Tea is one of the most popular beverages in the world, second only to water. But the average person may not realize its popularity, as the unique flavors and healthy benefits of tea are often pushed aside for more popular coffee drinks. However, with Starbucks' purchase of Teavana in 2012, interest in hot tea is on the rise. At the forefront of that trend are Dan Klein and Patrick Tannous, who created Tiesta Tea in 2010 with the goal of reaching a new generation of tea drinkers through loose leaf blends designed to keep your body in balance.
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In this exclusive interview with Dan Klein, CEO of Tiesta Tea, we find out how they’ve been able to grow while competing with larger manufacturers like Teavana and DavidsTea. It took lessons learned during their incubator beginnings, a unique millennial marketing strategy, and never-ending persistence. His take on their success? Entrepreneurs need to “get out there and hustle.”
Starting Up at the Enterprise Works Incubator
The inspiration for Tiesta Tea came when co-founders Dan and Patrick were on a study abroad trip to Europe. Blown away by how many varieties of tea were available, they saw an opportunity to bring that experience back to the States. Upon returning, they founded Tiesta Tea and applied for the inaugural year of the Illinois Launch incubator program at U of I.
“We had a great experience in that program,” Dan says. “We were housed in the Enterprise Works incubator in Champaign, a very famous incubator that a lot of great companies have come out of.”
It was there that Dan and Patrick started making the connections that would help Tiesta Tea take off, including the founder of Jimmy Johns, who helped with branding, packaging and mentorship.
“When you’re a small company like us, you’re competing with the powerhouses, the General Mills, Kellogg’s and Krafts of the world, so you have to be on your toes. You really have to maintain your shelf position, so it’s nice to have some people behind us who also have a lot of experience,” explains Dan.
Although Dan and Patrick met some of their advisors and investors through the incubator, Dan emphasizes the importance of networking to help get your business off the ground. Events, for example, have been a great way for Tiesta Tea to get their name out there and make important contacts.
“Show your passion and network,” recommends Dan. “We’ve gone to networking events where we met the CEO of OfficeMax and a year later we were selling hundreds of thousands of dollars of product to them. That doesn’t come just sitting at your desk."
Marketing to Millennials: How to Make Tea Cool
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Not many companies have taken on the challenge of making tea accessible to new audiences, especially to the millennial generation, and there are two main reasons why. The first is that tea can be very confusing to people, and the second is that the millennial generation is overwhelmingly interested in products that provide results.
“They [millennials] drink energy drinks to get energy, they might take a sleep shot to go to bed at night, so we played off of that a little bit with our tea functions,” explains Dan.
To help reach millennials, Tiesta Tea organizes their blends into five functions designed to explain the effects of the tea on the drinker: Slenderizer, Energizer, Immunity, Relaxer and Eternity. Tiesta Tea uses the five functions in marketing messaging to highlight the uniqueness of the product and how it ties into the core values of their target audience.
“From day one we wanted to make tea simple. We like to say our tea is accessible, understandable and affordable,” Dan explains.
Dan also explained how important it is that the Tiesta Tea product is affordably priced, and how that assists in attracting millennial consumers.
“We’re one of the few, if not the only, company that offers loose leaf tea in retail for as low as $4.99,” shares Dan. “You might not want to put down $20 on a tea that you don’t really know, but you may be willing to spend $5. And that’s one of the things that makes us unique.”
Starbucks’ $620 million acquisition of Teavana in late 2012 helped legitimize loose leaf tea as a mainstream product. That acquisition, plus the popularity of tea shops such as Argo Tea and DavidsTea, solidified the fact that loose leaf tea is a phenomenon that is here to stay. However, as Dan shares, not all tea drinkers are looking for speciality shops.
“Teavana has a great product, but not everyone wants to go to the mall to pick out tea,” Dan elaborates. “Some people don’t have a mall by them or they just want to go to the grocery store. That’s where we fit in. We’re one of the few loose leaf tea offerings on the shelf, and we were fortunate to be first to market on it.”
Get Out There and Hustle
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After moving from the incubator at U of I to Chicago, the Tiesta Tea operation hit the ground running in order to expand and build the business. Dan and Patrick not only added distribution partners during this time, they also gained feedback on their product directly from potential customers.
“We tried to build the business by doing whatever we could; going door to door to cafes, restaurants and grocery stores. In 20 days, we knocked on 500 doors and did three trade shows.”
High levels of growth aren’t without their own sets of challenges. One of the toughest things about being a high growth business is that cash is almost always low. Raising capital is not always easy and can take a lot of time and energy, which Dan knows all too well.
“We’ve been in positions where we’ve had to raise capital pretty quickly for different things and it does take a lot out of you, especially when you’re a younger team and you don’t necessarily have a track record to point to for investors. We’ve raised a bunch of money to date, and every time it’s tough, but overall it’s what you need for the business to grow.”
“I encourage entrepreneurs to just get out there and hustle it,” he continues. “You can build a business to a decent size by pure blood, sweat and tears. It’s not glamorous, you’re gonna make a lot of mistakes but it’s going to teach you a lot about where you want to go. It helps formulate your future by really figuring out where your place is in the market.”
Looking Ahead
2014 brought huge expansion opportunities to Tiesta Tea, including launching in Target and doing a holiday gift box for OfficeMax and Office Depot. Tiesta Tea also embarked on a partnership with Safeway, which ties into one of Dan’s long-term goals for Tiesta Tea.
“We’d like to pioneer the concept of having quality, affordable loose leaf tea in bulk sections in grocery stores,” states Dan.
In 2011, Tiesta Tea landed their first major distributor. In 2012, they added their first grocery chain, Illinois-based Marianos. 2014 saw an explosion of growth, and you’ll soon be able to find Tiesta Tea in over 7,000 stores.
