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Battle brews as tea entrepreneurs seek a
taste of coffee's success
By Susan Chandler
Tribune
staff reporter
Published January 5,
2004
As a former
management consultant, Daniel Lindwasser knows all about business
models and benchmarking. So last summer when Lindwasser opened Argo
Tea, a cafe in Lincoln Park, his friends could be excused for
thinking it was a lark, or at worst, a midlife crisis.
It is
neither.
Lindwasser and
his two partners, former management consultants themselves, are
trying to create a workable model to deliver new kinds of tea drinks
to harried consumers in search of a peaceful moment. Their role
model sits right across the intersection at Armitage and Sheffield
Avenues.
"Ultimately, our goal is to be the Starbucks of
tea," says Lindwasser.
A wave of new entrepreneurs has the
same idea.
On the East Coast, a company called Tealuxe has
two tea rooms in Boston, one in Providence, and is looking to
franchise its concept.
On the West Coast, tea shops dot the
urban landscape in Los Angeles, San Francisco, and Portland, Ore.
Portland--home of Oregon Chai and Tazo, two tea producers--claims
bragging rights as the capital of tea the way Seattle has cornered
coffee.
"The race is on to see who can get a successful tea
chain in gear," says Brian Keating, tea expert and marketing analyst
with the Sage Group in Seattle. "The question is who and when, not
if."
No question, tea is hot.
Wholesale sales of tea
reached $5.3 billion at the end of 2002, more than double the almost
$2 billion sold at the end of 1990, according to the Tea Council of
the United States.
The number of tea rooms offering sit-down
service rose 15 percent this year, to about 1,100, while the number
of shops selling loose tea and accessories rose 15 percent, to more
than 200.
Driving the increased interest is a stream of
studies claiming tea provides a long list of health benefits,
everything from lowering cholesterol to eliminating free radicals
that cause cancer to improving bad breath.
"Seventy-six
million Baby Boomers are trying to stay healthier than their folks,"
said Keating. "My doctor is recommending green tea. It's a dynamic
way to get antioxidants without taking a pill or eating
vegetables."
An increase in Asian immigrants is contributing
as well. In many Asian countries, tea is the national beverage, a
tradition that new citizens from India, Vietnam and China have
brought with them and shared with others through a growing number of
Asian restaurants.
Bon Appetit magazine recently named "green
tea" the best flavor of the year as more chefs at high-end eateries
incorporate its subtle attributes in recipes.
Green tea has
even become one of the most popular scents for soaps and candles at
L'Occitane, the French purveyor of skin care and fragrance
products.
But tea's increasing popularity is broader based
than that.
A new generation of specialty teas tastes better
than the dusty tea bags most Americans grew up with. These nouveau
teas are sweetened, sometimes spiced and mixed with milk, and in
some cases shaken like martinis with sparkling water or fruit
juices.
Now the rest of the country has discovered what
Southerners knew all along: Dumping a bunch of sugar into tea makes
it taste better. Just ask the teenage crowd slurping heavily
sweetened bubble tea with tapioca pearls or knocking back Snapple's
tea-based beverages.
Starbucks chief Howard Schultz bought
out a small Seattle chain of coffeehouses and built a $12 billion
empire by adding steamed milk to a commodity beverage and delivering
it in a hip environment complete with jazz music and bistro
tables.
But with more than 7,000 locations worldwide,
Starbucks' growth potential is limited. It needs a steady stream of
new products and, possibly, a new retail concept if it wants to keep
its top line expanding.
Tea's potential has not been lost on
Schultz.
Five years ago Starbucks acquired Tazo, a wholesaler
of specialty tea. Now tea beverages, including chai tea, which is
mixed with milk and spices, account for about 7 percent of
Starbucks' revenue, up from only 1 percent before the Tazo
acquisition.
"We've seen significant growth," said Steven
Smith, Tazo's founder, who stayed on to run the company as a
Starbucks unit after the acquisition.
