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Private Label for the Smaller-Sized Specialty Tea Business

By Randy Altman

Private label is one of the most secretive aspects of the tea industry. Here, Tea & Coffee Trade Journal gets an inside look.

The concept is simple, a tea company provides the product to a second business, and the second business produces the tea as a branded item for the original company. When done at high volume, this sector has one of the top profit margins in the tea trade. But what about the smaller specialty outfit, such as a single tea shop that wants its own brand on the packaging it sells? Where can the small businessperson go to get private label?

The disincentives of small economy-of-scale can make looking for private label suppliers a challenge. The large providers, like G. S. Haly of Redwood City, California, take only high-volume orders with an eye toward repeat customers. Custom Co-Pak of Philadelphia, a family-owned business with Len Szyper Sr. as president, is another example of success at the typical large wholesale level. Their smallest teabag order is 25,000, preferably 100,000. For tins, they will go down to 5,000, but might tack on an extra charge for clean up at this “low” volume. The company utilizes a variety of tea bagging machines for all their needs. They use the IMA C-45 for high speed tagless, the T2Prima for telescopic string heat sealed envelopes, Maisa string and tags, heat sealed with envelopes and Asko for round teabags. For pyramid and rectangular nylon and biodegradable teabags, the company uses Nasa/Fuso FS-100 machines.

One question the smaller business must answer is who will provide the designing of the packaging. Most private label companies will be able to do this in-house, or perhaps using a freelance designer, but obviously this will add to the bill. I suggest even the smallest orderer try to have their own designer do the work. Empire Tea, in Columbus, Indiana, will take requests for tins at the low volume of 16. The owner is Lalith Taraparanavitana, who states he has 20 private label customers. For boxes, which are handmade in Sri Lanka, the minimum order is 3,000. Tea shops are often his clients, with requests for tins in the hundreds. Tins contain loose leaf. Lalith mentioned one shop requested 400 tins. He also imports pyramid sachets available for private label. The pyramid bags are packed on Fuso teabag machinery in the company’s Sri Lanka branch. Teabag machinery also includes Maisa and Constanta.

If you are wondering why Empire will perform for 16 tins but requires thousands of wooden boxes, the answer is that the boxes use screen printing, necessitating a higher volume. He states that paperboard boxes need tens of thousands to be cost-effective. Lalith mentions rising freight charges as one of his own challenges, as his tea tends to come from Sri Lanka, via Hawaii. Products like fruits for tisanes are not imported from Sri Lanka.

Lalith reminds those who supply their own packaging design that various legal requirements must be met, such as display of corporate logo and net weight. Empire carries the full range of teas and tisanes and Lalith is proud of his white tea. He has been in the tea trade for 33 years and runs entrepreneurship training programs for those interested in starting a tea business. He has his own brand, Tea Temptations.

Large tea companies that have their own brands often focus, perhaps exclusively, on producing their proprietary label. Stash is interesting in this regard. I spoke with Dorothy Arnold, who said Stash does “a bit” of private label but their goal is to push their own brand. They are more willing to take on “special customers” and will regard private label requests on a “case by case basis, but are not actively seeking private label business.” Factors decisive in taking private label include machine capability and even time of year, but she repeats Stash “does not solicit” such business. Stash utilizes IMA teabag machines.

For the specialty tea shop that orders 20 or 500 tins, the private label company views this as a continuing business relationship, as a repeat customer. This business relationship is one reason companies will handle smaller orders. Lapis Tea House, in Greenfield, Massachusetts, has a focus on private label, and accepts tin orders as low as 12. Jake Meyer is the owner. He is currently re-vamping his operations to allow printed-paper boxes and stand-up pouches. His goal is to be “as accessible as humanly possible,” and this is good news for the specialty tea business. He entered the private label business, he said, because he could not find anyone to produce the product he wanted.

