Jewish World Review

JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
James Glassman
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Jackie Mason
Chris Matthews
Michael Medved
MUGGER
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Roger Simon
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports


Battle brews as tea entrepreneurs seek a taste of coffee's success

http://www.jewishworldreview.com | (KRT) As a former management consultant, Daniel Lindwasser knows all about business models and benchmarking. So last summer when Lindwasser opened Argo Tea, a cafe in Lincoln Park, Ill., his friends could be excused for thinking it was a lark, or at worst, a midlife crisis.

It is neither.

Lindwasser and his two partners, former management consultants themselves, are trying to create a workable model to deliver new kinds of tea drinks to harried consumers in search of a peaceful moment.

"Ultimately, our goal is to be the Starbucks of tea," says Lindwasser.

A wave of new entrepreneurs has the same idea.

On the East Coast, a company called Tealuxe has two tearooms in Boston, one in Providence, R.H., and is looking to franchise its concept.

On the West Coast, tea shops dot the urban landscape in Los Angeles, San Francisco and Portland, Ore. - home of Oregon Chai and Tazo, two tea producers - claims bragging rights as the capital of tea the way Seattle has cornered coffee.

"The race is on to see who can get a successful tea chain in gear," says Brian Keating, tea expert and marketing analyst with the Sage Group in Seattle. "The question is who and when, not if."

No question, tea is hot.

Wholesale sales of tea reached $5.3 billion at the end of 2002, more than double the almost $2 billion sold at the end of 1990, according to the Tea Council of the United States.

The number of tearooms offering sit-down service rose 15 percent this year, to about 1,100, while the number of shops selling loose tea and accessories rose 15 percent, to more than 200.

Donate to JWR

Driving the increased interest is a stream of studies claiming tea provides a long list of health benefits, everything from lowering cholesterol to eliminating free radicals that cause cancer to improving bad breath.

"Seventy-six million Baby Boomers are trying to stay healthier than their folks," said Keating. "My doctor is recommending green tea. It's a dynamic way to get antioxidants without taking a pill or eating vegetables."

An increase in Asian immigrants is contributing as well. In many Asian countries, tea is the national beverage, a tradition that new citizens from India, Vietnam and China have brought with them and shared with others through a growing number of Asian restaurants.

Bon Appetit magazine recently named "green tea" the best flavor of the year as more chefs at high-end eateries incorporate its subtle attributes in recipes.

Green tea has even become one of the most popular scents for soaps and candles at L'Occitane, the French purveyor of skin care and fragrance products.

But tea's increasing popularity is broader based than that.

A new generation of specialty teas tastes better than the dusty tea bags most Americans grew up with. These nouveau teas are sweetened, sometimes spiced and mixed with milk, and in some cases shaken like martinis with sparkling water or fruit juices.

Now the rest of the country has discovered what Southerners knew all along: Dumping a bunch of sugar into tea makes it taste better. Just ask the teenage crowd slurping heavily sweetened bubble tea with tapioca pearls or knocking back Snapple's tea-based beverages.

Starbucks chief Howard Schultz bought out a small Seattle chain of coffeehouses and built a $12 billion empire by adding steamed milk to a commodity beverage and delivering it in a hip environment complete with jazz music and bistro tables.

But with more than 7,000 locations worldwide, Starbucks' growth potential is limited. It needs a steady stream of new products and, possibly, a new retail concept if it wants to keep its top line expanding.

Tea's potential has not been lost on Schultz.

Five years ago Starbucks acquired Tazo, a wholesaler of specialty tea. Now tea beverages, including chai tea, which is mixed with milk and spices, account for about 7 percent of Starbucks' revenue, up from only 1 percent before the Tazo acquisition.

"We've seen significant growth," said Steven Smith, Tazo's founder, who stayed on to run the company as a Starbucks unit after the acquisition.

"Shaken iced tea with fruit juice was a phenomenal tea last summer," he said. "It adds a sense of theater, but it does more than that. It incorporates oxygen into the beverage and makes it taste better."

Building on that success, Starbucks is adding new Tazo teas to its offerings, including decaf chai and a vanilla tea latte concentrate that customers can purchase and make at home.

If someone is going to create the Starbucks of tea, it could very well be Starbucks. The company could easily roll out a chain of Tazo tea shops, industry experts say.

Tazo's Smith agrees: "Starbucks understands real estate and how to operate a business. Have we looked at this opportunity? Sure. We have looked at it periodically. It's not necessarily on our radar screen, but if anybody could do it in a big way, it would be us."

Smith tinkered with retail tea prototypes back when he was starting Tazo in the mid-1990s, including an outdoor tea cafe and a tea bar.

The business isn't as easy as it looks, he says.

Coffee consumption is driven by habit. Most folks are programmed to start their day with a cup of coffee.

Not so with tea drinkers. Some may use it as an afternoon pick-me-up or a calming ritual before bedtime. Many folks only drink tea during cold weather, making the business more seasonal.

___

And tea drinkers are not into quick service the way coffee drinkers are. Pots of tea leaves take time to steep and need to be made individually, which slows down service.

On top of that, tea drinkers like to linger. Slowing down is part of the experience, tea experts say, and that means tea shops may need a lot of seating and may have trouble turning tables.

There is an even bigger challenge, Smith says: Uncoupling tea from the image of old ladies, china cups and doilies without losing the quaintness of the tea ritual.

"We've been too serious about the tea business for too long," said Smith. "I would counsel people to make tea more accessible, make it more approachable without losing the mystery and the magic."

That's what the guys behind Argo Tea say they are trying to do.

Their tea is delivered quickly in a Starbucks-like paper cup. No china here. Employees brew strong tea syrups early in the day, which are diluted with hot or cold liquids when an order is placed, speeding up service.

Customers can settle into a small selection of upholstered chairs to do their sipping. It looks a lot like Starbucks with tea.

But Argo's founders hope to win customer loyalty with signature drinks Starbucks doesn't have, such as Carolina Honey Breeze, a blend of honey, tea and lemon, and Tea Squeeze, a mix of hibiscus iced tea and lemonade.

Traditional tea ambience is provided by a selection of loose teas that can be purchased in bulk as well as a selection of teapots and infusers. Seats are in short supply on the weekends.

"We want to capture the masses, although I don't like that term," co-owner Lindwasser said. "We're not trying to be a traditional tea house."

Although it has been around only six months, Argo Tea is beating its business plan.

Now that they know a single store can work, Lindwasser and his partners want to create a cluster of tea shops in Chicago. Then they will look at other markets.

So far, Argo Tea's founders have financed the business themselves, but they may look at bringing in venture capitalists to boost their development in the coming year, Lindwasser said.

___

Not everyone in the tea business thinks the Starbucks model is a good fit with a beverage as diverse and quirky as tea.

John Wallace started Aion Antiquities and Teahouse in Chicago because he wanted a space to sell rare prints and antiquities such as Roman glass. He thought he might as well serve something to eat and drink.

It's the tea business that took off.

"We have high tea on the menu anytime. A year later, I'm doing a ton of bridal and baby showers. The antiquities are here as decor."

Aion's tea is served in glass mugs so customers can see the color of the tea. Green and white teas are steeped in Yixing clay pots from China. Black tea would stain the delicate pots.

The idea of building a chain has no appeal, Wallace says. "I find people are looking for something that isn't a cookie-cutter franchise environment. The environment is really important."

Every weekday JewishWorldReview.com publishes what many in Washington and in the media consider "must reading." Sign up for the daily JWR update. It's free. Just click here.


Comment by clicking here.

Up

© 2004, Chicago Tribune Distributed by Knight Ridder/Tribune Information Services