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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.

OUTLOOK. Still, mention chai and you mostly draw blank stares, even in the coffee-crazed communities of the West and Pacific Northwest, where the drink has its greatest following. But familiarity with it is growing. Chai companies are popping up in Vermont. There are chai chat rooms on the World Wide Web. And even LiveChai's Murray is appreciative of Howitt's role in boosting chai's popularity. "I feel that Oregon Chai is doing a great job of getting the word out," she says.

Oregon Chai lands ever-larger national accounts, like Nordstrom, Seattle's Best Coffee Inc. (SBC), Trader Joe's, and Whole Foods Market. While Howitt still fantasizes about the future--"There's so much we can do!" she says with a sigh, going on to tick off possibilities ranging from chai cheesecake to a national chain of chai houses--her advisers insist that she concentrate on building sales of the company's current product: the liquid concentrate. "We have a winner and need to focus on it right now. Rex taught me that," Howitt says. "It would be great to be a $100-million company," she muses. Her conservative business plan, however, projects a different goal: revenues this year of just $2.8 million.

Sources: Oregon Chai and Specialty Coffee Association of America

Feedback: What the Experts Say

Is there room for yet another specialty drink?
Opinions are mixed. While few dispute tea's rising popularity, purists like Frank Miller of Blue Willow Tea Co., in Seattle, look down on chai as faux tea. "I don't get excited about highly processed foods. What's so sensual about opening a bottle of concentrate?" But, notes Seattle's Best Coffee's director of quality assurance Dave Wickberg, citing the popularity of sweet novelty coffee drinks, "Chai has what people go for in coffee drinks." Proponents also cite chai's larger profit margin. (See "Chai Versus Latte: More Net Profit Cup for Cup.")