Ten Ren Tea’s Growing Empire

SAN FRANCISCO, Calif.

Ten Ren Tea, one of the major retailers of loose leaf tea in the U.S., traces its beginnings to a humble teashop in Tainan City, Taiwan in 1961.

After harvesting and processing oolong tea from his own farm in the early 1950s, Ray Ho Lee sold it under the name of Ming Fong Tea. In the ensuing six decades, Lee has watched as the Ten Ren Tea empire has grown to more than 157 teashops on three continents.

Lee simultaneously built a sister tea company, Ten Fu Tea, in mainland China, which today counts 1,060 retail shops and provides the bulk of tea to the Ten Ren Tea franchises.

Ten RenUnlike its North American competitors, Argo Tea, Teavana, DavidsTea and Teaopia — all having launched approximately 100 shops, Ten Ren Tea’s shops operate as individual profit centers within the publicly owned company, now run by Lee’s son, Rie Ho Lee.

The corporation is a family affair with cousins, uncles and aunts running franchises across Taiwan, North America, Malaysia, Japan and Australia. Ten Ren counts 74 shops in Taiwan. It is nearing the 50-store mark in North America with 37 shops in locations from San Francisco, New York, Chicago, San Diego to Calgary, Toronto and Vancouver, B.C.

The firm has traded publicly on the Taiwan market since 1999. Growth has been steady and strong. It has a market capitalization of $4.3 billion in Taiwanese dollars (TWD). Earnings have grown from TWD$879 million in 2004 ($28 million) to TWD$905 million ($29.8 million) last year. Stocks were trading recently at $47 from a high of TWD$59.

Lee’s cousins opened their first Ten Ren Tea shop in Los Angeles in 1979. A San Francisco shop was added in 1982, and the City by the Bay remains Ten Ren’s North American headquarters. Today, four Ten Ren Tea shops operate in the Bay Area, which Henry Lii has taken over from his father, although the transition has been a slow one, harking back to 2002 when his father went into semi-retirement. Today, his mother, Lily, works alongside as co-owner and his brother Michael manages Internet sales and manages the website.

Ten RenThe Chinatown location, opened in 2004, is the largest at 1,500 sq. ft., while the remaining Ten Ren Tea shops in the Bay Area measure, on average, 800- to 1,000-sq. ft. of retail space. The flagship story in Taiwan was recently remodeled, and franchises have followed suit, although franchisees are free to craft the space according to their wants as long as they adhere to the basic components found in a Ten Ren shop, according to Lii.

Key design elements include a beverage bar, loose-leaf tea selection in large, gold canisters, shelf space for a wide selection of bagged tea, tasting tables and a display area for tea ware. Dark wood accented with bamboo and welcoming pastel-colored walls are characteristic of the teashops that are decidedly not sit-down affairs. This is where you shop for loose-leaf or bagged tea – in vibrant-hued boxes and tins – and then pick up a drink at the tea bar on your way out.

The bulk of Ten Ren Tea shops are sited in Asian strip malls, according to Lii, making it a daily or weekly market stop for many. Frequent shopping trips to these malls by Chinese tea drinkers bode well for Ten Ren Tea’s annual sales.

Broadening the customer base

Lii sees his customer base expanding beyond the typical Chinese shopper. Their Chinatown location draws the surrounding Chinese population and a tourist crowd dominated by Europeans. The past 5-10 years has seen green teas explode in popularity as the beverage’s health benefits seep into consumer’s awareness

Lii welcomes these health-conscious consumers. “People are coming to us in search of a healthy beverage,” he says, “and to augment their healthier lifestyles.” As more Americans reach for tea as their beverage of choice, Lii sees those older than leaning toward traditional Asian teas. The tea bar draws the 20- to 30-year-old set with its extensive menu of bubble (boba) teas. As to gender, Lii observes that his customers are split evenly between men and women.

San Francisco’s Ten Ren operation has also established wholesale accounts for bagged tea with local airlines, restaurants and corporate gift baskets. Although minimally promoted — clients reach them via word of mouth and through the website referrals clients — wholesale accounts yield about 25-30 percent of overall sales. Short-handed in the marketing department, Lii is directing his efforts toward the front of the house. “Our focus is on the retail side,” he says. “We are essentially a small business.”

Ten Ren Tea relies, but doesn’t rest, on its 58-year heritage and reputation. “We want to be seen as a trustworthy place to drink tea. It helps that we have been around since the 1950s,” Lii says. “I want customers to know that they are buying a good product at a good price. Our objective is to educate people about finer teas.”

Tea tips scales

Ten Ren Tea SelctionsTen Ren has a strong tradition of healthful offerings. Sales of ginseng propelled the business in its early days with tour buses making a regular stop for Asian customers seeking ginseng powder, roots and capsules from U.S. forests in the upper Mid Western states.

Wild round- and short-woods grown ginseng takes five to seven years to mature and sells for $56 to $69 for a 4-oz package.

A staple in Asian cuisine and a favored health tonic, the gnarly root became more readily available over the years at Asian grocers and health food stores. At that point, tea started to tip the scales and eventually overtook and, ultimately dominated sales.

