I was in holidays and during that time, I saw something I already knew but sometimes you rediscover things you already knew: in hotels, camping places, bars, coffeehouses… you don’t have loose leaf teas but only the “not so good” old tea bags (from several brands, some completely unknown to me).
This puzzled me and I thought about it after coming back from holidays.
Are the people in these places unwilling to give good quality products? Probably not as you could buy/drink/eat other things that you would consider of good/upper quality.
Do they care for their tea customers? Perhaps or perhaps not. Tea is not the most drunk beverage out there and they probably (I didn’t dare to ask them) think that with 3-4 different tea bags (let’s say Darjeeling, Earl Grey, Lemon or Mint and then Assam or Ceylon), they have all it takes to satisfy all their customers. We know this is wrong but do they?
However, after giving it a second thought, blaming the shops (a generic term I use here for all the places where you can buy/drink tea from) is perhaps a bit too easy.
After all, they are only a small part of all the things that are happening between the producer and the final consumer (see the picture below) and most of the time, they don’t have access to all these wonderful products we do have access to but only to the catalogue of wholesalers, which are the middlemen helping them to get all kinds of supplies in an almost efficient way (after all, they don’t sell them good quality teas).
Now that you see the picture, how does it work in real life? Let’s take a simple example: a small baker that makes different small breads.
He might need up to 10 different flours to bake his breads and some in really small quantities.
Does he have the time to visit potential sellers and ask them for price? The answer is obvious: no and this is where middlemen come into the game. Another advantage (remember this is theory) of these people is that they buy more goods, allowing them to get better prices.
So if you want to change things on a big scale, those are the men you should target as they are the one buying and selling to others.
No comes the tricky part, convince them of changing everything. You will probably say, “they should sell better quality teas. People would drink more of these higher quality beverages. This way everyone would be happy.”
Right but wrong.
Nowadays, they have a rather standardised product that can be bought from identified suppliers. Tomorrow, they will have to buy/store/sell a lot of different teas with big questions on constant quality, quantities…
A second argument against the change is price. Who is willing to pay more for this higher quality tea? You will answer me: “I am”. Yes but the “average” people in the street? It is one thing to have a better product, it is another to have people see it that way and it is a third one to make people pay more for what is basically the same thing: drinking a hot beverage.
So is there no solution to this endless tea in bags thing?
I wouldn’t be so grim.
People (and this is a trend in a lot of products) want more quality, traceability and for some a fair attitude/experience.
If you don’t believe me, just look at Lipton (I know this is the example that everyone uses but they are among the most famous and the usual bagged tea reference): not only do they now sell their teas also in loose leaf boxes but their Yellow Label is fair…
There is also a new product with cube shaped tea bags that gives more space to the tea leaves.
In the end, what people want is simple: they want a better experience and they want more for their money.
Is it possible to achieve this and to replace the usual teas in bags from the different places I mentioned earlier?
I do think so but it will take a lot of work towards the wholesalers or the shops.
For example, several “small” shops could get together and decide to focus on a few higher quality products at a reasonable price and by banding together (which is not easy to achieve), they could achieve this.
Why? Simply because what is needed to get this is critical mass and the willingness to skip several middlemen that can be useful but sometimes add really low added-value or no value at all for a rather high price.
For example, imagine your business is just collecting tea from different small blenders, repackaging them and selling them to hotels. What would be the price of your products? I stop you before you begin answering me in an accounting way, the answer is simple, you take the price of your supplies and you multiply it by 4 (or 3 or 5).
If you don’t believe me, this is a true story I learned from the boss of a small company working in the food industry.
Obviously, for our shops to be able to offer good quality prices, these people have to be skipped (sorry for them but such is the way of the market).
Another way around this could be to lobby the wholesalers to convince them that they should change.
This is probably out of our reach as individuals but companies and professional associations could and should do it.
As usual, all it takes to begin such a revolution is a few good men that are convinced that they are right.
Don’t stop asking for tea in restaurants, hotels… but ask them if they have real tea.
If we all do this, we might change the world, probably sip of tea by sip of tea but it will still be another step in the right direction.
I ALWAYS ask, and then refuse to drink the rubbish tea. But of course, If I then have a coffee instead, where’s the incentive for them to change?
You are faster than Flash.
Thanks for the comment and you are right but as I hope to have been able to show, targeting the coffeehouses owners is only a small part of the solution.
