Is a single product enough to build the brand?
Experts disagree. "Oregon Chai should stick to its knitting," advises David BenDaniel, a professor of entrepreneurship at Cornell University's Johnson School. "Once the company dominates a niche, then it can gradually widen its beachhead by building contiguous products." On the other hand, to make a significant impact on the market, Oregon Chai "needs to develop a line of products fairly quickly," argues Gary A. Goldberg, director of culinary arts at the New School, in New York City. "When you have more than one product, you have more shelf space, and you increase your identity."
What about the big players?
"The chai market is embryonic but growing, and we're certainly keeping an eye on it," notes Peter Goggi, director of tea buying for the approximately $1.2-billion Lipton tea behemoth, which is now serving a chai product of its own at the Lipton Teahouse in Pasadena, Calif. Chai's Seattle neighbor Starbucks has been selling dry chai in a tea bag since early 1995. Starbucks even discussed buying Oregon Chai's concentrate recipe in September of that year. Howitt boasts, "We turned them down."
Isn't Oregon Chai a prime acquisition target?
Both BenDaniel and Goldberg agree that Oregon Chai's best chance for survival is to be acquired eventually by a strategic partner. "I don't think they want to build a diverse, general food company, even if they talk that way," says BenDaniel. "Oregon Chai will definitely be of interest to acquirers as it grows," agrees San Franciscobased investment banker Anne Vrolyk. "There will be companies that will want to knock the product off, but if Oregon Chai has successfully solidified its brand awareness, the brand will continue to build significant value and will be attractive for acquisition." But Sophia Collier, an entrepreneur who sold her own Soho Natural Soda beverage line to Seagram's after growing it to $25 million in retail sales, disagrees. "Oregon Chai is sustaining a high price point based on novelty," she says. "As the novelty wears off, its price premium over latte will erode, and with it, Oregon Chai's distribution. The company should concentrate on profitably delivering its product to retailers at the same cost as latte. It's unlikely that an unprofitable company making an unprofitable proposition to retailers will exist in the long term, much less be acquired by a major consumer-products company."
Alessandra Bianchi is a contributing writer at Inc.
Resources
The Specialty Coffee Association of America (SCAA) offers a variety of resources for lovers of coffee as well as tea, including books, training manuals, and conferences. The SCAA also runs the University of Specialty Coffee program, which features an extensive curriculum, complete with espresso labs and brewer-technician-certification training classes. You can contact the SCAA by phone (562-624-4100) or E-mail ( coffee@scaa.org), or visit its Web site.
The Republic of Tea: The Story of the Creation of a Business, As Told Through the Personal Letters of Its Founders, by Bill Rosenzweig and Mel and Patricia Ziegler (Doubleday, 800-223-6834, 1992, $15), chronicles the rise of one of the most successful new beverage companies of all time.
DAVID BENDANIEL, Johnson Graduate School of Management, Cornell University, Ithaca, NY 14853; 607-255-4220; djb16@cornell.edu 66
REX BIRD, Rex Bird Consulting, 6823 SE 32nd Ave., Portland, OR 97202; 503-788-5065; rexbird@aol.com 66
BLUE WILLOW TEA, Frank Miller, 911 E. Pike St., Seattle, WA 98122; 800-328-0353 66
CROWN POINT GROUP, 1099 SW Columbia, Suite 350, Portland, OR 97201; 503-241-0887 66
GARY A. GOLDBERG, Culinary Arts, The New School, 100 Greenwich Ave., New York, NY 10011; 212-255-4141 66
JOEL LEWIS, Lewis & Partners, 433 California St., Suite 200, San Francisco, CA 94104; 415-362-7511; jlewis@lewis-sf.com 66
LIVECHAI, Claudia Murray, P.O. Box 7329, Boulder, CO 80306; 888-548-3244; fax, 303-545-2485 66
OREGON CHAI, Heather Howitt, 725 SE 9th Ave., Portland, OR 97214; 888-874-2424; nirvana@oregonchai.com 66
SATTWA CHAI, P.O. Box 805, Newberg, OR 97132; 888-841-CHAI 66
DWIGHT SINCLAIR, Sinclair Group, 533 Airport Blvd., Suite 400, Burlingame, CA 94010; 415-579-0998; vegenarian@aol.com 66
ANNE VROLYK, Vrolyk & Co., 433 California St., San Francisco, CA 94104; 415-837-1000 66
WORLD COFFEE & TEA, Colin Campbell, 1801 Rockville Pike, Suite 330, Rockville, MD 20852; 703-750-3184; cac.inc@ix.netcom.com 66
