Harvesting Tea Profits
Tender Leaf to Legal Tender
By Bill Waddington
Illustration by Shelly Tumbleson

I still have my yogurt maker, my StairMaster, the pasta maker, and the health-club membership. I paid good money for all of them but never used them to their full potential. Thus, I never received any return on my investment on these purchases. Unfortunately, this is an issue specialty tea programs often face. There is an initial investment up front, but many retailers never address their possibilities again, and are therefore unlikely to reap any benefit from it. In terms of profitability, specialty tea has the potential be the most successful department in your operation. Period. And here's why. How many servings will one pound of tea make? The industry standard for one pound of tea is around 200 cups of tea. It is important to realize that this yield of cups per pound is much higher than that of coffee, even though they are often sold for around the same price. What is the cost per pound of your tea products? If you are working with loose tea, your tea is probably already priced by the pound. If it is priced dollars per kilo, simply divide that price by 2.2 to determine cost per pound. If you're only considering the sale of teabags, skip to the next point.
   What is the cost per serving of your tea products? To figure it, simply divide your cost per pound by the number of cups it will produce. (For the sake of this article, let's assume one standard teabag makes one standard, eight-ounce cup of tea, and that one teaspoon of loose tea will also make one standard cup of tea.) For example, if the wholesale cost on your loose tea is six dollars per pound, simply divide six by 200. Your cost per cup is a mere three cents.

CALCULATING COST
Quality premium loose-leaf tea per pound can cost anywhere from six to $12 per pound when it is sized for foodservice operations. This translates to a per-cup price of between three and six cents. Premium tea packaged in teabags (this may be an oxymoron-but that's the subject for a different article) can range from seven cents to 14 cents per teabag, or per cup. The tea that comes in teabags is usually at least two times as expensive as a comparable tea in loose-leaf form.
   If you are selling tea in two-cup pots, your cost of product invested in that sale is only six to 12 cents. I recommend selling a two-cup pot of tea for at least two dollars (in our retail stores, two-cup pots of basic tea sell for $2.50, and more expensive teas sell for $4.50 per two-cup pot). That generates a profit of at least $1.88 per pot, a gross profit of 94 percent on your two-cup pot of premium tea. Compare that to the 50 percent gross product bakeries typically generate, and the 60 to 80 percent specialty coffee brings in.
   Many successful tea retailers agree that there are some basic guidelines to follow in establishing a premium tea program, and taking advantage of that profit potential is essential.

GET ORGANIZED
The most important rule is to purchase and retail high-quality tea consistently. Your customers will taste and appreciate the difference, and come to expect it every time. Find someone in your organization who is excited about specialty tea and willing to learn. While the book-keeper is calculating profits, the expert is the one in the store selling customers on the merits of the product. Passion is infectious and enthusiasm is critical. A number of our wholesale customers have involved part-time staffers in this process and have done extremely well with it.
   Be sure to track the results. If you can't measure your investment, you can't tell if it has been successful. Meticulously tracking the process and the numbers is essential. Devote a separate key on your cash register to premium tea. Make it a separate department in your reports. And know exactly what both your profit and your gross profit percentages are on the teas you sell, then track sales to see where the profit is coming from.