Well, I see hope and I think those of us that are interested in better and higher quality tea are starting to impact the American market. I don’t know how many of you are around young high school and college students but I see many of them embracing all kind of tea. Seattle, my home town is thought of as being all about coffee but many shops are offering fairly high quality tea.
Long ago I got over being shy about taking a T-Sac with tea I enjoy with me and if I don’t like the selection I just use my own or ask for just hot water. I have a friend who only drinks hot water and I learned that from her.
Thanks for the comment.
Asking for hot water… I wonder how much they would charge me for that.
I was just in a gourmet grocery store and they had 95% bagged tea. I know at one point they did carry some loose but price was very high mostly due to the lovely high end packaging. I then went to the coffee section and saw many bags of ground coffee. Packaging and price might be the issue. If a tea supplier placed loose tea leaves in sealed bags similar to coffee which could stand proudly on shelves like the coffee bags this might make it more appealing to tea buyers. What is also necessary is in store tastings because as you know once you tasted fine tea Lipton will just not do.
You make a good point here Jo and what you observed is something I continually take as proof that we are far from having that exciting boom with tea.
Coffee packaging is ideal for tea, and bulk tea in stores is my business dream. There will be a lot of money to be made that way, but its going to take some real innovation and some gutsy entrepreneurial spirit to make it happen (…that, and probably a few million dollars in investment capital!)
Thanks for your comments.
Coffee packaging? You mean the rectangular “sealed” box we can see in the supermarkets or something else?
Xavier, I like this very much, not only because I’m a firm believer in the importance of middlemen in business, but because it strikes home to something that too many people miss when it comes to innovating the tea industry.
Tea in the grocery store
It came up in conversation recently about the importance of getting loose teas in the grocery store. Last year, when I was studying business opportunities in tea and trying to determine what direction I could afford to take my enterprise in, I did a substantial amount of research into this.
I did it by doing a case study on a simple brand of tortilla chips. The company specialized in making organic tortilla chips, when I looked them up, they were small and appeared rather insignificant. I thought to myself, “how did they get their products on the store shelves?”
Enter the middle man
Say you come up with a unique loose tea brand. Your labeling is unique, you’ve got 6 or 8 good teas in your line and you did your homework on package preparation and found a way to make it stand out in the grocery store. You’ve got all this, a small warehouse, a few employees lined up, but you still can’t just walk up to the Piggly Wiggly and say, I want to put my stuff in your store.
You need a food broker. Grocery stores, as a rule, will not deal directly with food product manufacturers (which is who you are). It’s too inefficient, when they are looking for tortilla chips, they aren’t going around to the people who make them, they are looking for the agents who represent them. The food broker consolidates sources of food products into a manageable chain that the Grocery store can handle.
In addition to acting as your agent with the grocery store and going to bat for you to get you on the shelf and giving you good advise on merchanising, food brokers also have warehouses, trucks and delivery drivers. If you are in the tea business and you are lucky enough to score a sales contract with the Piggly Wiggly chain of stores and you don’t have a broker or agent, then you are automatically now in the shipping and distribution business. If you have to hire trucks and drivers to keep the 15 stores in your region supplied with your product, you can no longer afford to be in the tea business and your operations have expanded ten-fold. You’re even going to need to hire a logistics executive to make sense of it all.
However, if you have a food broker, he takes a cut of your profits, and, as a small business, you may need only one truck that you can drive yourself three or four times a week to the broker’s warehouse. His loaders unload your trucks, his staff inventories your product, his computer systems receive automated orders from the Piggly Wiggly locations and your stuff goes out on trucks right alongside corned beef, tortilla chips and spaghetti-o’s. His driver’s stock the shelves and ensure everything looks good and his salesman pushes Piggly Wiggly to put your teas on the aisle endcap for a week (maybe because you offered an incentive, but your broker’s man is the guy that makes it happen).
This isn’t just grocery stores, food brokers handle cafe’s and restaurants too. Different brokers have different specialties.
There are middlemen at every level of the logistics chain, and as much we we love to hate them, they are en essential part of the business cycle.
Peter, thank you.
I think you explained better than I did why people/companies need middlemen (I focused perhaps a bit too much on what we should/could do with them).
This is a fascinating discussion; I had not considered the tea business from this angle before. Thank you all!
Thanks for the comment.