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Moving an online tea collection into retail

Charles Cain - Dec 2nd 2009

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After 10 wildly successful years in the online tea business it's safe to say that Adagio's tea collection is a proven success. But success online will not necessarily translate to a retail store. The question, is how does a company like Adagio need to adjust their tea collection to be successful in a physical retail environment?

Adagio's Current Strategy
To this point the Adagio brand has revolved around making a premium product accessible to the masses. The population of tea consumers is heavily skewed towards the mass market, and Adagio has successfully positioned itself at the "doorway" between the commodity companies and the premium retailers.

This strategy has been effective for two key reasons:

  • The average consumer lacks an understanding of the drivers behind tea quality and, ultimately, price. By pricing slightly above the mass-market brands, while delivering a premium message and accessible brand image, Adagio captures the customer that wants to buy luxury but cannot justify the premium prices of some brands.
  • Adagio's primary distribution channels, online and grocery, are competition intensive and therefore highly price sensitive. A customer can, and will, select a less expensive product or company unless presented with a compelling reason to pay more.

Specialty Retail Strategy
The environment of a Specialty Tea Retail store does not share the key characteristics that have made Adagio stand out against its competitors online.

  • The customer fear of overspending on a product they will not appreciate is diminished by the lack of alternative brands in a specialty store environment. Fewer options means less uncertainty. Customers in specialty stores are more likely to buy luxury items at luxury prices.
  • The customer's lack of information is offset by the availability of experienced, helpful sales people. Again, less uncertainty and a greater appetite for luxury purchases.
  • Price sensitivity is also reduced by the lack of alternatives and the existing investment of time and effort to get to the shop in the first place (shopping around and coming back later is not worth the money that can be saved).

A specialty retailer's primary obstacle to success is offering enough value to convince the customer that it is worth their time visit the store in the first place. A specialty retail customer will go out of their way for three main reasons:

  • Selection products that are not available elsewhere
  • Service Experienced, helpful sales staff or a service that cannot be found elsewhere
  • Experience A process, environment or association that delivers a real or perceived benefit.

The Case for a Broader Approach
Based on my observations of the development and evolution of the typical tea consumer I believe the following scenario is playing out among Adagio's customers:

  • Adagio is introducing new customers to the world of tea through aggressive pricing, accessible teas, and excellent sales and customer service systems.
  • As these customers develop their palettes and expand their curiosity, those inclined to become connoisseurs may shift their business to other more specialized sources.

This same scenario plays out across the spectrum of consumer goods. The most popular mass-market wine labels, for example, are very effective at attracting new drinkers, but lose their appeal as the customer base becomes more educated and discriminating. Many of these wineries responded in recent years with premium lines of reserve or special label wines. While they will never attract the true oenophile, the mass-market brands have been very effective at capturing multiple levels of the customer evolution. Sterling Vineyards, for example, offers a low priced Vitner's Collection, their standard Sterling Collection, a Reserve Collection, and a range of small-lot wines. The same strategy of market segmentation has proven effective in consumer products from electronics to cars to clothing.

I draw two conclusions from all of this:

  • Customers go to specialty stores for specialty items, so carrying the most popular and therefore widely available teas is probably not enough
  • You're leaving money on the table in a specialty store environment if you don't offer premium products for premium prices. The customers, especially the connoisseurs, expect something special from a stand alone tea shop.

Proposed Changes
Based on these conclusions, I am proposing the creation of an Adagio Masters Collection comprised of between 12 and 24 premium teas which may be accurately described by some or all of the following: Limited edition, seasonal, single estate, small farm, and/or hand processed. This Masters Collection would be set apart both in packaging and in-store presentation, and would be priced well above the average of the regular collection. Teas which sell for between $25 and $65 for 4 ounces should be the target, with periodic entries at even higher price points.

There are about a half dozen teas in the existing collection that we may choose to repackage as part of the Masters Collection. While most of these teas would be classical, unflavored teas, it would be wise to include a sampling of premium flavored teas (more expensive, rare flavorings and a higher quality base tea) in an effort to stretch the pricing of the core flavored collection and capture those willing to spend more money but intimidated by, or uninterested in classic teas.

