2011 Tea Trends: Seven Cups makes a major shift
Old Mengku Puer Tea Pickers
First a disclaimer, there is no statistical evidence involved in this analysis of trends in the tea industry. What I am going to offer here is more like a farmer looking at signs in the environment and predicting the weather. There are some things that have happened in the industry recently that I think are significant indicators of where things will be going. Let me tell you what has happened and why I think it is important. In fact, some trends I’m seeing are important enough to cause me to change our company’s strategy.
First of all, Teavana is spreading like a juggernaut across the country. I am happy to see their success. It expands the market. Regardless of how one views the quality of their teas, what is important is that they are charging and getting prices that you would pay for better quality tea. Adagio is trying to go after Teavana with retail outlets of their own, hoping that having a little better quality will earn them some of Teavana’s market share. They have also added some more expensive teas to their offerings that they are also selling at a much higher price point. There are rumors that Specialty Teas was bought out by Teavana, but I don’t know whether that is true or not, in order to bring some better quality tea into their catalogue.
The other major event that was interesting to me was the departure of TeaGschwendner from the American retail market. The biggest tea retailer in Europe has been failing in its effort to sell profitable franchises across the US. They did a pretty good job of rolling the project out, so why did they fail? My uninformed opinion is that they raised expectations for quality, but did not deliver. Not only were expectations not met by the quality of tea that Europeans accept, but the American market’s expectations are more rooted in Asian definitions of quality, than in the old European standards. Teavana has a little bit more of an Asian motif than does TeaGschwendner, but quite a few people have commented about their teas being disappointing.
So what does all of that mean to Seven Cups and other small tea businesses in the US and abroad? I think that there are a number of things to be aware of. Large American retailers are shattering traditional price points for tea, pushing their prices up. This is a good thing for small companies that have been worried about carrying better quality teas. It will affect small quality tea businesses the same way that Starbucks affected independent coffee roasters and higher-end coffee shops. Few people think that Starbucks sets any standards for quality, but they did grow the market.
Seven Cups is making a major strategic change as a result of what we see as a trend towards better quality We will continue to keeps our high standards for quality and service for our retail customers. In the past we have been primarily focused on retailing the teas we sourced. We wanted to get the best teas we could find for our customers, both online and in our teahouses. We did very little wholesaling and it was by request only, we never put any effort into marketing that portion of the business other than having a contact page on our website.
We have always been aware that sourcing is the primary obstacle to success for small tea businesses, followed closely by being able to finance your inventory. Currently, the teas that are available for wholesale are the same disappointing teas that you can buy at big retail stores. They buy those teas by the container, commercial or specialty, flavor them or blend them, and the competition is for who can make the same old stuff taste better, and put it into a prettier package. Big companies can buy in large quantities leaving small companies unable to compete for price or outdo big marketing budgets. Try outbidding Teavana for a keyword driving your Google ad. Small companies must compete by having better quality tea, period. There is nothing else that can distinguish you from the competition. Clever puns and proprietary blends are a dime a dozen.
Good tea, by contrast, comes in smaller quantities and is not readily available in the wholesale market. Early in 2010 we started asking ourselves how we could lower our prices so that small companies could afford to purchase better teas, in manageable quantities, directly from China without having the expense of sourcing in China. We decided to open up our sources so that smaller tea companies could access the higher quality teas they need to delight their customers and grow their businesses.
Thus our new brokerage service was born. We will use our tea sources, our existing sourcing infrastructure, and the research we constantly do about each tea. We have started by supplying Simply Tea in Denmark because we wanted to be able to provide the service internationally, as well as domestically. That has been a successful pilot program and we’re ready to offer it to more people. We have been able to sell tea in Europe at better prices than if they were buying from a Chinese wholesaler, and in small batches, which helps them plan and finance their inventory.
We are hoping that our brokerage service will make it easier and more cost effective for smaller tea companies to carry better quality tea.
Austin
Good to hear of your future plans. The market certainly needs better tea.
Teavana actually purchased Specialteas more than 5 years ago. We were able to hire our buyer away from Specialteas because of the change in ownership and culture. In case there is any doubt left, try navigating to http://www.specialteas.com.
Good luck.
Thanks Charles, we really appreciate you good wishes. I know that you are always pushing the envelop to get better tea in your stores.
