Although that ubiquitous coffee chain, Starbucks, is seeing a downturn, the outlook for tea sales is anything but tepid. Research firm Packaged Facts forecasts that tea sales in the U.S. will double in five years, from $7.4 billion last year to $15 billion by 2012.
Several trends are at play. Tea, especially herbal infusions, has earned a rep for being good for you, or at least better than coffee, among baby boomers and twentysomethings. News reports boosting tea as a cancer and obesity fighter help. A study published last year in the Journal of the American College of Nutrition suggested that a one-gram drink of black tea may have the potential to stimulate an insulin response and reduce blood sugar levels. Another 2007 report published by the American Journal of Epidemiology found that drinking five cups of green tea a day may reduce the risk of prostate cancer by 48%.
Tea packagers and producers have seized on the interest and spawned ever more flavors and more interesting packaging. Packaged Facts forecasts that by 2012, the specialty tea segment of the market, which currently makes up 36% of the total, will grow to account for more than half of all tea sales in the U.S.
Plunging into this rich-looking future is Gene Dunkin, who took over as president of privately held Tea Forte in late 2007 after a long stint running Godiva Chocolatier. Tea Forte is distinguished in the marketplace by its pyramid-shaped, nylon bags, each in its own similarly shaped envelope. Dunkin talked with senior correspondent David Kiley about expanding a business whose product costs users about $1 per cup. An edited version of their conversation follows.
What made you want to leave the world of chocolate for the world of tea?
Last summer, [company founder] Peter Hewitt kidnapped me at the Fancy Food Show. I first met him five years ago when he launched Tea Forte. I had been smitten with the brand, the delivery system for the tea, the packaging. Godiva is a well-packaged product, but Tea Forte's packaging blew me away. He held up Godiva as a role model for what he wanted to do with the business.
How big is Tea Forte, and how has growth been?
The business has been growing a minimum of 50% a year since its inception. We are comfortable growing at about 50% for the foreseeable future. This year's sales will be about $15 million, approaching $20 million.
What sort of distribution do you have?
The initial distribution has been high-end gift stores, boutiques, and food shops. Recently, we have been branching out into department stores, such as Neiman Marcus, Harrods, Saks Fifth Avenue, Gump's, and Origins. We are going to David Jones in Australia and Harvey Nichols in England. The other channel that is taking off is hotel and spa distribution. We are in Ritz-Carlton and Four Seasons Hotels in 20 countries now. And we have a new global agreement with W Hotels to be in rooms and the restaurants.
As interesting as the pyramid bag is, it is made of nylon or silk. I took a dim view of not being able to compost it. Also, you have each bag wrapped in a paper envelope, and those individual bags are in a box. Isn't all that packaging at odds with the eco-friendly image of herbal tea?
You may be on to something, and we are, right now, looking at changing the bag's material to something biodegradable. The infuser, as we call it, is not just designed to be beautiful. Unlike the brown, frumpy, paper tea bag, the tallness of our infuser and mesh material is ideal to steep high-end, whole-leaf teas. And it does it in a neat, unmessy, way. Five years ago, that was a major innovation in the quality tea category. Our tea bag still looks good after it comes out of the cup or pot. Not having to look at the nasty tea bag after brewing is something people really like.
Several high-end tea brands exist. But it seems that Tea Forte really put the emphasis on using design to create a quality product. Has that been a deliberate strategy?
Design is important to this brand. The quality of the tea is still king, but the design element transforms it from being tea to being a tea experience. The accessories, the infuser—it's all multisensory. Peter Hewitt's idea was to create a "presence" for tea through design. The design literally gets people to stop and become more engrossed in the experience of brewing tea than if they just had a tea bag and a cup. We also have unique tea flavors and blends, and those get people to come back.
It actually seems a bit fussy to me. Does this appeal to younger people?
It's not a grandmotherly British tea experience. And it's not the ultra-elaborate Asian experience. You call it fussy, but we edited the more elaborate tea experiences of those cultures to create a contemporary experience. We are multigenerational in appeal. Tea is the hot category of consumables. A few years ago, the buzz was around coffee, spirits, and olive oil. Those are still relevant—but tea is hot. You know, aside from water, tea is the most consumed beverage on the planet. In a lot ways, though, it's just getting started in the U.S. Coffee gets you going, but tea is drunk in the afternoon or at night for ritual relaxation.
Does the recession make you nervous?
I was asking myself that at the start of the year. The reality is that our infusers sell for $1 apiece. Mighty Leaf sells for about 40¢. But I'm taking heart. In April, we broke all sales records—it was the best month in our history. It's my opinion that we are an affordable luxury, and I think people are going to continue to spend on those things. They might postpone a new car or vacation. But they aren't cutting the things that make them feel better.
Which do you like better—having to taste the tea, or tasting the chocolate when you were at Godiva?
The tea is certainly healthier. When I was in Belgium for Godiva, people would bring all this amazing stuff to me to try. It was like the Willy Wonka factory. You can get carried away, if you aren't careful.