Dec 14th 2009 Issue
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Reality Check: Is there really opportunity in tea?

Charles Cain - Dec 14th 2009

Is there money in tea?

I had an interesting debate this weekend with a commentator on one of the tea blogs. He challenged what he saw as the self serving optimism expressed by myself and other tea industry insiders. He suggested, though not in these words, that a lot of the hype is wishful thinking perpetrated by those who are desirous of more people getting into the industry, starting business, and buying teas. So the question is this: is the US Tea Industry strong and growing or is it currently characterized by struggle and heartbreak where only a few survive?

My answer is… BOTH! I believe without question that there is a ton of money to be made in tea, and a lot of fun to be had along the way. I also believe that most new tea businesses will fail.

Over the past 6 months I’ve spoken with more than 100 tea retailers (including stores, cafes and web shops) and more than a dozen prominent wholesalers. My anecdotal evidence suggests that most established retailers have seen their sales decline by roughly 10% so far this year. At the same time, the wholesalers have seen sales increase by more than 20%. This suggests to me that while individual businesses are struggling and consumers are spending less, the industry is still growing and the total number of consumers drinking tea is still expanding. (These are of course averages. Some companies have seen sales grow by 50% this year and others have gone bankrupt and closed their doors.)

The simple truth is that the number of tea shops in the US has roughly doubled over the last five years. New companies of all types are popping up all over the place. But it is also true that start-ups are characterized by risk. The US economy has seen incredible expansion and prosperity over the past 50 years, and yet during this time we’ve also seen 2/3 of new businesses fail. Most ideas are bad ideas. Most advice is wrong. Most new tea businesses will not succeed.

Our plan at Adagio is to open a couple test stores. We’re doing this because one store may fail regardless of everything it has going for it. In our case, we have a proven brand, a proven tea collection, plenty of funding, direct from the garden purchasing power, and I have five years of experience opening and testing tea retail models. Even with all of these advantages, we’re most likely going to open two stores because start-ups are fraught with risk.

There really is A LOT of opportunity out there. I can tell you stories of incredible success achieved through good strategy and hard work. It IS possible. But be critical, be careful, and do your homework. Vision and passion and a romantic idea are simply not enough. I get the sense that between the feedback of friends (which is often irrationally positive) and the feedback of passionate tea connoisseurs (which is awesome but far from mainstream) too many people get sucked into ideas that just don’t have legs. Too many people make the decision to move forward based on vision and gut feel while ignoring the numbers. Trust me… I’ve done it myself. ;)

Adagio Teas