Increase Profit by Serving Loose Leaf Tea

Jun 29th 2010

tea_drawerServing loose leaf tea is often avoided in coffee shops and cafés because it is thought to be harder to brew than teabags and also take up a lot of space. However, Michael Stout from The Golden Moon Tea Company recently wrote an article featured in the June 2010 issue of CoffeeTalk, titled "How Coffee Houses Can Earn an Additional $20,160 Per Year Using Loose Tea." In the article, Stout gives advice on how to easily make the switch to loose tea from teabags while also making a larger profit. What you might first be curious about (I know I was) is how Stout came to his $20,160 figure. Here's his explanation:

  • Let's say you're currently selling a teabag for $1.50 and your cost of materials (teabag and cup) is $0.10. Your profit is then $1.40.
  • Let's say your cost of materials for a cup of loose leaf tea (tea, cup and paper infuser) is $0.26. Although the initial cost for you is higher, you can charge more for loose tea and customers will pay it because of its additional benefits. With loose tea, you can charge a premium of $1.00. If you currently charge $1.50 for a cup with a tea bag, that means for loose tea you would charge about $2.50. With this price your profit is $2.24, which is $0.84 higher than the $1.40 you would make from a teabag.
  • An extra $0.84 can seem insignificant if you don't sell much tea. Stout goes on to explain: If a coffee shop makes $400,000 a year in sales and 9% of that is from tea, that's roughly 24,000 cups of tea. With an additional $0.84 per serving of tea, profits would increase $20,160 per year.

Obviously your increase in profit will not be exactly the same as the number Stout came up with. It will depend on your specific cost of materials, the difference between what you charge for loose tea versus a teabag, your annual profit and what percentage of that profit comes from tea sales.

BREWING LOOSE TEA

tea_sack_step3Stout goes on to discuss why it may be assumed that brewing loose tea is difficult. A lot of the time, it is because the wrong tools are being used - such as thinking a teapot needs to be used to brew a cup of loose tea. A great way to serve a to-go cup of tea is with a disposable paper infuser, generally known as the brand name T-Sac. T-Sacs are oversized teabags you fill with loose tea that are also inexpensive and all natural. Since these infusers are bigger than typical packaged teabags, it allows room for the tea leaves to open up and release flavor. Using a paper infuser is not hard to do: simply open the container the tea is stored in, scoop out a single serving of tea, fill the infuser and place it in a cup with hot water.

DISPLAYING THE TEA

In addition to paper infusers, the only other items you need to start serving loose tea are containers to store the tea, scoops for serving, and the tea itself, so the initial starting costs are not very high. Good containers for loose tea are made of tin or glass and are square - containers with round edges waste a lot of space on a shelf. Even more space is saved if the containers are stackable. When first carrying loose tea, a good number to start with is six different teas. This will allow a nice mixture of black and green teas as well as herbal blends and will also not take up a lot of room. Once you have all the necessary materials, it's a good idea to create an eye-catching display, which glass containers are especially good for. With glass, customers are able to see the tea before they order it.

BENEFITS

Since most cafés serve teabags, just having loose tea available will interest customers, as many people have not seen it up close. In the article, Stout attests that people are willing to pay more for loose tea because it looks nicer, smells nicer and tastes better than bagged tea. Loose tea is composed of whole tea leaves while teabags contain ground up leaves called "fannings," which lose their flavor much quicker than full tea leaves. With loose tea, customers will appreciate the extra step of service and that you're willing to go further for quality. Overall, serving loose leaf tea over bagged tea is a win-win. Your business will end up making more money and your customers will be happy you're serving a better quality product.

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