Hot tips for hot beverage outlets

Following the extraordinary success of US-style coffee shops, Tom Bawden reads the leaves for the future of tea houses

US-style coffee houses have probably had more impact on our city centres in recent years than any other retail phenomenon.

Tapping into our obsession with the US and the increasing popularity of the coffee bean, major chains such as Seattle Coffee Company and Coffee Republic are in the throes of a sustained ambush of our high streets.

Since 1995, coffee shops have changed beyond recognition, with around 200 US-style outlets springing up. These sell a range of coffees which consumers previously didn’t know existed.

And it is still early days. Coffee Republic estimates the UK market could sustain more than 1500 coffee outlets, and recent announcements from the major players suggest it is only a matter of logistics before that figure is reached.

US chain Starbucks has bought the 56-strong Seattle Coffee Company and will rebrand it as Starbucks. It plans to open around 450 new European outlets by 2003. Costa Coffee plans to swell its numbers from 87 to 157 in the next year.

At the other end of the scale, The Bean, with only one outlet, also plans to expand and has hired Assorted Images to revamp its identity.

Industry observers put the success of this new wave of coffee chains down to the value they add to the coffee drinking experience. Because high quality coffee-making equipment is prohibitively expensive, consumers rely on coffee shops for espresso-based coffees, as well as for flavourings and the rarer coffee beans. US coffee houses have tapped into this, creating heavily branded environments that stress the value they add to coffee drinking.

It was only a matter of time before entrepreneurs looked at ways of stretching the concept into related areas. Tea was an obvious choice.

Whittard of Chelsea confirms it has appointed a design consultancy to work on a new tea shop concept. “We are in the early stages of the process and it is all confidential. We are working with a group we have worked with a lot in the past,” says a Whittard spokesman.

Whittard is thought to be working with Ian Logan Design on one element of the project, although the group declines to comment on any involvement. The client currently has around 100 tea product retail outlets, providing the infrastructure for such a scheme. And at least one other manufacturer is believed to be considering a similar venture.

On the surface, there is no reason why the coffee house concept couldn’t be translated into tea houses. There are already thousands of afternoon tea shops dotted around the country, but based on a different concept to the coffee houses. Existing tea shops tend to be places people go to sit down, to have a cup of tea and a slice of cake. They are usually one-off outlets and not heavily branded. When they are, the tea itself is not an integral part of the brand.

So there would appear to be a gap in the market for a sophisticated tea house, adding value to the traditional tea drinking experience through a variety of herbal, fruit and specialist teas.

Tea Council executive director Illtyd Lewis says it is simpler than that. “A lot of the interest around coffee shops is because it provides somewhere in the high street to put your backside. Since 42 per cent of all fluids going down our necks are tea, compared to 19.2 per cent for coffee, it is logical there is an opportunity there,” says Lewis.

Lewis adds that Whittard is the only manufacturer he knows of currently planning such a venture.

Others in the industry say the coffee itself is integral to the success of coffee houses and that the properties of tea make it less likely to succeed in this market.

“There’s often talk of opening tea shops, but the truth is people don’t want to pay money for tea in this country. It’s not like coffee,” says a spokesman for Tea Brokers Association of London. He cites the demise of Williamson & Magor’s three-strong tea house chain two years ago as evidence.

“There are enormous opportunities for [cafés serving] good quality tea in the UK. It just wasn’t our line of business,” says a Williamson & Magor spokesman. The company has no plans to launch a new chain.

The arguments against tea shop chains seem perhaps more compelling. “My gut feeling is that there is far less scope for tea than coffee. Coffee chains are successful because they add value; they are more exotic,” says one equity analyst.

“With tea there is the perception that all you are getting is hot water and a bag. People will only pay for added value. And, even with the more sophisticated blends, there is none – it is still just hot water and a bag, the same as you could have at home,” he adds.

Despite Williamson & Magor’s foray, the tea shop idea is still largely uncharted territory. But potential entrants to the market should think very carefully about what tea shops can offer the consumer that he or she can not get at home.

On the surface, the brand proposition for the leaves is less apparent than for the beans. The real challenge for design consultancies is to create a brand experience which is as powerful as that of the coffee houses.

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