The Business of Tea: The Challenge and Struggle.

You usually don't hear about the business of the tea industry or the challenges that require creative solutions in order to stay relevant and top of mind. Tea is a $9 Billion industry and deserves some attention. As a result, today we'll take a snapshot of what it's like in the Tea Biz.

Here is a common misconception: once you have a product line and find a customer you start making money and ultimately over time you'll succeed if they keep buying. Sadly, that couldn't be further from the truth. Here is the truth....to make money you need money. This is a poor capital market where angel investors are acting like private equity companies and private equity companies are acting like venture capitalists. It's a true bane on many small companies that need constant cash infusions to remain competitive. There are even greater challenges with banks and their ability to lend. Small businesses are not seen as good opportunities for investment by traditional financial institutions anymore.

Small business owners make very difficult decisions based on a desire to want to see the business succeed. The typical capital infusion decision tree is either to give up a large percent of equity to support the vision or depend on an organic but slow growth in an industry where innovation is the differentiator. Village Tea has been fortunate that we're still new, unique and have a national foot print but there is always an opportunity for growth.

The challenge: Long lead times on product development combined with short retail delivery times. Depending on the product line and time of year, the lead times on production could be as far as 60 days. However, retailers ask for 30 day delivery and with long lead times you can imagine where you spend a majority on your money - inventory. A quarter or more of your cash is usually invested in inventory.

The struggle: Keeping the consumer engaged. As a new brand, no one knows who you are and people buy items in 3 ways:

1) what they are familiar with
2) what their friends tell them to buy
3) new and shiny things.

Unfortunately, the volume generated by #3 is about 1/16 of the total which means that "new" isn't sustainable long term. What is sustainable is a forced exposure that generates trial at the store level. However, demo's are expensive.

I write this to encourage the angle investors, who sit on the side lines looking to jump in but at a price where the business owner has to give up his life's work, to be kind. I write this to encourage, the private equity group that always "likes" the business but wants to see $1M in EBITDA before they jump in, to simply jump in. I also write this for my entrepreneur colleagues. Keep your chin up. It'll get better for all of us. Maybe you'll get a bunch of dedicated consumers like this young tea lover below and capital won't even be an issue anymore.



- Posted using BlogPress from my iPad

Location:30,000 feet on the way to LA just realizing I forgot to bring something with me......

Hotel Tea Doesn't have to Suck

It's very rare that I pump my own product on my blog just because it seems very self serving.....however, I think it may be appropriate when this time it's so AWESOME!  It's not a secret that I own a tea company and as such I have been tasting a bunch of teas, exploring new and interesting packaging as well as studying competitive packaging.  Sadly, I have been a bit underwhelmed considering that my category is a $1.3 BILLION dollar category.  What has been most disappointing is what has been presented in most hotel rooms.  

I believe that there should be a consistency in a brand or product that is provided.  For example, you wouldn't expect an upscale steakhouse to serve a delicious steak and then turn around and serve it with plastic ware right?  So, why do hotels that cost $200 a night provide subservient products that don't match the brand or type of room?  You will probably spend, in a 4 star hotel room while on vacation, close to $1000 for a 4 night stay in a good hotel so at least the TEA should taste good.  Ok, if you Groupon then you'll probably spend 75% of that amount.

You've experienced this before.  You wake up, decide on a morning beverage, you choose wisely and pick up tea (thank you for the support), decide on the 3 flavors (usually a lemon black or orange black tea), proceed to tear the square package and put the dusty tea bag in hot water.  Then you watch it color the water.  So, introducing the better way to enjoy tea in the hotel: Village Tea Single Serve.  TINY paper tubes, 1.7 x 1.5 inches made from 100% recyclable paper material with 1 soilon (soy tea pouch that doesn't leach a chemical into your water) pouch which means it's 100% biodegradable.  What's even better is that its 100% whole leaf tea so you get all the best stuff while on vaca.  Now to find a hotel that wants to carry it :-) 

Make sure to visit Retail Partners to see where you can purchase Village Tea in your neighborhood!


Posted by Martin Ekechukwu at 12:55am on 7/22/2011 at home on my iMAC using the new OS X Lion and giddy with it all.