notes: some interesting ideas in marketing.
DARJEELING, India — The tea plantations here in the shadow of the cloud-shrouded valleys of the Himalayan mountains may be the last place to find technological innovation. Many of the colonial-era practices involved in tea-growing and processing still follow the time-honored manual labor and handwritten bookkeeping.
But as global consumers increasingly become connoisseurs of high-quality products, one entrepreneur is seeking to give the industry a Silicon Valley makeover.
India is the world’s second-largest tea grower after China. Yet, even as the country produces quality specialty varietals that are as highly regarded as wines from France and whisky from Scotland, its industry is antiquated.
With the backing of one of Silicon Valley’s biggest venture capital firms, Accel Partners, Kaushal Dugar, a Singapore-trained financial analyst, is among those slowly bringing the sector into the modern era via his online tea retailing start-up, Teabox.
The bulk of India’s production — about one billion of the total 1.2 billion kilograms (2.6 billion pounds) — is consumed by the domestic market, where mass-market brands from the Indian conglomerate Tata and the multinational Unilever hold sway. But the remaining 200 million kilograms is a market ripe for shake-up.
“We grow some of the best teas in the world, but our processes are archaic and marketing is nonexistent,” said Arun Kumar Gomden, a tea industry consultant who managed tea estates for 35 years.
Teas lined up for tasting at the Goomtee tea estate, a supplier to Teabox.
Saritha Rai
Teas lined up for tasting at the Goomtee tea estate, a supplier to Teabox.
As is the case with other successful e-commerce sites, technology forms the core of Teabox’s online operations. Algorithms predict demand based on such factors as past sales, internal ranking of tea varieties and pricing. Information about a tea’s picking date, season and origins is made available to online customers.
Taking a cue from the successful wine industry, Teabox is bringing in wine tasters to provide engaging online descriptions for its products. Gone are the flowery but opaque descriptions like “distinctly high-grown character” and “surprising malty nuance.” They have been replaced by more consumer-friendly taster phrases like “light-bodied tea with a slight woodiness in its flavor,” along with detailed steeping instructions.
Teabox, which started in mid-2012, is introducing a subscription model offering personalized tea selections, replicating similar successes of online sites selling wine, razor blades, cosmetics and organic products.
All of these steps aim to hook a new generation of customers in countries such as Russia and the United States. As consumers on a quest for the latest niche food products veer toward drinking the brew in upscale salons and tea bars, Indian tea could tap into the large addressable global tea market, estimated to be $90 billion in size.
“Tea is a time-sensitive product, but the industry’s supply chain is quite broken and has many intermediaries,” said Prashanth Prakash, a partner at Accel India, which along with Singapore’s Horizon Ventures has provided some $1 million in early-stage funding to Teabox. “The business is ripe for disruption, both in terms of price and quality,” he said.
The venture capital approach is helping Teabox change operations. It was Accel Partners that suggested the wine industry method to “product discovery” — industry jargon for helping shoppers discern and select products online.
“By employing tactics used by the wine industry, we want to demystify tea and present it in a more accessible manner along with how-to brewing directions so that buyers can explore varieties, regions and flavors,” said Mr. Dugar, 31, founder and chief executive of Teabox, which is based in Siliguri, Darjeeling, the heart of India’s tea-growing region.
His family’s trade connections go back four decades and give Mr. Dugar access to high-quality teas from the estates of Assam and Darjeeling. From his childhood summers spent on plantations, he recalls the tea pluckers picking two leaves and a bud that was transformed into brewed tea within hours. “I imagined that the workers in tea plantations were magicians.”
Kaushal Dugar, chief of Teabox.
Saritha Rai
Kaushal Dugar, chief of Teabox.
Mr. Dugar had worked for a few years as a corporate finance analyst at consultancy firm KPMG in Singapore, but he then returned to India to become an entrepreneur. He and his backers quickly discovered that the industry first organized by British colonizers about 200 years ago has not changed at all. Many plantations are controlled by third- or fourth-generation owners, using machines dating back a half-century or more.
“Traditional processes such as withering, rolling, drying are all manually monitored just like it was when the tea industry was first established in this region centuries ago,” said Amar Nath Jha, a senior manager of the 162-year old Steinthal Tea Estate in Darjeeling, a supplier to Teabox.
Because of the lengthy auction and distribution process, it can take up to six months for the tea to reach a consumer overseas.
“The lack of modern infrastructure leads to tea quality deteriorating and losing aroma along the way,” said Mr. Gomden, the tea consultant.
To change that, Teabox set up sourcing centers in Darjeeling and Assam, within a few hours from the gardens where the leaves are plucked and processed. (Other buyers have also begun to bypass the auction system and buy premium teas directly from producers).
Almost as soon as the teas are procured fresh from the production centers, Teabox stores them in temperature- and humidity-controlled warehouses. Then, within 48 hours, the teas are checked, vacuum-packed and dispatched to fulfillment centers in major markets such as Russia, the United States and Australia.
Data analytics also help. When they log into the website, buyers are served personalized recommendations according to one of Teabox’s 53 tea profiles.
Customer feedback goes quickly back to the producers. For example, Teabox now sells tea only in 100-gram vacuum packs after complaints that tea in larger packs lost aroma.
The company tries to win over customer share its audience by offering high-end teas at a discount to established brands like Twinings and upscale European, Asian and American tea salons, all of which sell online (Teabox’s products can sell for as much as $1,099 per kilogram).
For instance, a French tea salon called Palais des Thés sells the Mission Hill tea at $340 per kilogram, but Teabox sells the same product about 60 percent less at $126 per kilogram. TWG, a high-end tea bar in Singapore, sells the Okayti at $390 per kilogram while Teabox sells it as $180, less than half the price.
Teabox is still a small player in the industry: It has shipped 10 million cups’ worth of tea to customers in 65 countries so far. The challenges are many. Traditional distributors have blocked access to plantations and Teabox has had to counter rumors from rivals that it is an unreliable buyer.
Mohan Chirimar, 53, of Raghunath Exports, a bulk supplier to Starbucks as well as retail chains and supermarkets in 30 countries, said Teabox was chasing a big opportunity that had room for other entrepreneurs.
Raghunath Exports is itself gearing up to compete online as Mr. Chirimar’s 23-year old son, Aditya, a recent graduate from Cornell University, has returned this month to join the business. “He is going to expand our business online; it offers more opportunities and will speed up our growth,” Mr. Chirimar said.
Teabox does have an early-mover advantage but must now build its name. Regular access to financing will help Teabox ramp up its brand in crucial markets like the United States where tea drinking growth rates are overtaking coffee. The start-up aims to grow 300 to 500 percent in the coming year and cross $1 million in annual revenue.
“With cash in the bank and support from investors, we can dream about quickly building a billion-dollar tea brand from India, something that has never been attempted before,” Mr. Dugar said.