TALKING TEA
Finding a respected vendor is your first order of business. There are many good ones out there, so ask for recommendations from other tea retailers you respect. They should advise you in determining how helpful the vendor will be at offering useful advice, and their level of expertise.
   In establishing a tea menu, gather samples from different sources and cup them against each other. Keep in mind that this exercise should be conducted by the person in your organization who will be in charge. I recommend starting with between six to 12 teas. Fewer than six doesn't create much of an impact but more than 12 can be a lot to handle. I recommend at least one of each of the following:
   . A straight black breakfast blend- Some customers call this "regular tea."
   . An Earl Grey- Its continued popularity requires you to carry it (so get the best one you can find).
   . A flavored black tea- Seek one that's unique and will make you stand out from your competitors.
   . A straight green tea- Gunpowder and Dragonwell are reliable choices.
   . A flavored green tea- While there is a lot of public interest in green tea due to health reports touting its powers, many customers aren't quite ready for the flavor of straight green tea. A green tea with mango, or a Moroccan mint green tea are tempting vehicles for introducing novices to the world of green tea.
   . An alternative with no caffeine- We usually recommend one or two of the following: a minty-chamomile herbal blend; a fruity tisane; or a rooibos.
You might also consider carrying an oolong tea- they're not as strong as black teas but stronger than green teas-or a white tea. Keep in mind the enormous amount of press on white teas lately, which is the lightest and most delicate of all teas.
   Another recommendation for establishing your selection of teas is start small. You can always add teas later and customers will just view it as a newly added benefit. However, if you start out with a lot of teas and then have to cut back your selection, customers will feel that their options are shrinking and their retailer is not as reliable as they once thought. Lastly, carry a tea for people who like to drink coffee. Some possibilities might be Keemun, Yunnan or Puerh teas from China.

BREWING SUCCESS
Maintain the quality of your teas by dating your products when they arrive. Make sure to rotate your teas so your supply never goes stale. Moisture, air, light, and heat will degrade tea quickly.
   But no matter how high-quality the tea nor how well you've protected it, any tea can be ruined by poor preparation. Here are a few easy steps for making great tea:
   . Choose good tea.
   . Use good water. If you have poor water, your tea (and your coffee) will reflect it. Conducting a professional test of your water solubles is a smart move for many.
   . Use the right amount of tea. An average measurement to start with is one rounded teaspoon per eight-ounce cup. This usually translates to around three grams per eight-ounce cup. Keep in mind that you may need to adjust this to suit your own menu and situation. The most common mistake coffee retailers make with tea is using way too much, which results in tea so strong, it's undrinkable.
   . Use the right temperature of water. Different teas require different water temperatures. Black teas and herbals tend to brew well in boiling water. For oolong teas, use water that is slightly off the boil (190 to 200 degrees). Green teas necessitate considerably cooler water (165 to 185 degrees). And white teas require an even lower temperature. Your tea vendor should be able to advise you on appropriate water temperature and assist you in devising a process for achieving it.
   . Steep tea for the proper amount of time. Again, seek guidance from your tea vendor on this issue. In general, black and herbal teas steep well between four and six minutes, oolongs slightly less time, and green teas need only 2 to 3 minutes. A good trick is to provide each customer with a small sand timer.
   . Allow room in the cup for the leaf to expand. When hot water hits the dried leaves, they rehydrate and expand two to four times their size. This is why we don't recommend tea balls (i.e. those little steel balls on a chain). They may be cute, but they limit leaf expansion. There are many effective and reasonably priced alternatives on the market, such as do-it-yourself teabags, tea-basket infusers, tea presses, loose brew vessels, and strainers. Your vendor should be able to help you devise a preparation method that works for your operation.
   . Separate the leaf from the liquid when it is done steeping. If you leave the tea in hot water indefinitely, the brew will become unspeakably bitter. Choosing an effective steeping device will likely eliminate this potential problem.
Finally, its essential that you make a splash when it's time introduce your program. Send press releases to your local papers, post banners and balloons, and hand out plenty of free samples.
   Make sure your teas are listed and described accurately on your menu. Customers love having access to sample jars so they can experience different aromas, which is likely to result in a sale.
   Premium tea can be synonymous with profitability. Simply having a program, however, isn't going to be enough. But the reward potential should be inspiration for hard work.
   Remember that StairMaster? If it been used for exercise instead of as a coat rack all these years, your waistline would show the difference.

Bill Waddington is the owner of TeaSource, a tea retail and wholesale specialty tea establishment in St. Paul, Minnesota. He can be reached at 877/768-7233 or via www.teasource.com.