How to Compete in the Specialty Tea Industry
Too many in the Specialty Tea industry are fighting a gentleman's battle and losing as a result. Many tea shops are doing a poor job of appealing to all existing tea lovers, let alone converting new ones. As we look at the market on a national scale, we see a need for more competition. The result will be far fewer casualties among independent shop owners than most expect, and a far healthier and faster-growing industry in the long run.
The Specialty Tea Industry is chasing 11% of the US population. According to a study by Mintel, 75% of American households buy packaged tea products, and 15% of those purchase loose-leaf tea. According to those numbers, just over 11% of US households are buying loose-leaf tea. Chasing the 11% is a painful and expensive process. Traditional advertising is far too pricey if only 11% of your audience is predisposed to your product. The prospects for opening a retail store are similarly bleak if only 11% of the foot traffic has any genuine interest.
Converting the other 89% to loose tea lovers is going to require giving consumers better access to high-quality tea. We need to cultivate curiosity and inspire passion. One of the best ways to create buzz and increase the pace of customer conversion to tea is through more competition in Specialty Tea.
"Tea" is an extensive category, and a “tea shop" could be anything from Old English with a focus on black teas to an Asian shop with a specialty in green or oolong tea. A more universal tea retailer that carries 300 varieties of loose teas and herbs must be, by definition, not an English or Asian shop. Whether they admit it or not... whether they're doing it intentionally or by accident, every tea shop appeals to a particular crowd more than others. You simply cannot be all things to all people. It's impossible to cater to pu-erh connoisseurs and fruit tea enthusiasts with equal effectiveness.
The market is not a zero-sum game. This is especially true in tea, where 80% of American Households buy tea at some level. We’re pretty confident that we could find a tea or tisane that would make 95% of consumers say "I like tea". The prospect of clawing out a share of a tiny market is not very appealing. What's even more exciting is the potential to introduce quality tea to a broader audience of consumers who have never tried it, thereby expanding the market!
To say it another way, the introduction of competing brands and retailers does not saturate the market - it grows the market. The American consumer loves to consume! Even in the current economy, consumption is far less about physical need and far more about recreation, entertainment, and emotional fulfillment. Consumption is about acquisition and discovery.
Open a new tea shop in a town, and the curious consumers will stop by for a visit. The ambiance, decoration, product selection, pricing, and service will appeal to a third of the audience. Half of those will fall in love with the product and become loyal customers. The rest will remain casual consumers. After a time, the "newness" wears off, and the shop owner is left searching for a way to re-energize the business.
Open a second shop in town, and the cycle begins anew. The consumers are curious. Sure, the first shop will lose business for a time as their loyal customers test out the new offering, but assuming we're not all a bunch of copy-cats, the new store will appeal to a different third of the audience. Most importantly, more people will be drinking and talking about good tea. As more people drink and talk about good tea, the appeal of good tea rises. Tea moves from niche to mainstream.
When wine was a niche luxury, it was considered rather boring and stuffy by most consumers. As wine became more mainstream, a working knowledge of good wine became a social necessity. Wine quickly moved from a niche product with a small core following to a social phenomenon with a great deal of romantic cache.
Coffee is another good example. In 1991, most Americans drank coffee, primarily bad coffee. There were 1,650 coffee shops in the US at that time. By 2006, there were more than 25,000. In some cases, the demand grew faster than the distribution, but in the vast majority of markets, the first specialty coffee shops were met with skepticism. Everyone assumed that Starbucks would never make it in their town. The availability of options bred curiosity, and eventually, just about everyone who had the palate to appreciate the taste of coffee had a shop or brand that appealed to them.
If Specialty Tea is to grow effectively, it must be able to support multiple tea businesses in a trade area. Specialization among these businesses will allow each to focus on what they do best, and thereby do a better job serving the customer.
The Specialty Tea Industry is chasing 11% of the US population. According to a study by Mintel, 75% of American households buy packaged tea products, and 15% of those purchase loose-leaf tea. According to those numbers, just over 11% of US households are buying loose-leaf tea. Chasing the 11% is a painful and expensive process. Traditional advertising is far too pricey if only 11% of your audience is predisposed to your product. The prospects for opening a retail store are similarly bleak if only 11% of the foot traffic has any genuine interest.
Converting the other 89% to loose tea lovers is going to require giving consumers better access to high-quality tea. We need to cultivate curiosity and inspire passion. One of the best ways to create buzz and increase the pace of customer conversion to tea is through more competition in Specialty Tea.
"Tea" is an extensive category, and a “tea shop" could be anything from Old English with a focus on black teas to an Asian shop with a specialty in green or oolong tea. A more universal tea retailer that carries 300 varieties of loose teas and herbs must be, by definition, not an English or Asian shop. Whether they admit it or not... whether they're doing it intentionally or by accident, every tea shop appeals to a particular crowd more than others. You simply cannot be all things to all people. It's impossible to cater to pu-erh connoisseurs and fruit tea enthusiasts with equal effectiveness.
The market is not a zero-sum game. This is especially true in tea, where 80% of American Households buy tea at some level. We’re pretty confident that we could find a tea or tisane that would make 95% of consumers say "I like tea". The prospect of clawing out a share of a tiny market is not very appealing. What's even more exciting is the potential to introduce quality tea to a broader audience of consumers who have never tried it, thereby expanding the market!
To say it another way, the introduction of competing brands and retailers does not saturate the market - it grows the market. The American consumer loves to consume! Even in the current economy, consumption is far less about physical need and far more about recreation, entertainment, and emotional fulfillment. Consumption is about acquisition and discovery.
Open a new tea shop in a town, and the curious consumers will stop by for a visit. The ambiance, decoration, product selection, pricing, and service will appeal to a third of the audience. Half of those will fall in love with the product and become loyal customers. The rest will remain casual consumers. After a time, the "newness" wears off, and the shop owner is left searching for a way to re-energize the business.
Open a second shop in town, and the cycle begins anew. The consumers are curious. Sure, the first shop will lose business for a time as their loyal customers test out the new offering, but assuming we're not all a bunch of copy-cats, the new store will appeal to a different third of the audience. Most importantly, more people will be drinking and talking about good tea. As more people drink and talk about good tea, the appeal of good tea rises. Tea moves from niche to mainstream.
When wine was a niche luxury, it was considered rather boring and stuffy by most consumers. As wine became more mainstream, a working knowledge of good wine became a social necessity. Wine quickly moved from a niche product with a small core following to a social phenomenon with a great deal of romantic cache.
Coffee is another good example. In 1991, most Americans drank coffee, primarily bad coffee. There were 1,650 coffee shops in the US at that time. By 2006, there were more than 25,000. In some cases, the demand grew faster than the distribution, but in the vast majority of markets, the first specialty coffee shops were met with skepticism. Everyone assumed that Starbucks would never make it in their town. The availability of options bred curiosity, and eventually, just about everyone who had the palate to appreciate the taste of coffee had a shop or brand that appealed to them.
If Specialty Tea is to grow effectively, it must be able to support multiple tea businesses in a trade area. Specialization among these businesses will allow each to focus on what they do best, and thereby do a better job serving the customer.