In short, a premium collection, resulting in greater pricing spreads within the collection, will allow Adagio to remain competitive with the lower priced commodity brands while stealing market and mind-share from the premium brands.

Needless to say, Adagio's strategy of targeting the largest group of specialty loose tea drinkers has been far more profitable online and in the grocery aisle than the more selective strategies of the super premium retailers. I would never propose abandoning the mass market, but I believe we can increase sales AND profits by stretching the collection and taking advantage of the specialty store customer's willingness to pay for quality.

Adagio Teas
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Voice your opinion about this article on TeaChat!
Dec 4th '09 9:36
I'm working with the team at Adagio Teas to expand the tea collection and I'd love to get customer feedback on any teas that you would like to see us carry!

Read more about our plans to modify the tea collection at http://www.tearetailer.com/article_6.html and let me know your thoughts.

Charles Cain
Adagio Teas
Charles
Chicago, IL
Dec 4th '09 11:02
Having read your interesting and informative article (thanks for sharing), classic greens for a "master series" gets my vote.

A premium quality Long Jing, first flush. Appearance, fresh dry leaf aroma, more classic LJ flavor profile are all paramount. All these would need to be elevated above the current Dragon Well offering.

And definitely first flush Japanese greens, perhaps an Asamushi and a Fukamushi in a more Japanese package that would show Adagio cares about quality and freshness. It is useless to bring in a premium sencha and store it in bulk in some warehouse, opening the bulk container frequently. Freshness is paramount. Should arrive stateside prepackaged at the source! Hopefully cold stored by Adagio upon receipt from Japan.

Perhaps a regional "tour" of offerings from Uji, Kagoshima, Shizouka, and possibly Yame.
Chip
Back in the TeaCave atop Mt. Fuji
Dec 4th '09 11:07
+1, since Japanese Greens reign supreme in our TeaHome.
Mrs. Chip
Dec 4th '09 11:17
Ah... music to my ears. We've been cupping Lung Chings and found an excellent one for the Master's Collection. Also have been reviewing Fukamushis and Tamaryokuchas but have been a little disappointed by the quality. I'm looking for incredible here and that's had to find. :)
Charles
Chicago, IL
Dec 4th '09 11:25
Looking for incredible! Excellent!!!!!!!

It appears that domestic USA vendors have not generally "gotten it" when it comes to Japanese greens. It is virtually impossible to source excellent offerings the way they do it, just does not work.

I believe Rishi is a good example of how a domestic vendor is thinking outside the box when it comes to sourcing Japanese greens, going to the source, visiting Japan and better developing relationships first hand. Yeah, a big investment in the short run, but hopefully big dividends in the long run.
Chip
Back in the TeaCave atop Mt. Fuji
Dec 6th '09 16:10
I'm sorry I don't have a specific tea. But I would love to see more (better) Pu Erhs.
macalan
Gainesville, FL
Dec 6th '09 22:14
Some estate teas from the Nilgiri region of India would be nice, as well as more Darjeelings.
geeber1
Oregon
Dec 6th '09 22:23

+1 As Geeber states some quality Nilgiri and Estate Darjeelings would be great. Also of course, I have a weakness for greener premium high mountain oolongs.

I have been thinking for some time, that it would be nice if Adagio would additionally offer a premium line of tea. I know the participants of TeaChat are a discerning group of connoisseurs who would be supportive toward moving in this area. Sounds good to me!
Victoria
Southern CA
Dec 7th '09 12:32
Victoria, that is a wicked cool teacup! Where did you find that? (Do I need to go chop wood to compensate for the fact that I'm in awe of a heart shaped teacup?)
Charles
Chicago, IL
Dec 7th '09 13:21
Awww thank you!! Actually I had it saved as a favorite picture before I even joined TeaChat. It's not that often you find OOLONG in that style of cup. When I joined I knew immediately what icon to use! So many people began asking about it, and if it was mine, that I set out to own it. It took some time, but I finally did! There are some other heart shaped cups out there, but nothing as large as this one - made by Arita -Japan: http://www.inoshonline.com/ari001.html
Victoria
Southern CA
Dec 8th '09 16:42

Spot on man. Its about time. I have always seen adagio as an entry point into tea and not much else (minus a few good value priced teawares). I see the quality of adagio tea and tea knowledge on the rise!

