Selling Tea in Grocery Stores: An Overview
What's the difference between the success or failure of a new tea on the grocery store shelf? Packaging. In the long run, quality certainly matters. Still, before the consumer can be impressed by your quality, they first have to be impressed enough by your packaging to make that initial investment and give your product a try.
We recognized the importance of packaging in consumer behavior before designing our packaging for bagged and loose teas for wholesale distribution. We developed custom boxes for our individually wrapped pyramid tea bags. Because these bags contained the same, high-quality loose tea we sold elsewhere, we called this product realiTEA. These boxes each contain 15 bags and retail for between $8 and $19. We also designed some very cool tins for our loose teas. This visibiliTEA packaging had a clear lid with a UV coating so that customers could see the tea, but it wouldn't be harmed by exposure to the light. These tins typically contained about 4oz (more or less, depending on the leaf) and retailed for between $10 and $30, depending on the tea.
What we didn't realize was that most of the tea you see on the shelf at your local grocery stores doesn't sell. OK, so that's an overstatement, but suffice it to say that most of them don't sell enough to make a profit. Many companies purchase shelf space to get their products in front of consumers. Just because you see it on the shelf doesn't mean many people have bought it in the past or will buy it in the future.
The tea products that do sell well in a grocery setting (even a premium grocery store like Whole Foods) are those priced around $5 or less. Even the people who work at Whole Foods will admit that most customers don't read the packaging, don't pay attention to the amount of tea they are getting, and don't understand 90% of what they are looking at.
They buy based on price, familiarity, and packaging. The best way to encourage customers to try a new line of teas is to design eye-catching packaging and price it around $9.
For the foreseeable future, the grocery channel will never replace the role of Specialty Tea Retailers online or in small tea shops across the country. You simply can't please a tea connoisseur with a $9 package of tea bags. But there also aren't enough tea connoisseurs buying tea in grocery stores to support the number of expensive tea products already on the shelf. Please consider carefully whether that is the right area of competition for your business. Here are just some of the concerns:
Company Stability is a key criterion of large buyers. New companies or brands pop up (and go out of business) all of the time, and serious buyers have learned to avoid unproven products. To establish your brand in the minds of the buyers and convince them that you’re here to stay, consider exhibiting at national and regional trade shows. You might need to pitch your products to buying committees once a year for several years before they decide to give you a shot.
Buying Shelf Space is an option for those who don't have a few years to establish their brand and convince the industry that they are for real. Each grocer/retailer handles this a little differently. Some, like Whole Foods, never sell shelf space (but are also very hard to get into). With others, it would not be uncommon to pay $5,000 per SKU to put your packaged tea products on the shelf for one year. A collection of five different teas would then cost you $25,000, multiplied by the number of retail/grocery partners you work with.
Shelf-Ready Packaging is an absolute pre-requisite. Your packaging has to be highly professional. Grocery customers select their tea based on two criteria: packaging and price point. They lack understanding of quality, fail to recognize most brands, and overlook the quantity of tea in the package. Most customers will choose the best-looking package that is $5 or less (or $10 or less in some gourmet stores).
Competitive Price Points are critical. While there are tea drinkers who will pay $15 or more for a 4-ounce package of loose tea, those consumers are not likely to buy their tea in the grocery store. Grocery store tea drinkers are much more price-sensitive. Based on looking at the loose tea shelf at a high-end grocery store, one might conclude that the more expensive teas sell reasonably well in many cases, but that's not the case. Remember, just because a product is on the shelf does not mean it sells. The wholesaler may have purchased that shelf space, or the grocer may keep it in stock to stretch the price points (retailers often carry a few expensive products to make others appear less costly by comparison and move the "middle" up the price ladder). In some cases, 80% of the sales volume may go to 20% of the products on the shelf!
Distributors are another key element to the Grocery and Large Retail supply chain. Because they do not want to buy from hundreds of small vendors, many grocers and retailers, or regional distributors. This reduces the burden on you for warehousing, fulfillment, and customer service, but also eats heavily into your margins.
Brokers are another vital piece of the puzzle. While many brokers are costly and will represent a wide range of products in addition to yours, a good broker will already know the key decision makers and can gain you an almost immediate audience with top buyers. Many of the larger buyers would be entirely overwhelmed by offers and proposals from small brands looking to get on the shelves, and so they use the brokers as a way to filter out those who are not serious or not ready. A broker won't jeopardize their reputation by representing a company that is not ready. Hiring a good broker is a sign that you have arrived. But buyer beware. A broker will take your money with no guarantee of success. Choose carefully.
The opportunities for meaningful revenues and profits selling tea into Grocery and Large Retail remain limited, primarily to extensive tea wholesalers with deep pockets. You will find specialty brands on the shelves. Still, the presence of the product does not mean that they are profitable or that their business model is sustainable, given current buying patterns among the bulk of tea drinkers in the US. This is an acceptable strategy for a small company looking to gain exposure, but the speed of adoption and sales results will likely be less than you expect.