"Shaken iced tea with
fruit juice was a phenomenal tea last summer," he said. "It adds a
sense of theater, but it does more than that. It incorporates oxygen
into the beverage and makes it taste better."
Building on
that success, Starbucks is adding new Tazo teas to its offerings,
including decaf chai and a vanilla tea latte concentrate that
customers can purchase and make at home.
If someone is going
to create the Starbucks of tea, it could very well be Starbucks. The
company could easily roll out a chain of Tazo tea shops, industry
experts say.
Tazo's Smith agrees: "Starbucks understands real
estate and how to operate a business. Have we looked at this
opportunity? Sure. We have looked at it periodically. It's not
necessarily on our radar screen, but if anybody could do it in a big
way, it would be us."
Smith tinkered with retail tea
prototypes back when he was starting Tazo in the mid-1990s,
including an outdoor tea cafe and a tea bar.
The business
isn't as easy as it looks, he says.
Coffee consumption is
driven by habit. Most folks are programmed to start their day with a
cup of coffee.
Not so with tea drinkers. Some may use it as
an afternoon pick-me-up or a calming ritual before bedtime. Many
folks only drink tea during cold weather, making the business more
seasonal.
Leisurely service
And tea drinkers are not
into quick service the way coffee drinkers are. Pots of tea leaves
take time to steep and need to be made individually, which slows
down service.
On top of that, tea drinkers like to linger.
Slowing down is part of the experience, tea experts say, and that
means tea shops may need a lot of seating and may have trouble
turning tables.
There is an even bigger challenge, Smith
says: Uncoupling tea from the image of old ladies, china cups and
doilies without losing the quaintness of the tea
ritual.
"We've been too serious about the tea business for
too long," said Smith. "I would counsel people to make tea more
accessible, make it more approachable without losing the mystery and
the magic."
That's what the guys behind Argo Tea say they are
trying to do.
Their tea is delivered quickly in a
Starbucks-like paper cup. No china here. Employees brew strong tea
syrups early in the day, which are diluted with hot or cold liquids
when an order is placed, speeding up service.
Customers can
settle into a small selection of upholstered chairs to do their
sipping. It looks a lot like Starbucks with tea.
But Argo's
founders hope to win customer loyalty with signature drinks
Starbucks doesn't have, such as Carolina Honey Breeze, a blend of
honey, tea and lemon, and Tea Squeeze, a mix of hibiscus iced tea
and lemonade.
Traditional tea ambience is provided by a
selection of loose teas that can be purchased in bulk as well as a
selection of tea pots and infusers. Seats are in short supply on the
weekends.
"We want to capture the masses, although I don't
like that term," co-owner Lindwasser said. "We're not trying to be a
traditional tea house."
Although it has been around only six
months, Argo Tea is beating its business plan.
Now that they
know a single store can work, Lindwasser and his partners want to
create a cluster of tea shops in Chicago. Then they will look at
other markets.
So far, Argo Tea's founders have financed the
business themselves, but they may look at bringing in venture
capitalists to boost their development in the coming year,
Lindwasser said.
Quirky beverage
Not everyone in the
tea business thinks the Starbucks model is a good fit with a
beverage as diverse and quirky as tea.
John Wallace started
Aion Antiquities and Teahouse in Ukrainian Village because he wanted
a space to sell rare prints and antiquities such as Roman glass. He
thought he might as well serve something to eat and
drink.
It's the tea business that took off.
"We have
high tea on the menu anytime. A year later, I'm doing a ton of
bridal and baby showers. The antiquities are here as
decor."
Aion's tea is served in glass mugs so customers can
see the color of the tea. Green and white teas are steeped in Yixing
clay pots from China. Black tea would stain the delicate
pots.
The idea of building a chain has no appeal, Wallace
says. "I find people are looking for something that isn't a
cookie-cutter franchise environment. The environment is really
important."
Copyright © 2003, Chicago Tribune
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