, Ill. with a third Adagio store to open in downtown Chicago later this month.

Tea is currently only the 7th most consumed beverage in the U.S. but it’s the most consumed in the world. As the U.S. is the leading consuming nation in the world, these market forces are converging and it won’t be long before tea overtakes coffee as America’s hot drink of choice. Starbucks and Tazo definitely have this goal in their sites and we can only imagine the endless possibilities that lay ahead of them.

Now a company as large as Starbucks can reach out to vendors, suppliers and customers in a way that so many companies could not even imagine. At a recent seminar about Retail Tea Trends we attended at the World Tea Expo East, the effect of these large tea chains on the consumer and the smaller neighborhood tea room or specialty food store was touched upon. Many small business owners saw the "fast food" tea location as a large competitor that they could never touch and one that would ultimately take away their customer base. This does sound like a logical explanation, but many in the room also saw the "Teavana" model as a distinct advantage for independents. Just think about it. A local tea rooms prices will be lower since you are not paying the huge mall rent. Their tea stocks will be fresher since they can control inventory much better than a huge company can, especially one that is expanding so quickly. Then there is the most important factor of all, the overall customer experience. There is a greater chance that a customer who had a positive experience when buying their teas will return. It is the overall customer experience at Teavana that has soured many emerging tea consumers. One person at the seminar put it best when they said "let your customers visit that new flashy tea store in the mall. One visit and they will be right back to your location and even more thankful that you are there!"

It will be interesting to see how Starbucks handles the Tazo expansion. Given their diligent approach to customer service over the years and the addition of Charles Cain to the mix, I am sure they will be marketing something very special.

Information sourced from World Tea News, October 10, 2011