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Tea Maker Puts Consumers' Tastes First

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In the September 1997 issue of Inc. magazine, Orgegon Chai was profiled as part of the Anatomy of a Start-Up series. In January 2001, Inc. revisited the company to find it turning a nice profit, thanks to its consumer-friendly tactics. Here's a brief overview of Oregon Chai's rise to the top of the U.S. chai market.

Company: Oregon Chai

Founder: Heather Howitt

Vital signs then: Environmentalist Heather Howitt left the recycling trade in 1994 to sell chai, a milky tea that, although it had been around for centuries in India, had yet to hit the espresso set in the United States. With 1996 revenues just under $1 million, she poured every penny back into the business. The company, which is based in Portland, Oreg., became profitable in early 1997, and Howitt hoped to reach 1998 sales of $5.4 million.

What the experts said: Most beverage bigwigs were quick to cite chai's high profit margins as a plus, but one tea purist looked down his nose at Oregon Chai's liquid concentrate, which required the ditching of traditional tea bags in favor of a large carton. But those manning the barristas were thrilled with the prospect of a new specialty tea drink that could complement their espresso offerings.

Vital signs now: Oregon Chai has surpassed Howitt's estimates, hitting $6.8 million in sales for 1998 and topping $10 million in 1999. Howitt credits the company's success in part to increased awareness of chai, thanks to the introduction of the drink at Starbucks. She's beefed up her staff, including her new sales department. "We have 29 people, which is insane," Howitt says, noting that Oregon Chai has penetrated chic cafés, natural foods stores, and even large supermarkets like Safeway. The company was #18 on the 1999 Inc. 500 list of the fastest-growing private companies in America.

What the experts say today: "Chai is to the emerging U.S. tea market what cappuccino and latte were to the specialty coffee market when it arose a few years ago," says Brian Keating, founder and president of Sage Group International LLC, a tea market research company in Seattle. Back in 1996 the entire U.S. chai market amounted to only $7.5 million in sales. For 2000, Keating's group estimated that sales would be in the neighborhood of $28 million to $30 million. And at nearly $11 million in annual revenues, Oregon Chai has a huge stake in the chai business. Oregon Chai's success, Keating says, is due to the way Howitt spiced up the traditional flavor, focused the product offering, and made it easy for food servers and consumers to make the drink. "I think of them as the Gatorade of chai," says Keating. --As reported by Anne Marie Borrego

Copyright © 2001 G+J USA Publishing

Last updated: Jan 10, 2001




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