Monday June 15, 2009 | 7 comments
Argo Tea is a Chicago-based concept and specialty tea phenomenon. After attempts for years by a number of companies to move in the “Starbucks of tea” direction, a marketing whiz named Arsen Avakian, formerly in high tech, decided to attempt to do for tea what Starbucks has done for coffee…make it attractive to the masses as a “social beverage” in a “stay or go” retail format.
With two partners, he opened the first Argo Tea in Chicago in 2003, very near a Starbucks. He immediately began seducing market share from them and proved that, in the right format and with the right menu and mix, tea was a viable concept for the masses. Since that time, what began as a single store has become a chain of 14 stores, including kiosks at a medical center and an airport. Avakian is a “must meet” for me someday because he did it first. Teavana, a larger and older chain, is not included in my stats because it is basically a retailer of tea accessories and packaged loose-leaf tea and not a “café style” concept.
To make the “tea to go” format work, Argo needed to speed up the brewing process; their answer was to brew the loose-leaf tea in concentrated form prior to serving and then add hot water at the point of sale. As they grew, the need for more concentrate eventually led Avakian to install a “brewing room” in one of the stores with a large glass window where customers could watch the tea being steeped in large vats and then bottled to ship to the stores. Without expressing my opinion on this process, I will simply say it has worked for Argo in terms of acceptance and growth. Overall, Argo has consistently maintained a 4.5 star rating on yelp, the premiere Internet consumer review site, which is quite impressive.
Argo Tea recently obtained venture capital financing, which gave them needed funding to grow in a much more vigorous way. Avakian’s plan has always been to open a new store only when the prior one was profitable and his success has been remarkable. The company is now expanding their territory to parts of the East Coast, with New York in their sights.
This is a company to keep an eye on because the team is tight and has known each other for years. They have a strong and successful business background, they stay lean, and they have a proven plan for profitable growth.
When seeking retail locations, Avakian and team look for spaces near a Starbucks, as they share demographics and provide an alternative to Starbucks’ coffee-centric menu, while giving patrons an almost identical aesthetic feel, with muted colors, wi-fi access, and professionally done menu boards and merchandising style. They hired a marketing company to put together a complete “look” for the brand, from the style of their cups to the photos of their specialty drinks. Nice if you can afford it, and they can. Coffee and coffee drinks do play a minor role, which helps ensure maximum “capture” of coffeehouse expatriates looking for alternatives.
Agree with their brewing process or not, these visionaries have, indeed, proven that Starbucks is vulnerable to a professional concept that will “get in their face” and promote tea as a beverage worthy of star billing. Cheers, Argo! I am in awe of their marketing prowess, determination, and cutting-edge business concept. They are an inspiration to everyone who is searching for a way to make specialty tea visible and appealing to the masses of coffee drinkers looking for a real alternative in a format they are comfortable with. Argo will be a hard company to compete with and they have a nice head start, if there is, indeed, a “race” for a nationally recognized tea-retailing brand.
Ultimately, someone like Starbucks may attempt a buy-out. Only Avakian and his partners know if that would be in the cards from their perspective. Whatever happens, Argo is a trailblazer and trendsetter in the world of specialty tea, a concept whose time has come.