Can the future of loose-leaf tea be found in a bag?

Conventional wisdom holds that loose-leaf tea is expensive, messy, and far superior to anything that can be found in a bag.  Bagged teas, by comparison, are cheap, convenient, and filled with nothing but the dust and fannings swept up after processing “real” tea.  What if conventional wisdom is wrong?  What if these commonly held beliefs are standing in the way of the growth of specialty tea in America?

Many (if not most) Americans value simplicity and convenience over quality and price.  Americans … can I use the collective “we” without offending?  We will gladly pay more for a lower-quality product if you can deliver it through the car window so that we don’t actually have to get up.  We pay several times as much per pound for sliced, preserved lunch meats as for choice cuts of steak.  We pay huge premiums to get our drinks in single-serving bottles or cans instead of the hugely inconvenient bulk sizes.  Time is money and many gladly trade one for the other.

Loose-leaf tea is undoubtedly the most efficient method for inexpensively delivering an excellent cup of tea, but let’s consider the products or industries where growth has been driven by convenient re-packaging more than by changes in price or quality:

1. Beer is far better when served on draft, but there is little question that without cans and bottles to encourage home consumption and broaden the offerings of bars and restaurants, the industry would be MUCH smaller and less profitable than it is today. 
2. Coffee is best when prepared from fresh ground whole beans, right?  Then why do 84% of coffee-drinking households use pre-ground beans? (Experian Consumer Insight) The trend today is toward single-serving pods.  These glorious little devices cost several times as much and are terrible for the environment (extra packaging and shipping), but preclude the need for even a measuring spoon and filter!  Glorious Day!

But allow me to set aside the self-deprecating humor for a moment and ask what we as an industry gain by wishing it weren’t so?  Or rather, what do we lose by getting off our high horses and meeting the customer where they are?  We – as an industry – ARE converting the casual consumers to tea lovers by the thousands.  That said, many of us have also been expecting the pace of adoption to increase.  When I joined the industry in 2004, we certainly expected independent tea shops to have more financial success in 2011 than we are presently seeing.

The customer knows that tea is really good for them.  We know that tea tastes really good.  So what’s the catch?  What’s making it so hard for so many tea companies to turn easy profits?

Let me make two statements about the consumer that I believe to be, in most cases, true.  First, consumers are adamant about their willingness to pay a premium for convenience.  How else can Tea Forte sell two tea bags in gift packaging for $5?  Second, consumers are not sure that they like tea enough to spend the time and money to switch to loose-leaf tea.

Solution?  Why not put premium teas in tea bags?  With the exception of a FEW teas that are particularly voluminous, a pyramid tea bag or large sachet gives plenty of room for the leaf to unfurl and steep.  I completely understand and agree that the bag is not the least expensive solution and is not best for steeping some teas, but it should be easy enough to impress customers with a very good cup of tea in a bag.  Good enough to convince them that tea is a LOT better than what’s found in the “traditional” tea bag.  Wouldn’t it be easier to convert customers to loose-leaf tea after meeting them where they are and proving that YOUR tea really is a lot better than what they’ve had before?

Adagio began testing this theory last year by packaging 100% of our tea collection both loose and in pyramid bags.  We do charge a significant premium for the convenience of the tea bag.  The typical flavored black tea sells for $1.67 per ounce online and in our stores.  That comes out to about $0.17 per 2.8 gram serving.  That same tea sells in pyramid tea bags for $0.40 per bag.

In spite of the huge price premium, and in spite of the fact that our employees demonstrate the ease of brewing loose-leaf teas for every customer, tea bags make up 30% of our tea sales and 20% of sales overall (numbers based on retail stores only).  If we didn’t offer our tea in tea bags, I’m sure some of these customers would give in and buy loose.  I’m also sure that some would walk back out the door and go on believing that tea just isn’t worth the hassle. 

At the end of the day, the delivery mechanism shouldn’t really matter.  We’ll continue to educate, but the customer will decide.  They always do.