Different chais have different tastes. "Mine's more peppery, gingery," says Jan Drabek, whose company, the Chai Guy, also exhibited at Coffee Fest. But the most significant difference between Oregon Chai and its competitors is the company's strategic approach to winning a piece of the projected $3-billion specialty-coffee market (and $2.7-billion tea market). "These guys," says J.B. Groh, associate director at Crown Point Group Ltd., the Portland investment firm that has helped Oregon Chai raise $450,000 to date, "are more aggressive from a marketing standpoint than their competitors, many of whom seem content to remain backwoods mom-and-pops selling chai out of the back of a VW bus."
"We are definitely a culture unto ourselves," concedes Claudia Murray, who has been brewing her LiveChai product in Boulder, Colo., since 1990. The six principals of another competitor, Sattwa Chai, who live and work together in Oregon Chai's backyard in the wine country outside Portland, describe their foray into chai in spiritual terms. "What's important to us is not being entrepreneurs but living a healthy life. We have a purpose and are involved in a healing journey, but we have no idea where it will lead," explains Sattwa's Faye Fields.
THE STRATEGY. The willingness of Oregon Chai's founder and her employees to seek the advice of experienced professionals has already paid off. For instance, Sinclair taught the first-timers the merits of using contact-management software and schooled them in distribution practices. "We had no clue about these things," recalls Ross. Since Sinclair's arrival, in September 1995, the company's distributor list has swelled from 6 to 130, and Oregon Chai picks up new accounts daily. The company's polished marketing and point-of-purchase material--designed by board member and 40-year ad veteran Lewis--has attracted some of those accounts. "I like the way they put their program and packaging together," explains San Francisco distributor Norm Weil of Gourmet Express about his decision to carry Oregon Chai. "Their competitors are not as professionally handled--a bunch of folks stuck in the '60s."
The veterans who are approached for advice say it's hard to turn down bright young people with passion and a high-quality product who ask for help. "There are two types of people who start companies: people who know it all, and people who seek out information. The folks at Oregon Chai are an excellent example of the latter," remarks ad man Lewis. "The Oregon Chai people are open-minded about where they should be and how they should get there. To me, that's evidence of a company that wants to do it right," he says.
Oregon Chai's advice-seeking attitude has also served it well in the marketplace; distributors and retailers have provided the start-up with some invaluable suggestions. Early on, Howitt decided she would sell Oregon Chai in liquid-concentrate form in the interest of product consistency and simplicity, but her choice came at a price: unlike Snapple or Earl Grey, Oregon Chai (which is made by mixing together equal parts concentrate and milk) is a completely novel tea product, unfamiliar to most consumers. To compensate, the start-up relies heavily on in-store demos and free samples, and Oregon Chai's packaging even depicts milk and concentrate being poured together. Still, it was one of Oregon Chai's distributors, Sunshine Dairy Foods, in Portland, that came up with one of the start-up's most effective chai edification strategies: "Show up in the morning with some chai before our teamster drivers head out," sales rep Doug Warrick recalls suggesting to Howitt. "Morning" to Sunshine meant between 1 a.m. and 5 a.m., but nevertheless, Howitt dutifully set up a sample table and passed out chai in the dark to truckers. Now when milk accounts ask if Sunshine has chai, the drivers know exactly what they're talking about.
Howitt has another distributor to thank for Oregon Chai's pricing strategy. After researching competitors' prices, she initially charged direct customers--cafés, for example--$2.50 per quart of Oregon Chai. Then a distributor tactfully pointed out that that price would undercut his business to similar accounts and didn't allow enough of a margin to make carrying Oregon Chai worth his while. "We totally overlooked the distributor's markup--typically 25% to 30%," Howitt concedes. Today Oregon Chai moves 90% of its product through distributors, for $3 a quart (or $16 for a 1.5-gallon food-service size), whereas direct accounts are charged $5 a quart, prices that are roughly comparable to those of Oregon Chai's competitors. While it would be prohibitively expensive for Oregon Chai's small staff to ship the liquid chai to individual consumers, the company's Web site (www.oregonchai.com) has a map to steer interested folks toward a local distributor or retailer. It also solicits recommendations from those who live in areas where Oregon Chai has yet to sign up distributors.
Howitt's instincts led her to coffee bars, universities, ski resorts, and upscale restaurants to sell chai; the product ended up on retail shelves a little more serendipitously. Oregon Chai was selling so well at the espresso counters of Nature's Fresh Northwest, a Portland-area chain of natural-foods stores and one of the start-up's early accounts, that the chain's buyer virtually insisted that Howitt put chai into a retail package. The start-up hastily slapped a bar code and an ingredients label on its bottles; today, thanks to ad guru Lewis, Oregon Chai boasts a comprehensive point-of-sale program--complete with posters, stickers, table tents, menu strips, and shelf talkers, "all these things I'd never heard of," Howitt confesses. While food-service operations are still Oregon Chai's leading vendors (constituting 55% to 65% of its accounts), specialty and natural-foods stores are second (representing 35%).
