Sips by founder Staci Brinkman launched her tea subscription service in January 2017 at $15 per month, approximately $1 per cup, including shipping. Her monthly selections include a range of tea from 150 brands. Member profiles and ongoing product ratings permit the company to curate teas using proprietary personalization and deep-learning algorithms that improve matches over time.
Online sales account for only a sliver of tea volume, but there is growing evidence online consumers are the discerning and affluent base essential to growth and innovation in the specialty tea industry.
Personalization has proven popular. A recent article in Forbes describes how Sips By grew from a basement fulfillment to a sophisticated monthly mail-order retailer delivering 30,000 boxes monthly. The Sips by Steep Society counts 350,000 members, according to Brinkman.
With so many brands and types of tea, discovering new favorites can be difficult. Sips by takes the legwork out of the process, leveraging technology to matchmake tea lovers with brands and flavors from around the world. This personalization aspect sets the service apart from many other subscriptions. Members receive only teas that align with their preferences, whether they’re experienced tea drinkers or tea novices. When selecting teas for each Sips by Box, they consider many different characteristics, including flavor profile, tea type, bagged versus loose, flavored versus pure, and caffeine content, to name a few. Sips by makes sure their tea portfolio is diverse enough to satisfy each member’s unique tastes. This care comes across in every aspect of the service, which is one reason why the service has proved popular as a gift.
Last year eight angel investors raised $1 million to grow the venture.
The company writes that “navigating the wide world of tea can be daunting — we want to help guide your exploration.” Brinkman designed her business to make discovering tea fun, personalized, and affordable for U.S. tea drinkers. As a tea consumer, she found it difficult to navigate the world of tea given the vast number of brands and was spending time and money researching and sourcing the teas she wanted to try. Each time she found a new brand, she had to pay shipping costs that could double or even triple the cost of the sample she had ordered. She was left paying more for a single sample or two from a brand or spending more on samples that she was less enthusiastic about in order to meet purchase thresholds for free shipping.
Thus, the Sips by Box was born. For $15 a month, four teas ship for free, often in sample sizes that aren’t available from brands in retail. Brinkman wanted to help others discover great tea, aligned to their unique preferences, from brands big and small around the world. With more than 150 brand partners, including large global brands, boutique tea shops, and small tea farms, Sips by has the opportunity to introduce tea obsessives to a new world of tea. The majority (70%) of Sip by's brand partners are small, craft teas.
Brinkman's background in launching and helping to grow other start-ups prior to Sips by, and before that, building custom software solutions for large enterprise, gave her the confidence to move the concept of Sips by forward.
It was Brinkman’s husband, Øivind Loe, a Norwegian technologist trained in engineering cybernetics and working in the semiconductor industry who coded the software that matches members with their preference in tea. He calls the platform “Steep”.
Critical to success is the ability to suggest teas based on their extensive tea personalization quiz and Members’ subsequent ratings of the teas they receive each month. Tea discovery encourages experimentation. Online ordering and monthly delivery accelerate growth, unlike Amazon, where most tea buyers are simply restocking.
The brands that attract the most sales are familiar to the specialty community: Harney & Sons, Pukka Herbs, The Republic of Tea, Ahmad Tea, Revolution, DAVIDsTEA, Davidson's Organic Teas, STASH, Rishi Tea and Botanicals, and Smith Teamaker. The service also draws attention to much less well known such as Fava Tea, Udyan Tea, Yaupon Brothers, Nepal Tea, Jade Leaf Matcha, Equal Exchange Tea, Organic India, Teeccino Herbal Coffee & Tea, Metolius Artisan Tea, and Tea Drops.
Abraham Rowe, the founder of Sinensis Research, has been studying what he describes as “very heavy tea drinkers.” A survey of U.S. households in July 2019 found 71% of tea drinkers purchased tea at grocery and 20% at discount supermarkets with 12% buying tea at convenience stores. The survey revealed 13% of tea drinkers also buy online, according to Statista, a German market research firm. Only 15% of tea drinkers purchase their tea at tea houses and specialty tea shops
“Myimpression is that very heavy tea drinkers are a) a lot more likely to buy teaonline, and b) the primary online purchasers. This is interesting because itsuggests that online retail is being driven by the top 20% in brand engagement,etc., but not many others,” wrote Rowe.
Expanding Distribution
Jurgen Link, a pioneer in specialty tea (and anadvisor and investor in Sips by), observed that you still cannot always find a tearoom with goodquality tea in every U.S. city of say, 25,000.
SinensisResearch estimates there at 1,607 specialty tea businesses in the U.S., ofwhich 255 are chain outlets with five or more locations. Two years ago,Starbucks closed 358 retail tea outlets. The Tea and Spice Exchange is now thenation’s largest chain retailer with 79 outlets with a goal of 100 in 2020.
Accessis further complicated by the concentration of these locations in largemetropolitan areas within only a few states. California is the most popularwith 169 outlets (serving a population of 40 million), followed by New York andthe Pacific Northwest, Texas, Florida, and Illinois.
Incontrast, ready-to-drink tea is pervasive in 152,720 U.S. convenience outletsand 7,815 Canadian convenience stores (counts that include gas stations). Finetea outlets may be few and far between, but the thirst for quality teacontinues to grow. Sales of Teavana's bottled tea grew 15% to $30 million ingrocery and convenience last year, and sales of packaged dry tea saw a 281%increase to $12 million in grocery and mass-market outlets. The tea categorygrew only 0.4% overall. In comparison, specialty brands like TraditionalMedicinals saw a 12.9% increase in sales, Bigelow's sales grew by 6.5%, andCelestial Seasonings saw a 6.2% increase in the $1.2 billion mass-marketsegments, according to market research firm IRI*.
To reach its full potential, Link observed in2016 that specialty tea would require "a lot more distribution, many, manymore outlets, points of sale, and a lot more education."
Not much of that growth is likely from smalltea shops, but online retail paired with tea discovery tools like those createdat Sips by is a promising alternative.
Source: IRI, Forbes
*IRI total US Multi-Outlet w/ C-Store (Grocery,Drug, Mass Market, Convenience, Military, and Select Club & DollarRetailers) for 52 weeks ending Nov. 3, 2019.