Let’s imagine a conversation from five or so years ago: “I’ve got it,” he said, his face lighting up, “we’ll do Starbucks with tea instead of coffee!”
“Are you kidding,” comes the negative unhappy answer — remember we’re imagining this — “Starbucks already sells tea, good tea, several kinds, and they serve it with milk and whatever if you want. They own Tazo.”
The conclusion, in my imaginary conversation, would have been “that’s a dumb idea.” I’ve been in Starbucks many times getting my coffee while wife and daughters get their tea. They have options, milk in their tea, the whole thing. On to the next thing. Not so in this case, though, the real-life entrepreneurs did a business plan and got going.
The New York Times today has a profile called Sidestepping Starbucks With Cafes That Sell Tea, about Argo Tea in Chicago. Sales of about $5 million this year “and nearly $10 million in 2008.”
Argo Tea, a four-year-old homegrown company, has developed a distinctive brand that has captured the palate of young professionals. From its novel recipes for sweetened iced teas — Bubble Tea, a mix of Indian black tea and coconut pearls from the Philippines, is very popular — to its signature interiors of greens, reds and browns, the brand has become so well known that this month the company opened its eighth cafe, in the Lincoln Park neighborhood. It plans two more by the end of the year. Along with hot and iced tea — and Illy coffee — the cafes sell sandwiches and pastries, some baked on the premises.
So what do you think? Is this an idea-driven business? Here’s more:
The idea for a chain of tea cafes was hatched by Arsen Avakian, 31, and Simon Simonian, 32, boyhood friends from Yerevan, Armenia, who emigrated to Chicago in the 1990s for postgraduate study. Both ended up in high tech, Mr. Simonian as a computer scientist and Mr. Avakian as a specialist in start-ups who recruited millions in venture capital to open a software company. After the dot-com bust, Mr. Avakian spent a lot of time in coffee shops, noticing how many customers they attracted. “I asked myself, what would be the closest cousin of coffee?” he said. “In Europe that’s easy. It’s tea. But here in the United States, tea is one of the least consumed beverages. People in Chicago said how stupid can you be, starting a business with tea as the dominant drink? I said, perfect. That’s the opportunity I’m looking for.”
The partners hired Mark A. Cuellar, a Chicago architect, to design the cafes’ interiors, which include long library-style tables with outlets and Wi-Fi for Web surfers. They also came up with innovative tea drinks that sell for less than $4. Among them are MojiTea, made with Armenian mint and fresh lime, and Tea Squeeze, a mix of Egyptian hibiscus leaves, fresh lemon juice and sugar cane.
Of course you can’t tell that much about a startup from a single story, but it seems to me like a good example of how it’s the effort put into building the business that matters, much more than the idea.
Though Argo Tea’s story, as told by Mr. Avakian, reflects the same spirit of risk and entrepreneurship, it is past the start-up phase. The company employs nearly 150 people, most part-time, and offers medical benefits to those who work at least 20 hours a week. The company gives raises periodically based on how well workers score on a written test. Objective evaluations are only one ingredient in the partners’ recipe. “Our business appeals to the senses and desires,” Mr. Avakian said. “Things have to be right, feel right, taste right. It’s much more subjective than high tech.”
Sales are expected to reach $5 million this year and nearly $10 million in 2008, company executives say. The concept has proved so successful that Argo Tea is planning cafes in other cities, starting with Boston or Washington in 2009. This is great implementation, and pretty effective positioning, playing off of Starbucks. Think about your business. How are you different?
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
