Aug 29th 2010 Issue
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Branding in the tea business

Charles Cain - Aug 29th 2010

Adagio's iconic mark

The brand presentation is critical

Adagio's new tea pouches

Consumer uncertainty is the enemy that is slowing the growth of the Specialty Tea Industry. In far too many cases, the buying public has no good way to know whether or not the tea they are buying is fresh, clean of contaminants, a good value, and will deliver a rewarding experience. Consumers are hesitant to pay a premium for a luxury or gourmet product when they are uncertain of its value. As a result, the vast majority of tea drinkers in the US retreat into the predictable mediocrity of mass-market tea bags on grocery store shelves. There has to be a better way.

The grocery store is a terrible place to build a premium brand or convert casual tea drinkers to loose leaf connoisseurs. Sure, some people will try a new product on the shelf, but most buy what they know. At a minimum, they buy products that fit within the price and packaging templates they are used to. There is no question that consumers will buy gourmet products in a grocery store, but that's typically the case when the brand is already known from another environment.

When we as consumers see a luxury brand at a good price at the grocery store, we respond enthusiastically. Starbucks, while admittedly not luxury, is able to fetch a premium price on the grocery store shelf because the product is well recognized and associated with a distinctly non-grocery brand. Branding is key, and the information vacuum of the grocery aisle is a terrible place to build a brand.

In the grocery store (and in too many tea shops), buying gourmet tea is a similar experience to buying designer handbags or clothes at a flea market. Is it real? Is it fresh? Does the vendor even know or care? Will I be disappointed? With the exception of a small subset that derives tremendous satisfaction from finding deals, consumers prefer to buy luxury goods in a luxury environment, and most grocery store are certainly not that. Sadly, most tea shops also fail to deliver.

Building a brand requires story and experience. A tea shop is a terrific place to build a brand. The consumer enters curious and you have the opportunity to engage. Some consumers will respond to sensory engagement, some to intellectual, others to cultural or even spiritual engagement. In the end, tea offers a wide range of options for turning curious consumers into customers. But has this experience established a brand?

I would suggest that the first step to building a brand is engaging the customer on their level (more about this in The Fountain of Customer Loyalty). The second step is to establish a relationship. Many small tea shops do an excellent job of this. The third step is what separates experiences from brands, and that’s the ability to replicate the experience. Most tea shops are their own brand, and the only way to replicate the experience is to return to the shop. This is great if you live or work down the street, but tea is not central enough to most people’s lives that they will go to great lengths to replicate a good tea experience.

Imagine going into Charlie’s Wine Shoppe and finding that every bottle is private label. There are Napa Merlots, Sonoma Pinots and Russian River Chardonnays, but all are Charlie’s private label available only at this one store. There are two big problems with this. First, while you may decide to buy something, it’s unlikely you’ll spend much on this unfamiliar label. Second, the pleasure you’ll derive if you find the wine excellent will be less because you know it will be hard to replicate. Wine drinkers love discovering new labels and then being able to use that knowledge at the restaurant or their local liquor store. The wine industry is driven, in part, by the cycle of discovery and replication that builds loyalty to a particular brand.

Too many tea shops deliver an experience that can’t be replicated, and the relatively high risk of investing in an unfamiliar brand depresses the sales that would otherwise be possible. This is part of the reason that Teavana is able to open stores that gross more than a million dollars a year while so many beautiful independent tea shops struggle to pass $250,000. The ubiquity of the chain establishes the brand and the brand provides Teavana with credibility. Allow me to present two examples of independent retailers that have found a way around this challenge:

Fava Tea in Appleton Wisconsin offers both branded (Rishi, Adagio and Harney & Sons) teas and their own private label line. Customers are then able to compare product and pricing, and Fava Tea gains a tremendous amount of credibility in the process. Read more about the execution and benefits of Fava Tea’s model in Building a tea collection.

Seven Cups in Tucson, Arizona is an extremely impressive small company. They are the only US tea company I’m aware of that actually has a Chinese EXPORT license. In addition to buying directly and importing into the US, Seven Cups is able to work directly with small gardens in China who have no way to get their product to US shores without going through brokers or wholesalers. On the distribution side Seven Cups has a small tea shop in Tucson where they are able to engage the customer and offer a rich experience. As importantly, their teas are also available in local high-end grocery stores like Whole Foods. Finally, they have a quality website.

The feedback loop offered by these three distribution channels is a winning strategy. A Whole Foods customer passing by the Seven Cups shop will be pleasantly surprised to recognize the brand and realize they can get a richer experience in-store. A Seven Cups store customer will be thrilled by the convenience of finding the teas at their local grocery store. All of the customers, regardless of where they live, will be glad to be able to find the product online. Each distribution channel has an exponential effect on establishing the brand and lending it credibility. A customer of Seven Cups has a high degree of confidence that their investment will pay off and their tea experience will be replicated each time they buy.

The entire industry would benefit from less focus on private labeling and more on transparency. While it may be a stretch to hope that each independent tea shop will give up the pursuit of establishing their own brand, at a minimum we need to do a better job of talking about a tea’s source garden or region. “Risheehat Darjeeling” instead of just “Darjeeling #22”. “Anhui Keemun” instead of just Keemun. Just like the appellation “Napa” signifies quality in wine, we need to talk more about were our teas come from. A Silver Needle from Fuding in the Fujian province of China should fetch a higher price than a generic Silver Needle with no known heritage.

The premium tea industry still intimidates most people. After joining the industry representing a foreign brand that few people in its home country could even pronounce, I’m thrilled to be working with Adagio. With millions of annual visitors to Adagio websites, an established wholesale network, and grocery distribution through established chains like Whole Foods, Harris Teeter, Sunset Foods, Meijer and more than a dozen others, the Adagio brand is primed and ready for an explosion of brick-and-mortar retail success.

Adagio Teas