I did see that their site had gone off line. Good luck to you too! I looks as if the is a big snow storm headed your way.
Interesting ideas. I would like to talk to you about doing some cross promotion with 52teas.com. Your fancy estate teas + my blending & flavoring skills. Might be a win for all. Can you shoot me an email?
Good analysis, Austin and I appreciate your posting it. I liked TG but felt that they didn't understand the American tea market very well. Heavy on Indian teas when, in my experience, serious American tea people prefer Chinese and Taiwanese teas. Sam Richey, their tea sommelier, was great though, and very helpful to me and others. Glad to hear that you will be supplying more retailers as well.
It is a great talent to be able to put language to taste and smell. I have a great respect sommelier that can do that.
Hi Austin: this is Ning and I have been exchange emails with your wife for a while.
This is very nice site and you are running an excellent business for people here to get to know China, its tea and culture.
I have been Teavana and bought some tea there since I have to write an article for the Chinese Tea Weekly in China. I bought some white and black tea there, to my surprise, the quality of their tea is quite good. I am not sure where their receive their tea. I have not calculated and compared their price with other tea suppliers.
I know next to none about tea business, or business in general but seems to me that the striking differences between your shop and Teavana is your service. People come to your shop or take your tours are different from a casual tea buyer walked into Teavana's shop in a mall. They are very interested in learning about another culture and they are intensely interested in Chinese tea. Maybe some of the casual tea buyers of Tevana, after trying out Chinese tea will be interested in learning more, so they will find you, your site and your tour. People who work in Teavana do not know much about Chinese tea, they like the tea (for the most part) but are not able to answer any questions. So they are like Starbucks 's Italian coffee, or Cosco's French wine, good enough for the general consumption but not sophisticated enough for people who only want the real and the best thing.
Interesting ideas in this article. I hope that you will be successful in this new venture, but one problem that every tea buyer has in China is that because of their way of operating, it is hard to find consistent quality in large enough of quantities of a tea throughout of a year or years. The only place of tea I found was in Wu-yu-tai and their Jasmine Tea,but not all tea in their chain-shop can reach that standards. So can you always get the consistent and good quality of the same tea?
Another thing I thought was special about your operation is that you are not only a tea shop, you are trying to introduce chinese culture in some depth, through a complete process of learning tea to people here through your yearly tours. I would like to talk with you a bit more about it and write an article on it for the Chinese tea weekly, the work I do for Chinese Tea Weekly is almost like a volunteering job through me to open a window for the tea farmers of china to know what is going on outside of China, they would like to meet you and your site, your shop though this paper. It might also help you to get more contacts for your tea supply.
Let me know if you are interested. Thanks!
Ning
Hi Ning,
Thank you for such a thoughtful comment, I would be happy to talk with you. I am surprised to hear that you know next to nothing about the tea business since your grandfather was such an important influence on Chinese tea and tea culture. Thank you for your kind words about our business.
We have been able to maintain our consistency from year to year because we never buy from any Chinese tea merchants or wholesalers. We only buy from the makers themselves in 9 different provinces. We have between 25 and 30 different producers and visit twice that many each year. We inspect the gardens and production practices. We have producers that we know well and have been buying from them for a long time. We buy differently from other tea companies because we focus on establishing the quality of the tea that we are going buy before we talk about price, rather that establishing the price and then finding a quality to match the price.
Wu Yu Tai is an interesting case. I know some of the producers that they buy from. They are effective marketers in that they have convinced people in Beijing that they have some secret that is special to their tea. Some of their jasmine tea is sold for 1500 RMB per jin ($200). For this tea they will use top quality green. For their commercial grade tea, they still use tea that is rich, but it is harvested later in the spring. This grade of green tea is not as affected by weather as is the early spring tea which can change slightly from year to year. They buy most of the tea from the Huangshan area, which has rich tea, and the quality is much better than what is usually used to make jasmine tea. It is also easier to maintain consistency when you are scenting the tea, because the scent covers what might be slight variations that naturally occur from year to year.
Wi Yu Tai also maintains a standard for quality, and they always deal with producers personally, which is really the key. The domestic market in China continues to be very fragmented and localized, even though that has changed in the last few years, but brands such as Wu Yu Tai are rare, and even still, they carry a very narrow selection of tea. Chinese companies as well as international companies source their tea from Chinese wholesalers, where good quality is rarely found, and consistency is difficult (if not impossible) to maintain.
