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TEAPUCCINO ANYONE? HOW ARGO GOT AMERICANS TO DRINK TEA
By ANITA HAMILTON
TIME Magazine
http://www.time.com/time/specials/packages/article/0,28804,1877020_1877030_2096362,00.html
Oct 6 2011
Thinking Big
TIME surveys small businesses around the world and the entrepreneurs
that keep them going
Fifteen years ago, Arsen Avakian arrived in the United States with
$360 in his pocket and a Fulbright scholarship to study business.
Today, the 35-year-old Armenian-born entrepreneur is the founder and
chief executive of Argo Tea, which in 2010 brought in $15 million
in revenue from its upscale chain of tea shops in the Midwest and
Northeast. Thanks to a new line of fruit-infused bottled teas that
recently debuted in some 3,000 grocery stores around the country,
including Whole Foods, Avakian expects his eight-year-old tea company
to top $20 million in annual sales by year end.
While inventiveness is etched in Avakian's DNA - his father Yuri, an
alternative-energy engineer, holds multiple patents in wind and solar
technologies - it didn't exactly take an Einstein to come up with the
idea behind Argo, which is named after the mythological ship that the
Greek hero Jason sailed to retrieve the golden fleece. Avakian hit
on the concept while working out of coffee shops a decade ago on the
many business trips he took as vice president of business development
for the software firm i2 Technologies. "I realized that I see a lot of
Americans drinking coffee, but nobody in this country is drinking tea,"
he says. "A nasty Lipton tea bag is all Americans knew about tea."
(See "Method Cleans Up With Style (Toxic-Free) Substance.")
Indeed, Avakian's big idea dovetailed with a growing thirst for an
alternative to coffee: Tea sales in the U.S. surged from $1.8 billion
in 1990 to $7.7 billion in 2010, according to the Tea Association. The
beverage's perceived health benefits, along with the growing
availability of ready-to-drink offerings at grocery stores and chains
like McDonalds and Dunkin' Donuts, were transforming the sleepy drink
that only Granny could savor into a refreshing, mid-day pick-me-up.
"Our goal was to make it easier for people to enjoy tea," adds Argo's
director of product development, Daniel Lindwasser.
Financing it with their own credit cards, Avakian and his childhood
friend Simon Simonian (then a software engineer also living in the
U.S.) opened a 900-square-foot tea shop across from a popular Starbucks
in Chicago's tony Lincoln Park neighborhood in June 2003.
The store quickly gained traction with tea drinkers intrigued by
offerings like earl grey vanilla crème (earl grey tea blended with
vanilla syrup and milk), teapuccinos (the company's trademarked name
for tea and steamed milk), and whole-leaf selections like blueberry
white tea (flavored with a natural extract). Unlike most retail tea
outlets, which focused on selling tea in bulk to be brewed at home or
offering traditional sit-down afternoon tea services, Argo devised
a Starbucks-like model of specialty drinks served in paper cups for
a premium price - now about $4 each.
Things went so well that first year that Avakian decided to approach a
local Whole Foods store to carry boxed versions of his whole-leaf mango
mambo, green tea strawberry and other flavors. "He was organized and
had this attitude that he just wasn't going to be denied," recalls
Perry Abbenante, then the grocery director for the Midwest region
of Whole Foods. But less than a year later, Avakian pulled the line,
he says, because he didn't want to be pigeonholed as just another dry
tea leaf seller. "It's hard to say that our green tea is better than
someone else's green tea," notes Avakian.
Instead Avakian focused on perfecting his one-of-a-kind tea drinks
in house. The Lincoln Park store became a tea lab to Avakian,
who was both barista and flavor inventor. "I love creating tea,"
he says. On vacation at Rio de Janeiro's Ipanema beach, for example,
he recalls paying a juice bar operator a few hundred dollars to close
shop while he experimented with flavor combinations that resulted
in the company's mango mateccino, a mix of roasted yerba mate, milk,
ice and chunks of mango.
(See " A Small Company Capitalizes on the Bollywood Boom.")
Even today, with some 26 outlets in Chicago, St. Louis, Boston and
New York, Argo's flavor choices are its defining quality. The popular
hibiscus steamer is a blend of hot herbal tea made from hibiscus
blossoms, apple cider and caramel. Its white frostea combines white tea
from China's Fujian province with white chocolate sauce and peppermint
oil. While such sugary drinks aren't exactly low-cal, they typically
have about a third fewer calories than a Starbucks' equivalent.
As Avakian opened more stores in the Chicago area - he had ten by the
end of 2007 and says he was serving some 20,000 customers a week -
he realized he needed a way to ensure consistency from one shop to
the next. So he began brewing up concentrates in a central location
that he would then supply to each outlet and dispense in a clever
tap system also found in some craft beer bars. And he started a
"universitea" for employees that rewards them with raises for high
marks on written exams about the company and product.
