Academic journal article Journal of Case Studies

Teakoe: The Path to Growth

Academic journal article Journal of Case Studies

Teakoe: The Path to Growth

Article excerpt

Introduction

Lemon, Ginger, and Spearmint. As he held the cup close to his mouth, Paul felt the steam from his new aromatic tea rise, enveloping his nose and face. The warm mist and elegant smell brought a smile to his face as he thought about the future of his start-up company. It had only been five short years ago when Paul first approached his long time friend Cole with the idea of launching a tea company. Now their Teakoe products were being sold in over 300 establishments ranging from hotels to restaurants to health clubs.

As Paul reflected on Teakoe's successes, he could not help but to return to a question that had been on his mind: was Teakoe growing in the best possible way? Was it best to continue to spread their efforts across an array of wholesale segments or was it spreading itself too thin? Would Teakoe be better off focusing on a particular product and/or market segment?

Teakoe Background

Paul Fry first came up with the idea for Teakoe in 2008. As a young, professional lacrosse athlete playing for the Denver based Colorado Mammoth, he was devoted to maintaining his health and pursuing an active lifestyle. With a mind towards health, he began blending his own tea as a healthy, flavorsome alternative to sugary beverages. As Paul experimented with various spices, fruits, herbs, and teas, he began to recognize the need for a tea that appealed to a younger demographic, interested in unique innovative flavored tea blends that offered the potential of healthy alternatives to commercial sugar based beverages (Teakoe, n.d.).

Paul's vision expanded toward establishing a brick and mortar tea cafe. He decided to approach his long-time friend, Cole James, with his idea of launching a new company and employing creative marketing strategies to provide signature hot and iced teas geared to younger consumers interested in unique health-based products. Cole excitedly agreed. Cole's skill base as a 6-plus year professional background with Starbucks provided the venture with a resource to understand the challenges of targeting unique wholesale markets, an understanding of value chain management, and a successful track record with product market segments. After a handshake, Paul and Cole rolled up their sleeves and started to work.

The two worked for over a year to develop signature blends that appealed to consumers. The company introduced its first product in 2009 at a local Denver farmers market with the goal of learning about consumer demand, tastes, and preferences. Laboriously seeking and incorporating feedback from potential customers, Paul and Cole worked to develop a sophisticated understanding of customer tastes and preferences. As Paul and Cole learned more about their potential customers, they continued to learn more about exotic ingredients, their flavor profiles, and health attributes. They eventually developed several bagged tea products specially designed for either hot or cold consumption and began to sell these products directly to consumers at various farmers markets and special events.

As Paul and Cole surveyed younger customers about their tastes and preferences, they recognized an increasing trend among young clientele to frequent fast casual restaurant establishments. Unlike the fast food segment--commonly referred to as the quick service segment--the fast casual restaurant segment offered higher quality, innovative menu items in a pleasing environment. While prices at fast casual establishments were typically higher than that of the quick service segment, the fast casual segment was able to offer lower prices than the table service segment due to its lower overhead and faster table turns.

While the fast casual restaurant concept first took hold in the mid-1990s, it did not become mainstream until around 2010. Three areas in the U.S. to experience the fastest growth in the number of fast casual establishments were the Denver, Fort Collins, and Boulder metropolitan areas--all in close proximity to Teakoe's headquarters in west Denver (Brandau, 2013). …

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