In many ways, the modern Chinese market has not changed much since the Qing Dynasty. The producers are forced from their own isolation in the countryside to sell to wholesalers, and even though producers by and large do not like doing business with these wholesalers because they are regularly mistreated and almost aways paid late, there are very few alternatives. The wholesalers are their biggest customers.
The source of all of the bad information about tea also comes from those same tea merchants. Trying to source your own tea independently is very difficult. There are 70,000 producers in China, so just finding good ones is a challenge. There are significant language and culture issues to address, and all of those relationships must be maintained over time, which is expensive and time consuming. One of the things that we are trying to do with our brokerage service is to help small tea businesses with these issues, but of course the problems are very old and systemic. I would venture a guess that most companies don't understand the structure and believe they are actually buying from producers. The wholesalers are very good at fooling people into thinking that is the case.
You are welcome to call me or email me anytime. I understand that you have a good conversation going on with Zhu Ping.
Austin.
Austin,
I enjoyed reading this exchange between you and Ning; very insightful. Though I have bought a number of teas from Teavana over the past few years because of accessibility, I started questioning their quality about a year ago. So, the comment that they are trying to get better quality tea was interesting to me. They appeared to be moving to more boutique flavored teas, for one, and I have caught them trying to increase the sale by not asking the customer if they want a regular bag, which costs nothing, or a tin, costing about $10, for the tea they purchase. They tried to do that with a friend I was with and I told them to take it out of the tin and put it in a bag. I also find them so very intrusive and hawkish in their sales techniques that I do not enjoy visiting their stores. I have not been there for at least 6 months and find my first thought when I think of them is not their tea but their intrusive behavior. I make my feelings known to anyone with whom I discuss the topic of tea as I do not like their practices. The idea of them extending the market, like a Starbucks, is interesting. I do tell everyone I know about your exceptional teas and your site.
Jerri
Jerri,
I don't know where they are going with the brutal sales techniques, but a Teavana store opening in Tucson has done nothing but help to bring us new customers. We certainly appreciate telling your friends about us. Thanks for your comments.
Austin
I really appreciate the information you shared and admire that you are keeping on top of industry trends and being flexible enough to shift your strategy. Thanks for keeping all of us informed about your new strategy and I wish you all the best.
Thanks for your comment Lelia. I appreciate you reading my blog.
Austin
You have become my standard for guaging Chinese teas. I look to your information, as I continue my studies on tea, to clarify details for me. I think you set the best standard for a tea business. I am glad to hear many are flocking to your store. You may be puzzled by my frequent compliments when I have not bought much tea from you yet but believe me it is coming soon and will slowly build to experience all your teas. The samplers I have purchased are terrific. As I continue my tea education, I have been overwhelmed by the tea styles. This week I decided to follow a method of looking at the Ten Famous Teas of China as my anchor or base. I can appreciate there is some subjectivity to this list and I have not been able to find information on the criteria for the selections; some lists differ a bit . But, the list I will follow: Keemun (the only black tea); Huang Shan Mao Feng; Wuyi Rock Teas; Tie Guan Yin; Duyun Mao Jian; Liuan Gua Pian; Xinyang Mao Jin; Jun Shan Silver Needle; Bi Luo Chun and Long Jing.
The information on your teas is the only confidence I have of getting the best I can. Thank you for your exceptional business of tea and service. Jerri
Hi Jerri
We appreciate your support. It might be said that there are "ten famous lists, of the tea famous tea'. It really doesn't matter to much. Certainly puer is missing from you list, and Meng Ding Ganlu (Sweet Dew) My personal list would also include Tai Ping Hou Kui. Duyun Mao Jian rarely appears on a list. Guizhou is a ver poor province, and has a very long history in tea culture. It sits between Yunnan and Sichuan. You mentioning Duyun Mao Jian, sparks my interest to travel to Duyun and see if I can find some. The mountains in Guizhou I am sure are spectacular. There are many great Chinese teas that have never been made it on a list.
Thanks your comment and good luck with your studies.
Austin
Recently, on a road trip to Tucson, I stopped in Seven Cups Tea House. Just had to purchase some Gu Zhu Zi Sun (Purple Bamboo). One of my longtime favorites, but hard to come by, unless of course one is running around Tucson, Arizona, or gets lucky on the web.