We recognized the importance of packaging in consumer behavior before designing our packaging for bagged and loose teas for wholesale distribution. We developed custom boxes for our individually wrapped pyramid tea bags. Because these bags contained the same, high-quality loose tea we sold elsewhere, we called this product realiTEA. These boxes each contain 15 bags and retail for between $8 and $19. We also designed some very cool tins for our loose teas. This visibiliTEA packaging had a clear lid with a UV coating so that customers could see the tea, but it wouldn't be harmed by exposure to the light. These tins typically contained about 4oz (more or less, depending on the leaf) and retailed for between $10 and $30, depending on the tea.
What we didn't realize was that most of the tea you see on the shelf at your local grocery stores doesn't sell. OK, so that's an overstatement, but suffice it to say that most of them don't sell enough to make a profit. Many companies purchase shelf space to get their products in front of consumers. Just because you see it on the shelf doesn't mean many people have bought it in the past or will buy it in the future.
The tea products that do sell well in a grocery setting (even a premium grocery store like Whole Foods) are those priced around $5 or less. Even the people who work at Whole Foods will admit that most customers don't read the packaging, don't pay attention to the amount of tea they are getting, and don't understand 90% of what they are looking at.
They buy based on price, familiarity, and packaging. The best way to encourage customers to try a new line of teas is to design eye-catching packaging and price it around $9.
For the foreseeable future, the grocery channel will never replace the role of Specialty Tea Retailers online or in small tea shops across the country. You simply can't please a tea connoisseur with a $9 package of tea bags. But there also aren't enough tea connoisseurs buying tea in grocery stores to support the number of expensive tea products already on the shelf. Please consider carefully whether that is the right area of competition for your business. Here are just some of the concerns:
Company Stability is a key criterion of large buyers. New companies or brands pop up (and go out of business) all of the time, and serious buyers have learned to avoid unproven products. To establish your brand in the minds of the buyers and convince them that you’re here to stay, consider exhibiting at national and regional trade shows. You might need to pitch your products to buying committees once a year for several years before they decide to give you a shot.
Buying Shelf Space is an option for those who don't have a few years to establish their brand and convince the industry that they are for real. Each grocer/retailer handles this a little differently. Some, like Whole Foods, never sell shelf space (but are also very hard to get into). With others, it would not be uncommon to pay $5,000 per SKU to put your packaged tea products on the shelf for one year. A collection of five different teas would then cost you $25,000, multiplied by the number of retail/grocery partners you work with.
Shelf-Ready Packaging is an absolute pre-requisite. Your packaging has to be highly professional. Grocery customers select their tea based on two criteria: packaging and price point. They lack understanding of quality, fail to recognize most brands, and overlook the quantity of tea in the package. Most customers will choose the best-looking package that is $5 or less (or $10 or less in some gourmet stores).
Competitive Price Points are critical. While there are tea drinkers who will pay $15 or more for a 4-ounce package of loose tea, those consumers are not likely to buy their tea in the grocery store. Grocery store tea drinkers are much more price-sensitive. Based on looking at the loose tea shelf at a high-end grocery store, one might conclude that the more expensive teas sell reasonably well in many cases, but that's not the case. Remember, just because a product is on the shelf does not mean it sells. The wholesaler may have purchased that shelf space, or the grocer may keep it in stock to stretch the price points (retailers often carry a few expensive products to make others appear less costly by comparison and move the "middle" up the price ladder). In some cases, 80% of the sales volume may go to 20% of the products on the shelf!
Distributors are another key element to the Grocery and Large Retail supply chain. Because they do not want to buy from hundreds of small vendors, many grocers and retailers, or regional distributors. This reduces the burden on you for warehousing, fulfillment, and customer service, but also eats heavily into your margins.
Brokers are another vital piece of the puzzle. While many brokers are costly and will represent a wide range of products in addition to yours, a good broker will already know the key decision makers and can gain you an almost immediate audience with top buyers. Many of the larger buyers would be entirely overwhelmed by offers and proposals from small brands looking to get on the shelves, and so they use the brokers as a way to filter out those who are not serious or not ready. A broker won't jeopardize their reputation by representing a company that is not ready. Hiring a good broker is a sign that you have arrived. But buyer beware. A broker will take your money with no guarantee of success. Choose carefully.
The opportunities for meaningful revenues and profits selling tea into Grocery and Large Retail remain limited, primarily to extensive tea wholesalers with deep pockets. You will find specialty brands on the shelves. Still, the presence of the product does not mean that they are profitable or that their business model is sustainable, given current buying patterns among the bulk of tea drinkers in the US. This is an acceptable strategy for a small company looking to gain exposure, but the speed of adoption and sales results will likely be less than you expect.