September 01, 2016
Steeped Tea: Organic Focus and Innovative Product Ideas Spur Growth
by Lin Grensing-Pophal
Headquarters: Ancaster, Ontario, Canada
Top Executives: Founders Tonia and Hatem Jahshan
Products: Loose-leaf tea, food items and accessories
2015 Revenue: CAN$20 million
Take an online stroll through Steeped Tea’s vibrant website and it soon becomes readily apparent that the company is about more than tea—a lot more. The “Recipes” tab is particularly revealing. There visitors will find a wide array of recipes including salad dressing, protein balls, shakes, sodas, pancakes, quinoa and much, much more. What do all of these food items have to do with tea? Plenty. Each recipe incorporates Steeped Tea’s signature loose leaf tea offerings.
The seemingly never-ending stream of recipes is reflective of the creativity and marketing wizardry of Tonia Jahshan who, along with her husband, Hatem, founded the company in 2006 after discovering the delight of loose leaf tea during a vacation getaway. With a background in direct selling that funded her college education, Tonia immediately recognized the potential and possibility in sharing her discovery with others.
Based in Canada, Steeped Tea recently expanded into the United States. The company has been widely recognized both for its rapid growth and for Tonia’s stewardship. Also serving as President of Steeped Tea, she has been recognized as one of Canada’s top female entrepreneurs by Chatelaine since 2013, achieving the No. 1 spot in 2016. The company has been listed on Canada’s Profit 500 (akin to the Fortune 500) since 2013 as well, reaching the No. 20 spot in 2015. In 2015, North American revenue was CAN$20 million. U.S. growth, says Hatem, has been much faster than they experienced in Canada. “The growth we achieved in the U.S. in the past three years took us over six years to accomplish in Canada,” he says.
|Founders Tonia and Hatem Jahshan and their children.|
A great contributor to the company’s success was its partnership in 2012 with David Chilton and Jim Treliving, investors from the Canadian Broadcasting Corp. show Dragon’s Den (the Canadian version of Shark Tank). They Jahshans auditioned, were selected to appear on and ultimately gained funding from their appearance.
Hatem admits that he was initially against the idea. While there was obviously a potential upside in terms of infusing additional capital into the company, allowing it to expand into the United States, there was a downside as well. Generally, outside investors don’t have a strong understanding of the direct selling channel. These investors were different, though, he recalls.
“We were fortunate when we did the pitch that both Jim Treliving and David Chilton were very familiar with direct sales. They actually started a bidding war on that show and we accepted them as the investors.”
Tonia had a different perspective about the experience. “I had a really good gut feeling that we could do very well on the show,” she says. She also had another motive. “I knew that that exposure to 2 million people would be great for our consultants,” she says. And it was.
“Dave Chilton brings a wealth of knowledge from his finance background,” says Hatem. “He understands the direct selling world and has learned from other ventures in the industry. He is a trusted name in Canada as the author of The Wealthy Barber, one of the top best sellers in the country.” Having Chilton as an investor, says Hatem, “gives us tremendous credibility.”
Jim Treliving also brings some big benefits to the relationship. Treliving is a business mogul and the owner of the Boston Pizza franchise restaurant chain in North America and Mr. Lube chain in Canada. “His experience and reputation paved the way for us to navigate our way into the U.S. and continue our stellar growth,” says Hatem. “He too understands the direct sales model.”
Chilton and Treliving each own 10 percent of the company. “They continue to support Steeped Tea with their official stamp of legitimacy as stellar investments in their portfolios. They both sit on the Steeped Tea board of directors and help mentor and support Tonia and me,” Hatem says.
From Personal Tragedy
But, as much as it all sounds like a dream come true, the impetus behind the Jahshans’ loose leaf tea discovery was personal tragedy. As a young married couple, both Hatem and Tonia were extremely busy—she running a sales agency that required a great deal of travel and he as a restaurant franchisee with three locations. Despite their busy lives, they wanted to start a family. “We thought we were successful, but my wife miscarried and it was traumatic,” recalls Hatem.
It was while on a little getaway to Nova Scotia, where they were hoping to wind down from the demands and stress they had been facing, that they were served loose leaf tea at a bed and breakfast. It was Cream of Earl Grey tea, and it was heavenly. “It just touched every sense,” says Hatem. “It looked beautiful, it smelled amazing, it tasted incredible and, once you drank it, it inspired chattiness. We fell in love with it.”
Like many people, having only experienced the tea bag variety of tea in the past, the Jahshans didn’t realize how delightful the tea drinking experience could be. They went on a hunt to visit all of the tea houses on the island to figure out where the loose leaf tea came from. “My wife has always enjoyed sales and likes that aspect of work,” he says. “She said, ‘you know what, I’m going to start selling this stuff!’ ”
Enjoying a cup of tea lends itself to socialization. It’s a fact that Tonia immediately recognized and that drove her to start sharing her discovery with friends and family. Initially, says Hatem, Tonia sold her tea through baskets at open houses, fairs and shows. “It wasn’t very successful at first and then, all of a sudden, about a year and a half in she did a tea party—and almost everyone at the tea party wanted to have a tea party.” Soon she was hosting 15 parties a month, recognizing the fact that tea parties still held appeal, even in a fast-paced world where coffee often seems to be the go-to hot beverage.
When you think about it, what could be a better match for the direct selling channel than a product whose tradition is steeped (pun intended) in the concept of holding a party—in this case, a tea party—or Par-tea as Steeped Tea’s events are known?
