Natural Foods Merchandiser

Reading the Tea Leaves for Stronger Sales

As Starbucks came of age and coffeehouses sprouted across cityscapes like dandelions across spring lawns, the decade of coffee—the 1990s—was born. The first decade in this new century, however, may well become the era of tea. Not tea in bags, but tea that comes in tins and bins and requires some cool equipment and even a dash of personal ceremony to brew.

The numbers validate the buzz. Overall sales in the United States of the aromatic beverage have climbed from just more than $1 billion in 1993 to about $5.1 billion in 2003, according to the New York-based Tea Council of the USA. Some experts expect that number to double to more than $10 billion in the next few years. In the natural foods channel during the 12 months ending March 22, sales of loose tea have grown from $6.1 million to $6.5 million, according to San Francisco-based market researcher SPINS.

SPINS doesn't track sales of loose tea sold in bulk, but tea suppliers say bulk is becoming a larger percentage of their total sales.

"The general consensus is that bagged-tea sales are flat or growing at the same pace as [for] conventional grocers, which is about 1 to 2 percent a year," says Benjamin Harrison, co-owner of Rishi Tea in Milwaukee. "But premium high-quality teas are growing from 10 to 20 percent a year."

Rishi's sales have doubled every year for the past four years and are on pace to do so again in 2003, Harrison says. He thinks tea is a natural to perform as well as specialty wine, cheese and coffee. "It's part of the recognition of quality that's taking place on a broad and growing level in the United States," he says.

Ahmed Rahim, co-founder of Numi Teas in Oakland, Calif., says tea that's brewed outside a bag is becoming demystified. "You just need a strainer and hot water and a cup. There's no rocket science about it," he says.

Customers like bulk teas because they can try a small amount of premium tea before committing to a larger package of the often-pricey beverage. Republic of Tea's Wuyi Oolong full leaf tea, for example, sells for a daunting $130 per pound. To be fair, a pound of tea goes a very long way; it can brew about 250 cups.

For retailers, bulk tea sampling has an added advantage beyond abating sticker shock. "It actually fuels tea category sales," says Kristina Richens, regional manager for the West at Republic of Tea in Novato, Calif.

That can only be good news for natural foods retailers, whose industry is rooted in bulk sales. But with tea, suppliers say, succeeding at bulk sales requires some "out-of-the-bag" thinking. The key is merchandising, and specialty tea sellers are delighted to offer suggestions on how to do it well.

Richens believes bulk teas should be merchandised as part of the entire tea category because of their importance in fueling overall sales. "It's also great, especially for natural foods shoppers, to taste the tea in bulk, then buy the tin and refill it so they don't have to buy additional containers," she says.

Others say high-quality loose-leaf teas warrant a section of their own—apart from bagged teas. Still others suggest loose and bulk tea be merchandised like good wine.

"It's an idea I've had for awhile," says Steve Smith, founder of Portland, Ore.-based Tazo Teas, a unit of Starbucks. Perhaps a tea specialist could act much like a wine merchant and attach cards to each bin with comments about the tea's flavor and origin. Then, he suggests, do some food pairings.

Rishi's Harrison likes Smith's idea. "Tea has layers of flavor to it. Also like good wines, good teas have distinct regional profiles."

At least one retailer isn't so sure the wine strategy would entice consumers. "It's a big leap for the customer," says Tina Roberts, vice president of sales and marketing for specialty retailer Larry's Markets in Seattle. "I don't know that, from a grocery perspective, the customer can make that leap."

Larry's, along with Whole Foods Market and specialty grocer Dean & DeLuca, has acquired a reputation for savvy merchandising of bulk teas. In Larry's bulk foods sections, air-tight tea canisters sit on stainless steel Metro racks. To guard against cross contamination, each canister has its own scoop. Whole Foods, on the other hand, generally merchandises its bulk and loose teas in a specialty tea section far removed from the bulk foods section.

While she might differ with tea suppliers' ideas on merchandising, Roberts echoes their views on the merits of selling bulk tea. Larry's customers enjoy the option to buy a few ounces of different flavors. "It offers them the ability to treasure hunt," she says.

Suppliers Smith and Rahim aren't convinced that merchandising tea like wine is the only sure-sell solution, either. Both have other suggestions, like tea-tasting events. "If you've got an accessories program, if you've got pots, make the tea in the pots and you've got a self-liquidating program," Smith says. "You will sell the pots; you will sell the tea."

Smith says retailers also might consider a bulk-tea promotion that offers what amounts to a sampler—an ounce of four different teas, for example, at one price. He says there's enough margin in bulk tea to make the sampler idea work.

But, Smith admits, Tazo doesn't sell its tea in bulk. It currently sells the majority of its tea in bag format. That may change. Tazo has recently launched in Whole Foods, Wild Oats and several specialty grocers a loose-tea "sampler" that Smith says is akin to an individual tea mess kit. Called the Full Leaf Tea Kit with Infuser, it includes a stack of three different teas—a black, a green and an herbal—and an infuser, a strainer-like device. Tazo has applied for a patent on the infuser part of the kit. "It's a small piece of our business right now, but it's growing," Smith says.

Numi, known for its organic and kosher bulk teas and herbal teasans, offers another mess kit of sorts, only on a much larger scale. It consists of a bamboo display case that holds 16 colored bulk tea bins, also made of bamboo. The bamboo protects the teas from light and heat, both of which can damage tea, Rahim says. Bamboo not only looks exotic and elegant but also is an abundant renewable resource.

Interestingly, organic bulk and loose tea might be the fastest-growing segment of the bulk- and loose-tea market. This obviously is another piece of good news for natural foods retailers.

"The level of quality of organic tea has come up incredibly," Rishi's Harrison says. "We spent four years looking for quality organic tea. We saw one awful sample after another. We finally developed a relationship with a co-op in China, and their quality has been superb."

Rishi now has about 60 certified organic loose-leaf teas. "It's the fastest-growing part of our business and a dominant part of our business now," he says.

Ultimately, stimulating bulk- and loose-tea sales requires education—of both the retailer and the consumer. Most premium loose- and bulk-tea suppliers offer in-store training and workshops. Many also conduct tea tasting classes.

"There is lots of bad information and misunderstanding with tea," Harrison says. To counter it, tea suppliers can provide vital information about where tea is from—both geographically and botanically—and about what tea does for the person who drinks it.

Indeed, the health benefits of tea have been widely publicized. Regular tea drinking has been shown to stave off death after heart attacks and, especially with green tea, to protect against cancer. The latest research, undertaken at Brigham and Women's Hospital and Harvard Medical School, both in Boston, suggests that tea also boosts the body's immune system.

Education is fundamental for another reason, Rahim says. "Training key managers and key personnel is the only way tea is going to sell off the shelves. You've got to sample and educate and say why loose-leaf tea will make you think differently about drinking tea."

As he says, brewing tea may not be rocket science, but a certain reverence toward the task is required. You can't just steep and run. That's part of tea's attraction. "In today's times, with the challenges in the political and global arena, loose tea is becoming a form of Zen and a form of art," Rahim says. "And we're just seeing the beginning of what teas are going to offer."

Nancy Nachman-Hunt is a Boulder, Colo., freelance writer and editor. She may be reached at [email protected].

Natural Foods Merchandiser volume XXIV/number 7/p. 12, 16

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