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U.S. Specialty Tea:
Another False Start or Is It Real This Time?


No product has had more false starts than that of specialty tea. Nor has any product had a more devoted, patient following than the proponents of specialty tea. These long suffering supporters would cast an envious eye on “every dog” knowing that, according to long-accepted wisdom, that each would have its day. Now, it seems, even tea vendors and tea mavens will finally have theirs. The irony, of course, is that tea, next to water is still the most popular beverage in the world but that in much of North America, Western Europe and the U.K., specialty tea has had little more than the cult following it would said to have become known for…if it ever heretofore might have ever said to have become generally known at all.

But all that is changing now, and it’s probably not a false alarm this time, coffee houses are selling more and more tea and tea-based beverages, they are expanding their tea lines and selling more expensive teas. Tea, from green to black, has been getting great notices on its health-giving attributes and people have been reading these headlines and basing buying decisions on them. There are well over 1,000 tea salons in the U.S. today, and according to one person interviewed for this article the number is probably closer to 1,500. More and more tea-related products are being developed and sold. Better tea brewers are being placed on the market and more grocery store shelf space is being devoted to tea.

There is a lot for tea sellers to be happy about these days and a lot, too, for the consumer of fine teas and tea-flavored products. For once, as the following interviews attest, there’s a hopeful story to tell about tea.

Mike Spillane, president at the GS Haly Company in San Francisco, Calif. Discussed his new brand new Accu-Brew tea brewing system that he debuted at the SCAA conference in Boston in April.

“It’s actually pretty exciting,” Spillane said of his new product. “We have a new brewing device that actually came about when we found people were having trouble with to-go tea, so we wanted to try and facilitate that. The best dispenser now for to-go coffee is airpots, and so we felt that we tried to create something.”

Spillane explains that their original idea for the system, didn’t quite work out as well as they expected when they used hot water towers. “But we found out hot water towers are not very common in the industry, which surprises me, so that didn’t work. So we started to develop it with the brew-through coffee makers,” he said.

He explained that they adapted the unit to be used in the brew-through coffee makers. It took them a little while to perfect it, but eventually they found a good range of teas that worked well with his system. “They didn’t all work in this type of system, but some did. And so then we came up with teas too… it’s really a system where you use the infuser and certain teas that work in the infuser.”

The prerequisite for choosing the tea was that it would hold at least for an hour in the airpot. “The truth is, some of them hold for up to five or six hours in the airpot,” Spillane said. “Once we determined that, we made some modifications to the apparatus.”

Along the way, they made a discovery that their infuser works with fairly inexpensive coffee brewing machines. “Many of the equipment companies that we’ve been working with have simple coffee brewing machines that are very inexpensive,” he says. “Some of them are under $200, where you can use the stainless steel carafe; you pull the basket out of the unit and the carafe fits right in there with our infuser and it brews right into the carafe. So for around $200, you’ve got an automatic tea brewing system. That’s the best, it’s really cool. It’s really quick, it’s easy.”

Spillane sees his product being used for office service and he also believes retailers would benefit from it. “We’re excited because companies like AquaBrew who target office service, this is perfect for it. It is also good for retailers that want to have different varieties of, say, iced tea. They can use this infuser (manually through hot water towers or kettles or through the carafe brewer or airpots) and they can have diversified tea programs.”

Spillane also talked about some other companies that are also contributing some innovative products in the specialty tea industry. “There’s another one who’s been nibbling at the edges for a while and is a company called Affinitea,” he says. “They have - it’s kind of like an espresso machine, that brews tea in say, 45 seconds. It doesn’t work on every tea, but some teas are very good, especially herbal types.”

Spillane is excited about this product and believes it reinforces the notion that the industry is moving more towards the to-go drink. “I think Java City has been test marketing that for them and there’s a lot of interest in it,” he says of the Affinitea product. “It’s a brand new company on the market for that idea. They do have patents on it. But I believe that Tetley may have had a machine similar to that in Europe. They [Affinitea] made it faster than these people did.”

Spillane believes that the to-go segment of the tea market will continue to grow steadily and that’s one of the reasons why he developed Accu-Brew. “My thought has been for the last five years that the target market for additional sales of tea is foodservice. Tea has not been treated well in food service. The teabags have been an excuse or a crutch for people to have a tea program.

“I think foodservice is the future of the industry as a whole and it’s going to be supported by the specialty tea industry because that’s going to perpetrate the interest of tea,” he continues. “But I think once the restaurants get better equipment to be able to serve the tea, then it will change. It has actually been a crusade of mine to get the equipment companies around the country to make better tea equipment. That has really been my drive from the beginning.”

On a side note, Spillane was impressed by the fact that there recently was an entire convention dedicated to tea held recently in Las Vegas. “The fact is that they have now a dedicated tea convention that shows that somebody thinks that something’s going to happen in the near future,” he said. Noting that the convention predominately addressed retailers, he said, “That’s an indication that there’s a groundswell.”

