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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%).

FINANCIALS. To date, Oregon Chai has funded itself with what it calls "smart money"--the $450,000 of equity financing raised through Crown Point and an additional $200,000 from outside private sources. The boutique investment firm and several of its backers agreed to help the start-up largely on the strength of its board. Currently, the company is debt-free, having retired a $50,000 Small Business Administration loan last year. It recently secured a bank credit line of $150,000 to finance its growth.

Unlike most of its small competitors, Oregon Chai has turned a profit, as of last March. Howitt pours every available penny into marketing, distribution, and production. There's no money to waste. Oregon Chai's packaging, point-of-purchase material, business cards, and stationery are attractive and slick. Its 1,056-square-foot headquarters, on the other hand, are dingy, but at $885 a month, the price is right. Until recently, the company couldn't afford a receptionist or a cleaning service, but at one point it spent $250,000 to get into aseptic packaging.

Before they fortified themselves with the counsel of their experienced board members, the novices at Oregon Chai made some costly gaffes, and the start-up's bottom line has felt the precipitous steepness of their learning curve. They've flushed at least $40,000 worth of product down the toilet or dumped it in a cow pasture--that's the price paid in production casualties of botched batches. Early on, the company also forked over $25,000 to escape an exclusive three-year relationship with one distributor.

But the company has been rewarded for its efforts with impressive revenue growth. Annual sales climbed from $20,000 in 1994, to $190,150 in 1995, to $963,984 last year. Available in all 50 states and in 3,500 locations, Oregon Chai is now the most widely distributed chai in the U.S. market and the number-one-selling tea in natural-foods stores, according to Mountain People's Warehouse.

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