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Expansion of specialty tea in retail venues: as specialty tea increases in popularity, companies are looking for different ways to expand and benefit from this rapid growth.

INCREASING THE NUMBER OF RETAIL venues does more than just sell additional tea. Such outlets, for consumer shopping, exposes potential first-time buyers to a lifetime of tea drinking. Thus, extra points-of-contact mean entirely new customers. The picture looks good for specialty tea. One big current story on expansion of premium tea, is the Tazo move into Kraft stores.

Tazo is a wholly owned subsidiary of the famously successful Starbucks coffee company. Steven Smith, who holds the title of creative director, started Tazo. It was later sold to Starbucks under Smith's reign. The current president is Tal Johnson. On the Kraft side, the negotiation leader is Liz Smith, group vice president and president of US Beverages & Grocery Sectors. Smith states, "More Americans are drinking tea, making tea a growth category at retail." As a sign of how vastly significant this move is for the tea industry, the governor of Oregon has called Tazo "an outstanding brand" and said the new deal is "good for Oregon and job growth in our state."

You do not usually get governors announcing the latest tea innovation, and mentioning it will have statewide (positive) impact. The expansion means potentially millions of additional consumer contacts for Tazo. The arrangement, labeled a "new licensing agreement," means thousands of extra locations in grocery stores across the U.S. Smith says, "Through this partnership, Kraft can leverage its unparalleled expertise in the grocery channel to successfully build the Tazo grocery line nationwide."

Tazo uses the trademarked slogan "The Reincarnation of Tea," and was founded in 1994, quickly and somewhat quietly becoming a genuine powerhouse in specialty tea. Few in the industry realize how extensive Tazo already has grown.

Looking solely at the Starbucks forum, we see Tazo having over 7,500 venues. Also, Tazo sells in restaurants, cafes, resorts, specialty and natural/health food stores. They blend their tea and herbal products in Portland. The range includes filterbag, loose leaf, tea lattes, and ice & juiced tea in bottles.

Starbucks has a degree of expansion so great it is difficult to quantify. A marketing specialist for the company said of the number of Starbucks stores, "It seems to increase by the day. We generally do not pinpoint a specific number of stores in a press release, as it constantly changes."

The change referred to is overwhelmingly on the upside. Nothing matches this advancement of high-quality tea offered to the public. Tazo is available in major natural food chains, including Whole Foods and Wild Oats. It is even an international brand, selling in the U.K. and Canada.

Tazo's best-selling tea is "Awake," which by its name implies breakfast. Indeed, on the box front is the label, "A perfectly balanced breakfast tea of bold character." We will see that breakfast teas are consistently among the most successfully marketed specialty teas. Awake is a blend of Assam and Ceylon.

Tazo's parent, Starbucks, is rightfully in the news not just for tea & coffee, but also for good deeds. They have given $100,000 to the South Asian tsunami disaster, plus certain proceeds from store sales. Starbucksisa publicly held company, sold on the NASDAQ stock exchange. The marriage with Tazo continues to bring specialty tea into new territory. The use of Kraft as a forum is a wonderful stroke for the specialty tea business. I can think of no other developments of similar scope for the trade occurring today.

Other specialty teas certainly sell in grocery stores, most notably Twinings. Often the only tea sold loose in tins that a U.S. consumer ever sees, Twinings is based in Greensboro, North Carolina, and is labeled the R. Twining & Co, Ltd.

Twinings' arm in the U.S. is now undergoing a radical restructuring. The new head of marketing is Kenneth Leiter. He has a different philosophy from the previous team, and leads a changed staff. Leiter is not afraid to use the word "aggressive," regarding his aims toward the retail world. Specific targets are club stores and natural/health food stores. However, Ken is now developing plans toward a wide range of venues. Twinings is one of the few specialty teas that can be seen in diverse grocery store chains. Another recent corporate move is the headquarters' control over Ovaltine, which was bought for more than $270 million. The entire company is owned by Associated British Food.

Twinings has remarkable attention to detail, including re-exportation of tea from the nation of its base, the U.K., to the U.S. Twinings in the U.S. also covers Canada. In keeping with the fact that tea in the U.S. is mostly a convenience item, the overwhelming majority of these sales are in teabag format. I have met an actual Mr. Twining, a tenth-generation--brilliant public relations move for the company. Twinings, by having this tradition, shows how specialty tea can have a distinctly British approach beyond any single tea style.

Ten generations in business is unique in the U.S., while in the U.K. it is more common. There is more time in a person's day allotted for tea enjoyment in so much of the world outside the U.S.; to savor not just the tea, but the cultural traditions and history surrounding the beverage. The cultural support for special tea is not that widespread in the U.S. When I was first in Asia, the premium-tea-producing leaders there would often focus on Germany or the U.K., or discuss new progress into Japan. Lately, more attention has been paid to the U.S.