Lapis also caters to the internet venders, with a minimum order of 60 tins. Jake finds excellent specialty business with coffee shops that own several stores, selling them a few hundred items. He said he is concerned with keeping the coffee shop inventories low enough that the tea remains fresh. He states he has 150 customers, and if this number seems high, he is the first to state some of these are one-time-only customers. These single-shot customers can be very lucrative; especially the corporate gift market, and he mentioned prestige customers such as Volkswagen. Like most of these small-order specialty private businesses, he has a freelance designer he can call upon if the client cannot provide graphics. Many of the smaller private label packers seemingly do not have full-time graphics/designers on staff.

Island Tea Shop, outside of St. Petersburg, Florida in Tierra Verda, is owned by August Wald, PhD. He will take on projects “down to a few hundred dollars” in value. His focus is on re-sealable stand-up pouches. For teabags, he has a minimum of 5,000, but is looking at the option of “generic tea boxes” where you can “just stick on the labels” and this may lower his run amount. Wald stated the most popular request by far is for instant tea mixes like frappucinos and lattes, which he said for private label has an especially high profit margin. He recently published the book, Green Tea Health & Matcha Recipe. The company has a minimum for tins of only 20, especially if the tea is expensive.

Brinmühl Marco of the tea importer, Gebruder Wollenhaupt, states that they can fill round, square and triangular tins, with weights of 25 g, 50 g, 100 g, 125 g, 200 g, 250 g and 500 g which provides a complete range of choice. While their packing minimum is 1,000, they will sell the tins directly for the clients to pack themselves. Gebruder will sell empty tins and bags (such as 100 g), and tea itself directly to businesses. This company is a full service provider and sells 400 types of tea.

The Tea Affair, in Calgary, Canada, is operated by Sameer Pruthee, CEO. The minimum run for tins is 100, with teabags a daunting 10,000. He said most popular were flavored tea and herbal tisanes. The company has 10 employees and has been in the tea trade for eight years. The company is willing to put teabags in their tins. As is standard, he will use a freelance designer if the customer does not provide graphics.

Most notable about Tea Affair is what they term “whole leaf pouch,” which to my knowledge is unique. This is a single flat teabag with the dimensions of 2.5 by 2.5 by 1 inch. This is a very big flat teabag.

One new tea term I learned from Paulette Rigolli, executive sales director of Blue Ridge Tea & Herb Co, Brooklyn, New York, is, “contract packer.” By this she means large volume. The smallest run of tins they will perform is 1,000 and for cartons the number is 2,500, which she regards as small. Another company, Choice Organics, Seattle, Washington, is oriented to large volumes, specifically grocery stores, but will do smaller runs if the client is a repeat buyer. Eric Ring, director of production, purchasing and certification, says 90% of their business is teabags, and he often discourages small runs of private label because of the wide range of costs involved, especially if an envelope is used. He also warns that most tins these days are imported from China. He agrees that U.S.-made tins can be sourced. Choice Organics will consider making tin orders in the 100’s only if the client is a regular customer. Otherwise, the minimum is in the 1,000’s. They pack their teabags on IMA C21 and C27 machines.

The smaller-sized specialty tea enterprise that wants its own brand on its packaging can find businesses willing to provide the service.

Most tea packers work only at the level of high-volume for the obvious reason of economy-of-scale and larger numbers yielding higher profits. The smaller specialty outfit should impress upon the supplier that they are looking forward to a long-term business relationship. Market forces are probably driving this recently increased interest in specialty tea small-sized branding. There are just more and more specialty tea companies battling for market share, and they are too small to come out with their own designing and packaging.

I worry sometimes about the macro-economic problems hurting the middle-class and upper-middle class consumer, which may cause fewer discretionary income allocations to specialty tea. The U.S. and global economy, of course, does not pertain only to private label tea, but here we talk about specialty tea, which is a luxury of sorts. Perhaps branding will become even more important if a market shakeout occurs. There is not any necessary direct correlation between the economic mess and reduced spending on specialty tea. People may simply choose their daily little pleasures, but not take costly vacations. Opening a new specialty tea business in today’s financial climate may take a leap of faith, but those with established brand names may muddle through just fine.

Randy Altman has advised the United Nations and other transnational organizations, and has held directorships at various non-profit corporations. He also holds several adjunct academic appointments.

Tea & Coffee - January, 2009

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