Some competitvely priced higher quality taiwan oolongs would be great! The ones carried now I do not like at all and make me think bad thoughts.

I think it should be noted that not all great teas are expensive. There are plenty of teas out there that could probably go into your special collection but are cheaper then some of the price points for the teas you carry now. If adagio doesn't jack up the prices too high I think they will gain more trust and customer loyalty among those who consume tea ceremoniously and have an general awareness of tea prices.
teaisme
Dec 14th '09 9:58
Hi, Charles
I live in florida and I'm thinking about having/owning a small tea store. In florida decaf ice teas do very well,because of the heat. Will adagio be carrying decaf iced teas in a bottle? Will you also have a decaf chocolate tea? decaf cinnamon? and banana? apple?almond? caramel? other bigger selection of decaf flavored/non flavored decaf teas.
yours in teas :D
woodie
boywoodhe
Tea World, USA
Dec 14th '09 10:49

The short answer is that it remains to be seen, but an expansion of Adagio's Bottled Iced Tea (Anteadote) line won't happen immediately.

My experience is that the market for decaf teas is still relatively small, and that decaf drinkers are typically resistant to paying much beyond grocery store pricing. This limits the opportunities for someone like Adagio to carry a broad collection of iced teas. I have seen a number of retailers expand their decaffeinated loose tea collection in response to customer requests, only to see sales fail to meet expectations.
Charles
Chicago, IL
Dec 15th '09 15:14
I really like rose tea and I wish Adagio would carry that. Also rose and grape flavored sencha would be awesome.
As a spring special sakura sencha. Then on the home page you could add randomly loading haiku + some falling sakura petals ...
jazz88
Dec 22nd '09 17:38
White ground tea. Muzi carries it. I haven't seen it around anywhere else. Does the white ground tea have that much more antioxidants as matcha?
TeaPeople
Fort Collins, CO
Dec 22nd '09 17:44
sorry-I meant ground white tea.
TeaPeople
Fort Collins, CO
Dec 23rd '09 6:49
First thought is Matcha
rabbitsib
Dec 23rd '09 10:57
Matcha is definitely on its way. I believe it's already in the warehouse. Ground white tea is a good deal less common and I'm not sure that will be added.

For what it's worth, the extra antioxidant content of Matcha is due in part to the way the leaf is grown but primarily due to the fact that you are actually consuming the leaf itself. So in that case, yes, a powdered white tea WOULD have more antioxidants than a brewed whole leaf white tea since some antioxidants remain in the leaf during typical brewing times.
Charles
Chicago, IL
Dec 29th '09 18:14
How about green rooibos?
Jasmin
Dec 29th '09 18:17

Yes!
bsteele
Dec 29th '09 22:52
Hmmm... thinking a team of traveling TeaChat Tea-Tasters should be employed to visit the tea estates of India, Japan, China... bringing back the choicest selections for the Masters Collection. Sign me up. :D

Sarah
kymidwife
Kentucky
Dec 29th '09 23:53
Hmmm... thinking a team of traveling TeaChat Tea-Tasters should be employed to visit the tea estates of India, Japan, China... bringing back the choicest selections for the Masters Collection. Sign me up. :D

Sarah
Awesome idea, Sarah! Sign me up too!
geeber1
Oregon
Dec 31st '09 10:08
I personally wish that adagio carried Yerba Mate
cls46
Jan 2nd '10 16:59
I'm going to have to agree with a few of the people before me. I think rose tea, green rooibos, and yerba mat would all be great additions to Adagio's collection.
Mote
Jan 6th '10 9:52
I'm still relatively new to Adagio, but a lot of what I've seen has been either UK or Asian influence.. what about the rest of Europe? French milk-based teas, German fruit-flavored teas, or good Russian teas? I can mimic some of the flavors in blends, but that doesn't always work out the way I'd hoped.