David DeCandia, tea buyer at The Coffee Bean & Tea Leaf whose product support facilities are based out of Camarillo, Calif., cites Tea Lattes as the latest growing trend. “That’s one we actually pioneered,” he said. “I think we’ll probably see other people start to do that because it’s a way to have tea, but at the same time, people can have it in the latte form, whether it be with powder, milk, what not. That’s one thing that, for us especially has really taken off.”

Coffee Bean started with the Chai latte, but the tea latte came about when some of their customers began asking for a tea they drink normally in a latte. And from there, Coffee Bean opened up the whole line to whatever their customers wanted.

DeCandia explains the appeal of the tea latte, “For some people, certain teas, whether it be a green or something like that, may be a little tough to start off with, in terms of being grassy or earthy. But in a latte form, they get the benefit of the green tea, but it’s sweetened up with powder and milk.”

The latte has also opened up tea to a variety of drinkers. For those that are interested in trying something “trendy,” a tea latte sounds hipper and more acceptable that just a cup of tea. So with the latte, DeCandia thinks that will open up the market to a variety of consumers.

DeCandia has seen the consumption of premium whole leaf teas (as opposed to teabags) rise and he notes that green teas are by far the most popular with his customers. This is thanks to the many articles touting health benefits that are consistently appearing in periodicals.

Besides the highly publicized health benefits of tea, DeCandia also believes that people enjoy tea because it can be a more relaxing beverage than coffee. “It also allows people to slow down, sort of take time and reflect on life,” he said. “What it requires in terms of its preparation, as well as its drinking, it requires time - time for set up, time for the whole process. I think people need that now more than ever because of everything that’s going on.”

DeCandia does seem some problems that need to be overcome in the specialty tea industry. “The main thing with the whole specialty side is that, in my opinion, our problem is the fact that we don’t really have a validation or a measurement that sort of keeps everybody in line,” he said. “And I mean that in the sense of, if you’re carrying a whole leaf tea at your retail store, what standards are you keeping to keep the whole credibility of premium whole leaf teas up? If you’re carrying tea that’s two years old and you’re not rotating, it’s just basically going to set a bad example for premium whole leaf teas in general. That’s the one thing that’s lacking in terms of the industry.”

“It’s growing by leaps and bounds,”

Joe Simrany, president of the Tea Association of the USA said of the specialty tea industry. “It’s growing on many different fronts, from the standpoint of the purveyors of tea who are out there; the types of people who are selling tea.”

Simrany talked about how there are now a variety of methods that consumers have access to specialty tea, which include the Internet, tea salons and coffee houses. “You go back a few years ago and the thought of buying specialty tea over the Internet just wasn’t considered because there was no opportunity to do it. Today there are dozens of sites where you can buy specialty tea over the Internet. So it doesn’t matter, wherever you live, you’re going to have access to it. On top of that, I’ve estimated for a long time that there’s about a thousand freestanding tea salons out there, but the number in fact is closer to 1200 to 1500. And that’s freestanding tea salons and or specialty tea retailers. The third source is all the coffeehouses out there that have expanded their product offerings to include specialty tea, the granddaddy of them all, being Starbucks and their Tazo brand.

Simrany also mentions that there is a “flurry of activity in the afternoon tea area” as well. “Upscale restaurants are all molding into selling specialty tea because they finally understand they could make money doing it. It fills a void in the day part - after lunch and before the bar crowd - and many people have expanded their services to include afternoon tea as a result of that.”

He finds that consumers are very aware of the health benefits of tea and the fact that there continues to be a lot of articles written about tea and its benefits, continually raise awareness. “Awareness for tea is up and if you look at awareness, you’ve got to look towards the health benefits as being a major factor. Consumers have been literally bombarded with a wealth of information about why tea might also be a very health beverage for you. Much of that research has focused on green tea, but it’s beginning to expand to black tea as well.”

Simrany notes that ready to drink teas have dramatically expanded the target audience to include a much younger audience, even kids. “It’s much more family oriented than it ever has been,” he said. He also notes that the kind of people drinking tea has changed over the years with the different formats of tea.

He also sees a trend towards bubble tea, which was initially Asian, branching out to college communities and then even younger. He jokes that these drinks are targeted at people who “want to play with food.”

He talks about the nutraceuticals aspect of it, which is occurring even in ready-to-drink industry, where green tea is now the base for other flavors.” There’s a new line of soft drinks out there called Steap Green Tea Soda,” he said. “It’s basically green tea with cola, a 7-Up version, a root beer version, you name it. It’s a way to drink your soft drinks and at the same time get a healthy helping of anti-oxidants.”