Two of the leaders in specialty tea sales in the U.S., Earl Grey and English Breakfast, show--by their very names--an English heritage. Tea in the U.S., when associated with culture, is most likely linked with Britain. I associate the history really with its Asian origins. Furthermore, I am no longer amazed when a typical specialty consumer refers to the UK tradition of "high tea" as high in status. This is such a common misconception, since the "high" basically means a time later in the day.

Specialty tea can best expand sales by keeping a focus on prestige, and on pampering the consumer with something, well, special. The packaging must not only be visually attractive, but also consistent across a company's entire line. This consistency is necessary to create customer loyalty. One company with great loyalty is Harney and Sons, based in Millerton, New York, with a 90,000 square foot plant. Harney is one of the largest specialty enterprises in the nation that deals with truly super-premium tea. Mike Harney reports their sales are much more than 8 million dollars per year.

Harney and Sons' staff is at just under 100 people. Many specialty tea businesses have less than one-tenth this number. They state that teabags sell as well as ice teas, which fits nicely with the American love of convenience and speed. Also selling well are flavored black teas. "Hot Cinnamon Spice," Harney points out, "is a very good seller." He indicated almost the full range of retail venues as areas of Harney retail expansion: specialty stores, catalogue and foodservice.

For a truly special bottled tea, Honest Tea has gained wonderful new outlets this year. Their product is now available on Independence Air. Airlines are remarkably desirable, as the demographic of flyers is perfect for specialty tea to target and passengers tend to have disposable income. Another new retail site is the prestigious Smithsonian Institution. Also, for a very wide audience, Honest Tea will sell in all 1,320 Target stores. Their top sellers are Lori's Lemon, Peach Oolalong (a Fair Trade item) and Black Forest Berry, all in plastic bottles. Note again the importance of flavors.

The Republic of Tea is another successful specialty tea company. They quixotically have developed their own language, in keeping with their image as a republic. Executives are called "ministers" at the Republic of Tea, which started in California. A Republic marketing analyst used the term "early adopters" to describe those first attracted to specialty teas, and located these trendy types in the West Coast. Republic of Tea's base is still in the West and especially the Northeast, but it is selling in all 50 states and Canada. Their expansion target is the Midwest and Southeast.

Numi is a smaller specialty tea company. The two owners are brother and sister, Reem and Ahmed Rahim. The business has 17 employees that propel the product to all 50 states and 15 nations, such as Canada, Russia, Singapore, France, Germany and Japan. Their top seller is Rooibos, from South Africa. They have expanded into natural/health food stores, including Wild Oats and Whole Foods. Other venues include 338 Stop & Shop's, 170 Hannaford Brothers Supermarkets, Giant Eagle and 58 Wegmans Natures Marketplace. Further diversification includes private labels, such as Trader Joe's. This profile demonstrates how to become a successful specialty tea company.

Numi is now targeting Safeway, a huge mainstream grocery chain. If negotiations are successful, then progress will be made in exposing a wider public to specialty tea. Another goal is increasing international sales. They are also launching a new super-premium line consisting of "artisan flowering teas." These teas are genuinely super-premium, in terms of the careful attention in manufacture. Some specialty tea companies label themselves as super-premium, when I would instead categorize them as only premium. It is nice to see a super-premium tea married to a company with good marketing savvy skills.

The Numi artisan teas are hand-tied and blossom in hot water. They bloom into beautiful shapes, selling in 10-30 counts in a bamboo case for $14-30. Not cheap, but directly targeted toward the bracket of upscale women and anyone looking for a memorable gift. Numi plans to have its fans move from loose leaf to their flower leaf. We will see later in 2005 if "flower leaf" becomes a more well known phrase in the specialty tea business. Although Reem predicts that the future for this sector will include more men buying the product, she agrees that most of their specialty tea is bought by women. One factor promoting this is that women are the demographic tending to shop at natural/health food stores.

Numi generally sells organic teas. Reem says, "People are looking for better quality tea." This is a succinct definition of good news for the specialty trade.

Some wonder if the economy, which has not done as well since the bubble burst around 1999, would hurt the more expensive specialty tea realm. It was in that same year that Numi was founded. Reem adds "We came into business at a good time." I assume the affluent were above taking an economic hit and remained willing to spend to pamper themselves with fine tea. In a further sign of success, especially for a smaller company, Numi plans to give a yet undefined percent of profit to the South Asian tsunami victims.

Several trends appear in the expansion of specialty tea in retail venues. Many thousands of stores that sell primarily groceries or coffee, now also sell specialty tea. Bringing the product more into middle class life. A second major development is the natural/health food marketplace, which is an excellent demographic for those with disposable income. A third role is the importance of flavors. Another aspect is the generally increasing size of the companies I contacted. This is a very positive sign. The outlook for specialty tea seems favorable. It is hard to know if there is room for additional companies, but those that are already successful have a good prognosis for the long term.
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Title Annotation:cupService
Author:Altman, Randy
Publication:Tea & Coffee Trade Journal
Geographic Code:1USA
Date:Apr 20, 2005
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