If you ask this about blogging, the answer is obviously no.
You want an example? I have several files, articles and so on about Teavana IPO, finances and such (this is the nice part when a company goes public) but I have tried to analyse all of it in depth and I have been stuck in nowhere, unable to go anywhere but unwilling to let it go.
How does this connect to tea?
When I asked myself what I should do and found the question I asked myself at the beginning, the answer came to me: What is the growth strategy of Teavana? Where do they do make their money? Where do they make their profits?
I don’t know if I will be answer to answer all these questions but I will focus on them (this means I won’t cover everything but perhaps I might come back to it later).
“Teavana is a rapidly growing specialty retailer of premium loose-leaf teas, authentic artisanal teawares and other tea-related merchandise.”
I will come back to the growing part later on, so let’s focus on the sales mix.
Here is Teavana’s sales mix over the last years.
| 2008 | 2009 | 2010 | |
| Tea | 51,00% | 54,00% | 56,00% |
| Merchandise | 44,00% | 42,00% | 40,00% |
| Beverage | 5,00% | 4,00% | 4,00% |
Tea is the biggest part of it but not by much (only between 1 and 6% more than the two other categories put together) but its importance is growing while Teavana is experimenting a rise in their sales (from 63, 86 millions $ in 2008 to 124,70 in 2010), so when you mix the two of them, you see that tea is really important for Teavana.
| 2008 | 2009 | 2010 | |
| Tea | 32,57 | 48,74 | 69,83 |
| Merchandise | 28,10 | 37,91 | 49,88 |
| Beverage | 3,19 | 3,61 | 4,99 |
So important, that their tea sales were in 2 years multiplied by more than 2.
This is coherent with Teavana’s strategy as “A primary driver of our expected margin expansion will come from the continuation of our sales mix shift away from tea-related merchandise towards higher margin loose-leaf teas that our stores generally experience as they mature. In general, this trend is consistent with the evolution in our customers’ buying patterns as they graduate from purchases with a greater focus on merchandise with which to prepare and enjoy tea towards transactions centered more on replenishing their favorite teas and experimenting with new blends.”
To sum it up, they aim at opening more and more new stores but they also aim at bringing the consumers to the world of loose-leaf teas where their margins are higher.
Does it work or is their future growth the result of a growing number of stores?
Here is a first hint to see if it works.
The graphics provides us with a first analysis: the growth in the number of stores is obviously linked to the growth in revenues and also to the growth in profits (even if it takes time to get a return on investment, even if Teavana claims to do it rather quickly with a payback period of 1.5 year) but it is only one of their main components (I checked also using statistical formulas but I don’t want to bother you here with them).
So it seems that Teavana figures are in line with their strategy :
expand the number of stores,
-
increase the same-store sales,
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expand the online presence.
Will this strategy work? Perhaps and since I don’t read the future in tea leaves, I won’t answer that question. However, what I know for sure is that perpetual growth is an unknown phenomena.
If we get back to Teavana, from all the weaknesses they have identified in their strategy, I think the most important one is the potential problems with the new stores (suitable locations, lease terms, cash to invest) and the personal (train and retain it).
Why?
Simply because quality is not enough, you need to have the right people able to create a specific relationship with the buyers, allowing them to come back and to “upgrade” their experience.
You also need to be visible, meaning being in the right place, which comes at a cost.
So is bigger better? Only up to a certain point.
What point? It all depends on how a company is able to evolve and make the best of its size but sometimes, it just becomes too big to fail, which usually leads to a failure.
But one thing I know is that for now, Teavana is not going the Starbucks way and comparing the two is like comparing broccolis and carrots, they are both vegetables but that’s all. Teavana and Starbucks are both beverage companies but that’s all.
Interesting, although I am not a Teavana customer I respect them for taking the leap and bringing newcomers to the leaf.
Thanks for the comment.
I don’t know Teavana at all apart from their IPO stuff but I had promised to @sirwilliamoftheleaf to write something about this company.
All I had to do was to find the good idea.
This is *exactly* my position on Teavana.
I appreciate the work they’re doing. In some places, they’re the only obvious tea shop in people’s line of sight.
“The bigger the better…in everything” – Freddie Mercury.
Words to live by.
I do love your work.
Thanks for the nice words and for bringing Freddie Mercury in the discussion.
Xavier, I know I’ve said it before, but it’s still the case…what you’re doing here with your blog is so unlike any other I’ve seen.
I really enjoy it. And I find that you’re providing a service that really assists the rest of us. There are so many questions I have related to the business/economy of tea, but I wouldn’t even know where to begin in answering them.
Very interesting questions you bring up. Even if my personal experiences visiting this company were a bit less than satisfactory, I really want them to do well. I really believe in the idea of Teavana.
What you’re talking about here makes me even more curious how things turn out for this organisation.
Thanks @lahikmajoe for the nice words and I am glad if you find what I write interesting.
I will look at their results when they publish them.
And if you have any question on the business/economics of tea, just ask.
Xavier, I agree with @lahikmajoe, what an interesting and unusual blog. I actually mentioned your post over on G+. It’s not the most active place yet, but they are people I talk to over there, who probably haven’t seen your blog yet.
Great stuff, keep on writing & analyzing!
Thanks Jackie. I will keep on rolling.
Xavier, wonderful article. Must’ve taken you a while to put it together. Raising a cup of tea as a toast for your efforts! Have shared it on Twitter just in case there are tea tweeps who haven’t seen this amazing article yet.
Thanks @maykingtea
The most difficult part was not writing it but finding the good thing to analyse since a lot of data and analysis are available.
I too am interested in this topic although I do find that a lot of it goes over my head (I never can understand graphs of any sort). I am particularly interested in the concept of Teavana because it seems to me to be a similar type of business to T2 here in Australia. Same heavy focus on funky & attractive merchandise, lots of flavoured teas, but recently a strong investment into higher grades of tea – and an increasingly strong presence in shopping centres, bringing the loose leaf word more readily to the public, I guess. Which is good. But I don’t shop there much, simply because I have access to better teas at better value from vendors online – but its taken me time to find them. So the convenience value of places like T2 is still pretty high.
Value is another different topic but usually big companies are more like supermarkets in terms of quality and price.
I don’t know Teavana but if it brings more people to the tea side of the force, I welcome them.
And @Verity my next post will be dedicated to you (lots of graphics and strange concepts ;))
GREAT blog, Xavier.
Believe it or not, I interviewed with Teavana once, and their M.O. according to the manager was, “We’re not exactly used car salesmen, but we walk the fine line.”
There really isn’t a relationship that they try to set up with the buyer. Their aim is the casual buyer, not buyer retention. So, they to milk what they can from the passerby on the first visit – hence the aggressive upselling. The downshot to this is that they have a very negative view from the tea world at large.
I’ll give them credit for this, their blends are wonderful. However, that’s not what they’re trying to sell. Employees get better commission from the tea apparati rather than the tea, tins over bags of tea, and amount of tea sold. That’s it.
I’m glad they never called me back.
@lazyliteratus, I read your comment and I must admit it is plausible as I don’t have enough data to see if the trends I saw will last on the long term.
I think this topic is far from over.