An infusion of cash from investors like billionaire Sam Zell, Oxford
Capital, and others in recent years has enabled the growing company,
which now has close to 400 employees, to snap up prime retail space in
iconic buildings during the recession, including the ground floor of
Willis Tower in Chicago and the Flatiron Building in New York. There
are now Argo kiosks at O'Hare airport and a new store on the New York
University campus in Greenwich Village.
Argo's most notable success came in 2010, when it began selling a new
line of bottled iced teas at Whole Foods in Chicago. To seal the deal,
Avakian went back to Perry Abbenante, the grocery director he had
first convinced to carry Argo's dry teas back in 2003. Abbenante had
moved on from Whole Foods by then, but he introduced Avakian to Whole
Foods store managers in Chicago, who agreed to carry the new drinks.
Today, Argo's bottled teas, which sell for about $2.40 for a 13.5-oz.
bottle, are in some 105 Whole Foods outlets across the country. "It is
a lot sweeter than other brands," notes the chain's Midwest regional
grocery coordinator Chris Kopperrud, who says he carries Argo's drinks
in his stores because, "they had interesting flavor combos that are
based on pairing tea and juice flavors," such as green tea with ginger,
white tea with acai, and black tea with honey. The bottled teas,
which come in an unusual oval-shaped glass container, are now sold in
Safeway, Dominick's and other stores across the country and, according
to Avakian, already account for 20% of the company's total revenue.
Avakian says his company is profitable and on track to reach some $20
million in revenue for 2011, but because Argo is privately owned,
there is no way to verify his claims. What's more, some analysts
question whether tea can sustain an entire retail business. "To
most consumers tea is something available in lots of places. There
are just not as many people seeking that experience," says Ron Paul,
president of Technomic, a food industry market research firm. The top
six tea chains in the U.S. now have a combined annual revenue of $443
million versus Starbucks $9 billion.
Others question whether the tea experience offered by Argo can have
broad appeal. "They've built a place that is kind of cold. It's too
intellectual and industrial," notes restaurant consultant Clark Wolf,
of Argo's airy, green-walled stores.
Avakian begs to differ. "I am succeeding, and I never strayed away
from my vision," he says. Originally hoping to be the Pepsi of tea, he
now sees Argo as more of the Apple to Starbucks' PC. The secret to his
success? "You need to be a little irrational. You need to be gutsy."
But the most important ingredient, he says, is passion. "Anyone can
pour some liquid into a cup," he says.
By ANITA HAMILTON
TIME Magazine
http://www.time.com/time/specials/packages/article/0,28804,1877020_1877030_2096362,00.html
Oct 6 2011
Thinking Big
TIME surveys small businesses around the world and the entrepreneurs
that keep them going
Fifteen years ago, Arsen Avakian arrived in the United States with
$360 in his pocket and a Fulbright scholarship to study business.
Today, the 35-year-old Armenian-born entrepreneur is the founder and
chief executive of Argo Tea, which in 2010 brought in $15 million
in revenue from its upscale chain of tea shops in the Midwest and
Northeast. Thanks to a new line of fruit-infused bottled teas that
recently debuted in some 3,000 grocery stores around the country,
including Whole Foods, Avakian expects his eight-year-old tea company
to top $20 million in annual sales by year end.
While inventiveness is etched in Avakian's DNA - his father Yuri, an
alternative-energy engineer, holds multiple patents in wind and solar
technologies - it didn't exactly take an Einstein to come up with the
idea behind Argo, which is named after the mythological ship that the
Greek hero Jason sailed to retrieve the golden fleece. Avakian hit
on the concept while working out of coffee shops a decade ago on the
many business trips he took as vice president of business development
for the software firm i2 Technologies. "I realized that I see a lot of
Americans drinking coffee, but nobody in this country is drinking tea,"
he says. "A nasty Lipton tea bag is all Americans knew about tea."
(See "Method Cleans Up With Style (Toxic-Free) Substance.")
Indeed, Avakian's big idea dovetailed with a growing thirst for an
alternative to coffee: Tea sales in the U.S. surged from $1.8 billion
in 1990 to $7.7 billion in 2010, according to the Tea Association. The
beverage's perceived health benefits, along with the growing
availability of ready-to-drink offerings at grocery stores and chains
like McDonalds and Dunkin' Donuts, were transforming the sleepy drink
that only Granny could savor into a refreshing, mid-day pick-me-up.
"Our goal was to make it easier for people to enjoy tea," adds Argo's
director of product development, Daniel Lindwasser.
Financing it with their own credit cards, Avakian and his childhood
friend Simon Simonian (then a software engineer also living in the
U.S.) opened a 900-square-foot tea shop across from a popular Starbucks
in Chicago's tony Lincoln Park neighborhood in June 2003.
