Did it make sense for the founders of Mighty Leaf Tea to introduce their niche brand in large supermarkets amid a recession?
In our January/February 2009 issue, we wrote about Mighty Leaf Tea and its founders, Gary Shinner and Jill Portman. The pair was determined to extend the reach of Mighty Leaf's premium tea beyond its core market. Though the company had already carved out a profitable niche selling to luxury hotels, restaurants, and specialty-food stores, Shinner and Portman wanted to extend sales to large supermarket chains. Charlie Woodruff, the company's sales director for the eastern U.S., pushed back. He believed there was still plenty of room for growth in Mighty Leaf's current markets and feared that a mass-market push would taint the brand's upscale image. After much discussion, Shinner and Portman forged ahead despite the objections. They hired a national sales director and within a year signed their first supermarket account. By October 2008, Mighty Leaf had a presence in Kroger, Publix, Safeway, and Stop & Shop, and sales were expected to hit $20 million by the end of that year, up from $16.4 million in 2007.
WHAT THE EXPERTS SAID
Brian Morgan, a Chicago-based analyst with Euromonitor International, thought it was the right time to move into supermarkets. Seth Goldman, co-founder of Honest Tea, was lukewarm on the strategy, arguing that selling in supermarkets would put downward pressure on prices for the upscale tea. Christopher P. Ramey, president of Affluent Insights, said that if Mighty Leaf was set on selling to supermarkets, it should do so under a different brand.
WHAT'S HAPPENED SINCE
The recession put a crimp on sales to hotels and restaurants, but supermarket sales performed well and more than helped offset any softness in the company's other markets. Revenue hit $20 million in 2008 and was expected to grow another 10 percent in 2009. "Some considered it a risky endeavor," says Shinner, "but it helped us diversify." Now, Woodruff is a believer. "I realized to grow a brand, you have to have the meat and the potatoes," he says. "We've been able to come downmarket in a way that just blew me away."
Up to now, Mighty Leaf hasn't invested heavily in marketing. In the year ahead, the company plans to ramp up spending, especially on the Web and via social networks. "There's a lot more we can do," says Shinner. "We're looking to turbocharge the brand."