“There’s a groundswell of entrepreneurial enthusiasm which we’re witnessing,” sums up. “We saw that out in Las Vegas and I expect we’re going to see it again in Boston. People are hungry, eager, passionate to get into the business.” Simrany points out that you don’t typically see this kind of enthusiasm in a lot of other industries. He is very pleased to see the growth in the specialty tea market. “The industry needed an infusion of new life because a lot of consumers have come to view tea as a commodity product. Many of these specialty teas and ready to drink teas are going to their job they’re thinking that perhaps we should give tea another thought. And perhaps even the health news that’s coming out will serve to make people reconsider their favorite beverage and perhaps move over to tea.”

Starbucks purchased Tazo in January 1999 after unsuccessfully trying to execute a tea program themselves. Steve Smith, the founder of Tazo said that Starbucks realized that Tazo’s brand and quality level was a “pretty darn good match with their customer base.” Tazo is operated out of Portland as a wholly owned subsidiary of Starbucks. Smith explains, “We do our own marketing and development and buy our own tea and pay our own bills and have a great relationship with a company that gets us a lot of exposure and gets the whole tea category a lot of exposure as well. I think we’ve more than tripled the tea business inside Starbucks retail stores on a per store basis since we were acquired.”

In addition to Starbucks, Tazo sells to Starbucks competitors as well, coffee roasters and distributors. Smith talks about a challenge within the industry that they are currently facing. “I do think, however, the more typical distribution channels and a typical grocer needs a little bit of a wake-up call in terms of what’s happening at the top tier of specialty tea,” Smith says. “They still believe, I think, it’s the same kind of opportunity or the same kind of landscape as it was in the 70s and 80s when the more traditional brands were in the market. Now there are other brands. And I really believe that the only way the up-end specialty tea brand can get traction in that arena is to enlighten the retailer that things aren’t the same.”

“Sometimes these retailers treat specialty tea as a specialty item.” Smith explains, “It is a specialty item, but if it’s going to go into a grocery section where you’re going to have the best chance of introducing new consumers to better tasting tea, it needs to be marketed with the same sort of margin as other grocery type items.” Smith says that because it is perceived as specialty, that translates to some people as “high price, slow movement.”

“New younger more aggressive brands come in and instead of the distributor taking a twenty five percent gross margin to deliver it to the store, they take a thirty five,” Smith says. “And instead of the retailer taking a thirty to thirty five, he takes forty five because they assume that the volume isn’t going to be there.” This type of mentality basically creates a situation for the consumer where they make it hard for the more mainstream consumer to make the jump to specialty tea. “If we’re having that challenge, given the distribution volume that we have, I can imagine that a lot of the smaller tea brands are having that challenge as well,” he says.

“It used to be that natural food stores were not very competitive with grocery stores,” Smith recalls. “Now natural food stores are these best place in America, besides Starbucks, of course, to buy some of the best selection of specialty teas. Their distribution system allows them to get their product into the channel relatively cost effectively.” Smith credits these kinds of stores for treating specialty tea properly.

While Smith believes that tea consumption is growing, he also thinks that people need to look ahead. “The usual outlets that you’ll find specialty tea, natural food stores, small retail shops continues to grow. But there’s a certain amount of saturation there and a lot of people, small and large, in the specialty tea community are looking at where they go next. Where does the next level of growth come from? Foodservice. I think there’s still a great opportunity in food service and part of that is in more of a mainstream retail.

Another new product on the market is the Tea Wheel, created by a company called Tea Savoir Faire in Vista, California, which was established in 1999 as a firm offering programs on the history, tasting, and protocol of tea.

Donis W. Ford, founder and president of the company explained that the Tea Wheel was designed for the general consumer to answer some of their typical questions about tea. These questions might include: Where does it come from? What does it taste like? What tastes good with it? The Wheel features flavor profiles of 22 green, black, oolong, and white teas, food complements, and country of origin. In addition, the Tea Wheel presents a chart with suggested steeping times and water temperature for the various types of tea.

Ford markets the Tea Wheel to tearoom owners and she says the response so far has been strong. They also plan to do initial marketing that will target larger outlets such as gift shops and bookstores.

The tea tales this year are not only upbeat but extremely encouraging to anyone either in the tea business or considering entering it. Consumers, of course, will be the big winners but the patient and dogged efforts of tea pioneers, several of whom were interviewed for this article, deserve a lot of credit for sticking to their guns, even when there seemed to be little reason to do so. But there’s no miracle here (lest any Cubs fans reading this article might start to take heart!) what’s happening with tea today is the logical outcome of the tea proponents’ years of hard work and belief in their product. Fine teas are great tasting stuff, pure and simple, it’s just taking a little time for them to catch on...

Timothy J. Castle is the president of Castle Communications, a company specializing in marketing and public relations for the coffee and tea industries. He is also the co-author (with Joan Nielsen) of The Great Coffee Book, recently published by Ten Speed Press, and the author of The Perfect Cup (Perseus Books). He may be reached at: (310) 479-7370 or via E-mail at: qahwah@aol.com

Tea & Coffee - June/July, 2003


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