The store quickly gained traction with tea drinkers intrigued by
offerings like earl grey vanilla crème (earl grey tea blended with
vanilla syrup and milk), teapuccinos (the company's trademarked name
for tea and steamed milk), and whole-leaf selections like blueberry
white tea (flavored with a natural extract). Unlike most retail tea
outlets, which focused on selling tea in bulk to be brewed at home or
offering traditional sit-down afternoon tea services, Argo devised
a Starbucks-like model of specialty drinks served in paper cups for
a premium price - now about $4 each.
Things went so well that first year that Avakian decided to approach a
local Whole Foods store to carry boxed versions of his whole-leaf mango
mambo, green tea strawberry and other flavors. "He was organized and
had this attitude that he just wasn't going to be denied," recalls
Perry Abbenante, then the grocery director for the Midwest region
of Whole Foods. But less than a year later, Avakian pulled the line,
he says, because he didn't want to be pigeonholed as just another dry
tea leaf seller. "It's hard to say that our green tea is better than
someone else's green tea," notes Avakian.
Instead Avakian focused on perfecting his one-of-a-kind tea drinks
in house. The Lincoln Park store became a tea lab to Avakian,
who was both barista and flavor inventor. "I love creating tea,"
he says. On vacation at Rio de Janeiro's Ipanema beach, for example,
he recalls paying a juice bar operator a few hundred dollars to close
shop while he experimented with flavor combinations that resulted
in the company's mango mateccino, a mix of roasted yerba mate, milk,
ice and chunks of mango.
(See " A Small Company Capitalizes on the Bollywood Boom.")
Even today, with some 26 outlets in Chicago, St. Louis, Boston and
New York, Argo's flavor choices are its defining quality. The popular
hibiscus steamer is a blend of hot herbal tea made from hibiscus
blossoms, apple cider and caramel. Its white frostea combines white tea
from China's Fujian province with white chocolate sauce and peppermint
oil. While such sugary drinks aren't exactly low-cal, they typically
have about a third fewer calories than a Starbucks' equivalent.
As Avakian opened more stores in the Chicago area - he had ten by the
end of 2007 and says he was serving some 20,000 customers a week -
he realized he needed a way to ensure consistency from one shop to
the next. So he began brewing up concentrates in a central location
that he would then supply to each outlet and dispense in a clever
tap system also found in some craft beer bars. And he started a
"universitea" for employees that rewards them with raises for high
marks on written exams about the company and product.
An infusion of cash from investors like billionaire Sam Zell, Oxford
Capital, and others in recent years has enabled the growing company,
which now has close to 400 employees, to snap up prime retail space in
iconic buildings during the recession, including the ground floor of
Willis Tower in Chicago and the Flatiron Building in New York. There
are now Argo kiosks at O'Hare airport and a new store on the New York
University campus in Greenwich Village.
Argo's most notable success came in 2010, when it began selling a new
line of bottled iced teas at Whole Foods in Chicago. To seal the deal,
Avakian went back to Perry Abbenante, the grocery director he had
first convinced to carry Argo's dry teas back in 2003. Abbenante had
moved on from Whole Foods by then, but he introduced Avakian to Whole
Foods store managers in Chicago, who agreed to carry the new drinks.
Today, Argo's bottled teas, which sell for about $2.40 for a 13.5-oz.
bottle, are in some 105 Whole Foods outlets across the country. "It is
a lot sweeter than other brands," notes the chain's Midwest regional
grocery coordinator Chris Kopperrud, who says he carries Argo's drinks
in his stores because, "they had interesting flavor combos that are
based on pairing tea and juice flavors," such as green tea with ginger,
white tea with acai, and black tea with honey. The bottled teas,
which come in an unusual oval-shaped glass container, are now sold in
Safeway, Dominick's and other stores across the country and, according
to Avakian, already account for 20% of the company's total revenue.
Avakian says his company is profitable and on track to reach some $20
million in revenue for 2011, but because Argo is privately owned,
there is no way to verify his claims. What's more, some analysts
question whether tea can sustain an entire retail business. "To
most consumers tea is something available in lots of places. There
are just not as many people seeking that experience," says Ron Paul,
president of Technomic, a food industry market research firm. The top
six tea chains in the U.S. now have a combined annual revenue of $443
million versus Starbucks $9 billion.
Others question whether the tea experience offered by Argo can have
broad appeal. "They've built a place that is kind of cold. It's too
intellectual and industrial," notes restaurant consultant Clark Wolf,
of Argo's airy, green-walled stores.
Avakian begs to differ. "I am succeeding, and I never strayed away
from my vision," he says. Originally hoping to be the Pepsi of tea, he
now sees Argo as more of the Apple to Starbucks' PC. The secret to his
success? "You need to be a little irrational. You need to be gutsy."
But the most important ingredient, he says, is passion. "Anyone can
pour some liquid into a cup," he says.