There was another natural connection as well. Tonia’s background in direct sales as a young person helped her understand very well how the system works. She had put herself through college by selling candles and was very familiar with direct sales and its power. And, she adds: “Even before I sold candles, I was always going to parties.” She was drawn to the model from an early age. “I loved it. I was the friend who always had the [direct sales] parties. Every party I was asked to have, I would have. I was so attracted to that.”
‘The popularity of the tea party concept was immediate. But they came to a turning point, says Hatem. Some tough decisions needed to be made about whether to ramp up, or shut down, their burgeoning operations. “It just evolved into something that was literally keeping her out all night,” says Hatem. “We had to make a decision about what path to take—whether to hire people, or whether to add a salesforce that was on commission or payroll.”
An Ultimatum—and a Steep Trajectory
So, says Hatem, he issued an ultimatum and they made a deal. If Tonia could grow the company to about $500,000 in sales by the end of the year, he would sell his franchises and join her in the business. If not, they were going to “have to shut the company down and get back to our normal lives.”
She met the goal. So, in 2010 Hatem joined her in the business as CEO and began selling off his restaurants. Tonia’s strength was sales, not the financial or administrative elements of the business—that became Hatem’s focus.
In 2011 the couple decided to make an appearance on Dragon’s Den. The episode aired in 2012 and they struck a deal. They walked into the audition, he says, with about 300 percent growth for the year. “The day after it aired we were on a trajectory of about 600 percent growth,” he says. “Our growth has been so dramatic.” Steeped Tea entered the United States market in 2014, and the company has been seeing dramatic growth there as well, he says.
But, while the Dragon’s Den experience certainly can be pointed to as a significant impact on the company’s success, Hatem says that there’s more to it than that. Most notably, he says, is Tonia’s ability to connect with the field. “She’s literally one of them,” he says. “She started as a consultant. She did all of the trade shows in Canada. She’s the face of the company. We have an ear to the ground with Tonia so that’s a huge success factor for us.” Steeped Tea has a consultant base of 9,000 and is rapidly approaching the 10,000 mark, he says.
In addition, he says, “we do everything in-house; the complete business is under one room,” and “our supply chain pretty much goes down to the growers.” More specifically, Hatem says, “We source our own tea, blend and flavor in-house and store and distribute to all of North America from our single head office location. Our head office team does everything from blending, packaging and shipping products, to photography, marketing and customer support.” Maintaining this level of control, he adds, means they are “able to quickly respond to any new trends.” Most recently, that response was to the increased interest in matcha, a ground powder of green tea from Japan that is said to have the nutritional equivalent of 10 cups of traditional brewed green tea. “We can quickly change our production cycles and our marketing and just about anything about the company to hone in on a product line like matcha,” says Hatem. And, the company is also debt-free, he says. They want to keep it that way.
“We’ve been very careful with how we borrow and build; we’re very much against building it big in the hope that they will come. We prefer to grow with the sales.” That’s why, he says, they have no immediate plans to expand beyond their presence in Canada and the United States. “Right now the U.S. market is massive and we’ve just scratched the surface,” he says.
In a few years, though, he predicts, “we’ll start looking at Europe and Australia.”
A Product in Demand
Statistics back up Hatem’s sense of the high volume of unfulfilled demand for tea. According to the Tea Association of the U.S.A., “tea is the most widely consumed beverage in the world next to water, and can be found in 80 percent of all U.S. households.” On any given day, the association’s fact sheet says “over 158 million Americans are drinking tea.”
Perhaps most interesting, and clearly in line with the opportunities that Steeped Tea has seen, only 1 percent of the tea consumed is loose leaf tea, but “loose leaf tea continues to grow in both dollars and units.” In Canada, the situation is much the same. There, though, the loose tea market represents 61 percent of tea consumed, according to the Tea Association of Canada. There would appear to be ample opportunity to educate the American public and introduce them to Steeped Tea products.
In addition to being loose leaf and unconfined by a bag that may alter the flavor of the tea, Steeped Tea’s products are all natural, says Hatem. “We don’t believe in putting any kind of artificial flavor or color in the tea.” They also sell organic, herbal teas. “We’re trying to grow the organic line; that’s becoming more popular, especially in North America.”
They also believe in taking an approach, driven through Tonia’s marketing creativity, that is far flung from what you may recall of your grandmother’s tea-time experience. “She hates those doilies,” he says. “Tonia is very modern, very personable and upbeat. She always wanted to stay away from her grandmother’s tea sets—the prim and proper party.” Par-teas, he says, are “more modern, more hip and more cool.”
That has led to the introduction of products like sangria teas, and concepts like “virtual” Par-teas held through Facebook. “The home tea party isn’t the only kind of party,” says Hatem. “We’re always looking at tools to help consultants sell the product, to help them build their teams, and to help them reach whatever audiences they feel most comfortable with whether it’s online, or their neighbors, or friends and family.”
Steeped Tea does offer an autoship option, says Hatem, “however, we only autoship to customers.” The “Tea-Zer” subscription program sends two surprise teas from Tonia’s favorites each month.
A lot has changed for the Jahshans since their memorable trip to the bed and breakfast in Nova Scotia, and not just from a business standpoint. Since that time, the Jahshans have grown from a family of two to a family of five. The couple’s experience building a family, as well as Tonia’s own experience in direct sales, has driven a consultant-focused philosophy that puts family first.
“Our business really revolves around the way we like being in touch with our family,” says Hatem. It’s an approach that appears to be working well.