DAVIDsTEA namesake David Segal has resigned his position as brand ambassador — signaling an end to his role in developing many of the company’s innovative mix of flavors and tea blends.
DAVIDsTea co-founder David Segal (Photo by Carla Befera Public Relations)
Segal, 35, will pursue entrepreneurial interests according to a filing with the U.S. Securities and Exchange Commission. He co-founded the company in 2008 in Quebec with his cousin Herschel Segal, founder of the Le Chateau clothing chain. David Segal retains about 10% of the company’s shares. He did not respond to a request for comment by World Tea News.
Several recent events including a significant decline in the company’s valuation following an IPO and the greater visibility of CEO Sylvain Toutant likely influenced his decision.
The company, which now operates 156 tea shops in Canada and 37 in the U.S., surged 42% in value following a hot stock market debut last June but is now trading around $12 per share from a high of $30 and a low of $9.
Outlets are located in malls where sales are mainly to those new to specialty tea. Sales remain strong with 24 consecutive quarters of growth. Revenue is expected to rise to about $175 million in this fiscal year and the company intends to open about 40 new locations. Toutant announced plans to triple the store count to 550 with the majority of outlets in the U.S. and 100 new stores in Canada.
More than any competing chain, DAVIDsTEA has continually refreshed its offerings, drawing heavily for inspiration on restaurant dining trends, the emergence of super fruits with health claims and the ebb and flow of ingredients such as tiny hot peppers that reflect ethnic foods. The company carries a number of traditional teas but the selection of more than 200 varieties is weighted toward herbals and tisanes and fruit tea blends with flavors like Jumpy Monkey and Chocolate Rocket. The company invests in exclusive merchandise, relies on malls for exposure. An emphasis on convenience drives sales. Unlike rival Teavana many of DAVIDsTEAS are available in pyramid tea bags.
A report in the Financial Post of Canada, noted that “Segal had worked to expand the retailer’s selection of matcha and was known to look to food and restaurant trends for insights, infusing new tea blends with fruit, pumpkin and vanilla. He also developed a special canister for mixing matcha quickly and on the go, because the traditional process is slow and involves a whisk.”
The company is rumored to be a target for acquisition with Dunkin’ Donuts as the most likely buyer. The Street called DAVIDsTEA “a logical acquisition” with shares down 52% “opening the door for Dunkin’s Brands to make an opportunistic bid. DAVIDsTEA would give Dunkin’s Brands access to the growing, premium loose leaf tea market, which the coffee titan could exploit in several ways.”
Franchisees would eagerly open new stores; Dunkin’ could add tea to its coffee menu and launch a ready-to-drink line for grocery, according to The Street. Dunkin’ Brands would be following in the footsteps of Starbucks (which acquired Teavana) and Peet’s Coffee & Tea (which acquired Mighty Leaf Tea) in buying a tea brand such as David’s Tea.
Toutant dismissed talk of selling the company. He learned beverage retailing in the coffee segment, rising to the position of president of Keurig Green Mountain’s Canadian operations before joining DAVIDsTEA. He is optimistic about the company’s future and with little debt, a strong group of institutional investors backing the venture, and big plans, it may pay off.
Source: Financial Post, Seeking Alpha, The Street