Also, Scottish Breakfast.
LauraW
SC
Jan 6th '10 16:31

I'd like to second that one. :D
teabunnie
Wichita Falls, TX
Jan 11th '10 10:41
A yellow tea, perhaps, just for completion's sake? Jun Shan Yin Zhen, for example?
Trey Winston
Nrwy
Jan 15th '10 5:27
I feel that nearly the entire slate of Adagio oolongs is selected for completely different qualities than what I can only term "traditional" tea drinkers appreciate. This seems to be quite successful with the online retail market (mostly more casual drinkers), but if you wanted to teach people about tea, I would suggest 5 or so more traditional oolongs. I'm probably talking mostly about the "Master" class you mentioned.

Roasted Tie Guan Yin
a real Yancha or 3
Taiwan gao shan that doesn't strike people as being covered in cheap artificial scent
A decent Taiwanese aged oolong
Loose leaf, aged puerh is not out of the realm of possibility for Master class IMO.

Sorry to be blunt, but I think you could actually use it in your venture.
brandon
Jan 15th '10 9:38
Brandon, I agree.

I do believe that a couple of the recent additions to the Adagio Oolong collection are good first steps. The Dan Cong Aria (http://www.adagio.com/oolong/dancong_aria.html) is exceptional, and the Huan Jin Bolero (http://www.adagio.com/oolong/huang_jin_bolero.html) isn't too shabby either. Both are also very reasonably priced... thus selected for the regular collection.

I've cupped several of the premium Oolongs that you've recommended and suggested a few for the Master's Collection. What actually makes it depends on a range of factors including price and availability, but this is definitely the direction we're headed.

Also, for all those who have requested it, you will see Yerba Mate and Matcha in the regular collection in this spring. :)
Charles
Chicago, IL
Jan 15th '10 13:20
I am very excited to see this development at Adagio. I have only been brewing for about 8 months now, but I'm getting to the point of wanting to branch out and try higher grade teas. It would be nice to stay with a vendor I am already comfortable with.

I am glad to see matcha in the works. How about a genmaicha with added matcha?
Dresden
Louisiana Gulf Coast
Jan 16th '10 6:27
Thanks, Charles.
Which reminds me, would you hope to see the Master collection available both online and in the store?
Supplying a single store is obviously a much easier proposition for sourcing the appropriate quantity of premium tea.
brandon
Jan 16th '10 10:44
Brandon, the Master's Collection would be available in-store and online. Quantities would be very limited in some cases, but that shouldn't be an issue so long as we communicate up front. Our goal is to do a better job of keeping the regular collection in stock and focus our creativity on bringing some unusual teas to the Master's Collection.

I also look forward to developing a database of customers interested in certain types of teas. At my past company we would communicate new arrivals of limited edition teas to our preferred customer list and had some teas "sell out" before they even hit the shelves.
Charles
Chicago, IL
Jan 16th '10 13:28

Nifty idea, I like it! I really enjoy the personal feel of getting an email notification that something I want is in stock, instead of having to constantly check back to see if it is.
LauraW
SC
Jan 17th '10 0:41
Hmmm... Sign me up. :D

Sarah
sign me up too.
:D hugs
woodie
boywoodhe
Tea World, USA
Jan 18th '10 14:54
So... is there an ETA on being able to order matcha? I'm looking to place an order fairly shortly and if it's going to be in shortly I'd rather not make two separate orders.
LauraW
SC
Jan 18th '10 23:29
It will be at least a month. Waiting on the airtight packaging. :) Gotta do it right.
Charles
Chicago, IL
Jan 18th '10 23:34

Agreed. Ok, might just make it part of the next order then. Good to know, thanks!
LauraW
SC
Feb 2nd '10 9:10
I've been hearing a lot about olive leaf teas (taste, health benefits,) but they're very hard to find stateside. I'd love it if Adagio added an olive leaf tea to its selection of herbals.
givequicheachance
Feb 2nd '10 9:23
Sounds interesting.. I'd be willing to try it.
LauraW
SC
Feb 28th '10 1:37
yerba mate as well as rosebud tea and tulsi
plant partaker
Phoenix Arizona
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