Source: Randy Altman
The Secret and Lucrative Private Label Tea Market
"Private label is one of the highest profit-margin sectors of the trade. The basic concept is relatively simple. A tea company provides the product to a second business, and the second business markets the tea as its own product. Complexities quickly enter the picture, however, as many details must be worked out, ranging from who prints the teabag tags to how much tea is needed. Of particular interest, private label is the most jealously guarded club in the entire tea trade.
The good profits from private label derive from the fact that the deals are at the wholesale level and presumably reliable as repeat customers. Venues that are sold to can be large chains with many outlets. A single deal can result in sales to numerous stores, restaurants, hotels and the like. The retail consumer, the end-state user, thinks the tea is a proprietary imbuement of the establishment he or she is involved. This is direct positive public relations to the venue, providing another branding image. There is the corresponding disadvantage to the tea company, because they usually remain anonymous, out of view from the public. "
" SpecialTeas of Stratford, Connecticut is another company pushing private label. As the name implies, SpecialTeas focuses on the premium to super-premium types of teas, which they refer to as “gourmet teas.” Yes, even this niche is ripe for private label. The owner, Jurgen Link, started the company in 1996. The company now has a fine web page touting its private label, under the section heading “wholesale catalog,” and displaying their registered Trademark “Searching the World for the Finest Teas.”
SpecialTeas offers a wide range of Darjeeling teas and other elite items, plus four other categories: Functional infusions, Spice Mélanges, Fruit Blends, and Flavored & Scented teas. Their business is by necessity specialized, meaning clients are generally limited to specialty teashops with one, two or three stores. This results in a paradoxically larger number of clients than one might expect. Link states that they have 75 regular private label customers, and perhaps a total of 100 start-ups that order only once or twice and then fold.
SpecialTeas first started private labeling in 1998, giving it some good history in the niche. They in-house package the product on a highly customized machine. Link states, “everything was changed” on the machine, which originally failed to meet their requirements such as run time and changeover time. Due to this original failure, Link would not name the machine manufacturer. The company has no minimum size for a private label order, but now tries more diligently to weed out those stores likely to fail or stop ordering within the year.
Jurgen’s complete handling of the private label process makes for what he terms a “time-intense” interaction with every client. His response to what makes for a good relationship with a client, elicited, “understanding them, understanding their goals.” He pointed to the need for quality control over years of service to each customer. As a specialty enterprise, he said tea gardens’ own quality of output can change with the seasons, as one variable. Also, many of Link’s clients are opening up teashops, and so are new to the tea business, thus needing extra time for counseling and education. Taking all these factors into consideration, SpecialTeas has a larger number of employees — 31 to be precise. This employee count represents an impressive growth for SpecialTeas.
Link also explains what he cannot do for private label customers. Even though he has no minimum, he turns down orders that tend to require manual loading or “hand-packing.” For example, if a customer wants 48 2-ounce teabags per box, this order cannot be automated, and thus will be refused. SpecialTeas of course prefers larger orders, and seeks clients with a minimum requirement of 100 kilograms. Another variable in deciding to take on a customer is the number of different teas they order. Link would gladly private label an order for 6 or 12 teas, if he thinks that the client will result in a long-term business relationship.
SpecialTeas emphasized for this article that private label was a sideline operation, not their main orientation. "