Article By: Bill Waddington
Similar to the debate of choosing pods vs. brewed coffee, the long-running discussion of loose-leaf tea vs. teabags rages on. Most vendors immediately choose teabags whether they believe they are cheaper or succumbing to the myth that they are more convenient. What many vendors don’t realize is that loose teas provide a premium quality, flavor, merchandising options, and a surprisingly lower priced product that can’t simply be found in teabags alone.
You should know right from the start that I don’t like teabags. I don’t make teabags. I don’t sell teabags. But as a tea seller I feel it is vital to look critically at the question of loose vs. bagged tea.
I refer to myself as a tea seller but that term also embraces coffee shop owners, tea growers, tea packers, tea brokers, tea wholesalers, tea retailers, restaurateurs, grocers - we all sell tea. And one of the most fundamental decisions every tea seller makes is whether to market and sell loose leaf tea or bagged tea. With all of the teabag tweaking and repackaging that has been going on in the last few years, many folks jump immediately onto the teabag band wagon, not realizing there is a whole range of other options to consider.
When considering this question of loose vs. bagged I believe there are two factors you should consider before all others, quality and cost (or profit margin). Of course there are additional issues to consider such as convenience, consumer trends, meeting quantity demands etc.
The Quality of Loose vs. Bagged
This is not to say that all teabags have poor quality tea in them, far from it. I personally have a fondness for Typhoo teabags. There are many teabags that have good tea in them. And of course not all loose leaf is great or even good tea. It should also be noted that at some point personal taste enters the equation. You may find that you may happen to like a particular inexpensive tea, and there is nothing wrong with that.
But the fact remains that the best quality teabag is nowhere near the best quality loose-leaf tea. Not even close.
The Cost (Profit Margin) of Loose vs. Bagged
When looking at the cost or profit margin issue, the gap between loose tea and bagged tea is even more dramatic. Simply put, there is a phenomenally higher profit margin in loose tea than in teabags. Looking at wholesale prices, you can easily purchase good to excellent loose leaf tea for between one - eight cents per cup. You can purchase great and competition level loose teas for 10 - 20¢ per cup.
Mass-market teabags (generally containing mediocre to average tea) seem to run between 10 - 20¢ per cup. Supposedly better quality teabags seem to run between 20 - 30¢ per cup.
The trendy super-premium teabags seem to run between 30 - 70¢ per cup. And these super-premium teabags are still not as good as the best loose-leaf teas, despite the fact that they are 5 to 10 times more costly.
At any price level you can always get a dramatically higher quality loose-leaf tea for the same price than a teabag. And when comparing loose and bagged teas of similar quality (a difficult task at best) bagged teas will always be dramatically higher priced.
Simply put loose-leaf tea is one of the few arenas in the world where you can get a much higher quality at a much lower cost.
So then the question changes from, “Why bother with loose-leaf tea?” to why would anyone want teabags (with their higher costs and lower quality).
The Myth of Teabag Convenience
The primary reason people choose teabags is “The Myth of Teabag Convenience.” This is the big gun of teabag advocates, that teabags are much more convenient than loose-leaf tea. This is just a myth but it has been around so long, that it has almost achieved the status of accepted wisdom. But it is simply not true.
We sell lots of loose-leaf tea to restaurants. Restaurant managers are some of the most practical hard-nosed individuals I know. Without exception they have a strongly held belief that teabags are less work than loose-leaf teas. So one of my jobs is shooting holes in the myth of teabag convenience.
I always ask if they are concerned that converting to loose-leaf tea will be extra work (i.e. less convenient) for the servers. Invariably the answer is yes. So I offer them a challenge. I will prepare loose leaf tea and one of their experienced servers will prepare teabags as they have always done. We almost always finish at the same time. And then I have them taste the two teas. The loose-leaf tea almost sells itself. There are so many clever ways to steep loose-leaf tea today (do-it-yourself disposable teabags, in-cup or in-pot brewing baskets etc.) that it doesn’t take any longer to prepare a two-cup (standard restaurant size) pot of tea, than it takes to prepare a two-cup pot of tea with teabags.
Reasons for Selling Teabags
Another rationale for marketing and selling teabags is that with teabags you can achieve a more consistent flavor profile over time and over large market areas. There is definitely some truth to this. Unfortunately this more consistent flavor profile is usually defined as a lowest common denominator of quality. But clearly there is a large and ongoing demand to address this need for consistency. Teabags may be best suited to fill this need.
Another rationale for marketing and selling teabags is that you can bring your costs, and thus the final retail price down. In fact there are many people who believe that teabags achieved a dominance in the industry because it gave growers/packers, and manufacturers an avenue to sell lower quality tea. While it is true that you can bring some of your costs down (by using cheaper tea), more importantly you will also be bringing your profit margin down. In the long run that is a very unhealthy business model.
The truth is there is a definite market and place for teabags, but not at the exclusion of loose-leaf tea. Loose-leaf tea will always offer an opportunity of higher quality with lower costs. It is certainly great to see the tweaking and redesigning of the teabag over the last few years. And although much of this redesign of the teabag is pure marketing and hype there seems to be a decided effort to figure out ways to help the teabag deliver a better quality cup.
There are some who would say that this argument, that loose-leaf tea delivers higher quality with lower costs, is all fine and good, but it is only applicable on a very small scale (like a specialty tea store) or just in a food-service setting. I disagree strongly. McDonalds would be much better served if they would convert to a decent quality loose-leaf tea. The tea they presently offer to their customers is really dreadful. They would be able to achieve lower costs while delivering a noticeably better tasting product. The principle of delivering higher quality with lower costs is valid for any business, large or small, food-service or retail.
Additional Benefits of Loose Tea
In addition to better quality and higher profit margins, there are some other good reasons to market and sell loose-leaf tea. First, there are many more flavor choices and blend options available with loose-leaf tea. In fact with loose-leaf teas it is very easy and affordable to create custom and proprietary blends, signature items that are absolutely unique to your customer’s business. With teabags there is a huge economy of scale necessary that makes it difficult and much more costly to create proprietary blends.
Also in retail settings (from coffee shop to tea store to traditional grocery store) there are the additional sales of other tea brewing/infusing devices, when you are selling loose-leaf teas.
Another reason to focus on loose-leaf tea is that is where the growth is. Teabag sales in the U.S. are flat, at best. Specialty loose-leaf teas are on a very healthy upward trend.
In addition, I believe there are many more merchandising opportunities using loose-leaf tea vs. teabag tea. Loose-leaf teas are much more eye appealing than another box teabags on the shelf.
But, I am not saying, “Don’t carry teabags.” No. A market has been created for them, and as a seller of tea you need to be attuned to that market.
But keep in mind this fundamental truth, loose-leaf tea is one of the few things in the world that delivers much higher quality at a much lower cost. Shouldn’t this be one of your primary goals in working with all of your customers?
About the Author: Bill Waddington is the founder of TeaSource, a Minnesota based specialty tea wholesale company. As such he imports and blends some of the finest teas from around the world. Bill has also served on the board of directors of the American Premium Tea Institute, was the chairman of the 2004 Specialty Tea Institute Symposium, and was a featured speaker at the China International Tea Expo, Beijing 2005.