Today Ten Ren Tea earns 80-90 percent of revenue from tea — loose leaf and bagged account for 40 percent, the beverage bar contributes approximately 40 percent and sales of ginseng account for 10 percent. Ginseng remains a vital part of the product mix, and Ten Ren has developed sourcing relationships with Wisconsin ginseng farmers to ensure their supply.

More than 100 loose-leaf teas are housed in signature gold tins that line the walls of a Ten Ren shop, while up to 40 bagged tea selections decorate the shelves in brightly colored boxes. In the Chinatown location, pu-erh teacakes spill out of baskets sitting near the entrance of the spacious shop.

Ten Ren owns and operates five manufacturing plants to process tea grown on their Taiwanese plantations. Their San Francisco tea packaging plant distributes to the continent’s franchises including a successful New York City group of stores that opened in 1984 and are run by Lee’s nephew and wife, Mark and Ellen Lii.

Ten Ren Tea initially specialized in their homeland’s oolong tea. Now the tea shop imports a great variety of teas from Chinese supplier Ten Fu. Numerous green teas, Pu-erhs, Chinese black tea, and jasmine teas line the shelves. Top sellers are consistent across the country, Lii says. About 75 percent of tea stocked is the same across all stores. The remaining 25 percent is the local store manager’s choice.

Customer favorites fall in the oolong category with King’s Tea coming in first. The ginseng/oolong blend stands out for its sweet aftertaste. Single-origin green and dark oolongs are also top orders. The top selling oolong, Ten Li, is a high mountain, high quality tea that rings up at $280 lb. Ten Wu, another high mountain green oolong, goes for $200 lb., and a lower mountain, but still appealing, oolong Tung Ting can be purchased for a comparatively modest $12- to $80 lb. Dragonwell and Jasmine green tea are crowd pleasers.

Ten RenThe Ten Ren tea bar menu is filled with hundreds of permutations of tea, ice, milk, juice and flavorings. Iced teas with tapioca pearls (bobas), range from the prosaic lemon iced tea to the exotic kumquat lemon green. Customers can try grass jelly milk tea, pudding milk tea or a floral lavender green milk tea. Slushies, an ice cold treat, are flavored with powdered taro milk, chocolate milk or matcha green tea, among others.

A small percentage of Ten Ren Tea’s sales come from tea ware. Clay teapots for oolong multi-steepings as well as glass, porcelain and ceramic teapots are offered alongside the tea selection. Tea, however, dominates the product mix.

An outgrowth of Ten Ren Tea, Cha for Tea has turned its focus to food first with tea as the complement. The first shop of the Southern California chain opened in 2001 and appeals to the younger set with an Asian-inspired menu of dumplings, curried chicken, noodle and rice dishes, with iced, boba, and milk teas for liquid refreshment.

Fine-tuning the operation

Since Lii took over in 2002, his biggest challenge was taking over the reins from his dad, who relied on pen and paper rather than computers and modern business practices. Lii felt the need to establish new procedures, and clashes ensued. “I have a lot of differing opinions from my Dad — from how to run the business to what teas to choose,” he explains. “Too many bosses make it hard to agree on things. It’s still a transitional phase for us.”

Staffing can be problematic, as well. “It’s hard to find enthusiastic staffers that are truly interested in tea,” Lii says. Time poured into training doesn’t always translate to longevity in employees, he notes.

Training helps with inconsistency – another challenge that Lii is striving to overcome. He works with his staff to produce consistent products for consumers who expect their Bubble Tea to taste the same as it does in a sister Ten Ren shop. Lii makes sure recipes read the same across the board and makes a special effort to train staff to take pride in making Ten Ren’s signature drinks.

All of their training material comes from Taiwan headquarters and is written in Chinese. Therefore it goes unused by Lii who speaks, but doesn’t read or write, Chinese. Training, therefore, becomes more of an organic process, pulling from his family’s years of knowledge and experience behind the tea counters.

Looking ahead

Marketing efforts are minimal, reflective of a limited budget rather than a lack of interest. Lii reaches out to his key clients by advertising in Chinese community newspapers. Most of Ten Rea Tea shops are sited in Asian strip malls in Chinatown, taking advantage of the captive consumer audience. Lii takes part in occasional community events as they come up, donating to schools and sampling tea for organizations such as the International School in Palo Alto.

Ten RenDespite, or possibly in spite of, the limited marketing budget, Ten Ren Tea continues to consistently draw in loyal tea consumers. Enough so, that Lii is confident the Bay Area can ‘easily support’ 8-10 additional shops in the coming years. His plan is to open a few of those in the next 3-5 years. He is resolute in his plan to break into the American market, in order to “introduce tea to and educate more Americans about the multi-faceted beverage.”

“The tea industry [in the U.S.] is in its infant stage. If I want it to grow in the U. S. and become the number one consumed beverage, customers need to know there are reliable, good teashops out there,” he says. “We want to make a good impression, and give our customers a good and memorable tea for a fair price.”