Japanese Tea Shop Looks for Green in U.S. Market

Discussion
May 22, 2006
George Anderson

By George Anderson

Koots Green Tea Shop is hoping to do for green tea what Starbucks has done for coffee.

According to a Seattle Times report, the Japanese retailer’s shops with bamboo-like table tops and chairs with kimono patterned cushions offers a variety of green tea based drinks such as “matcha chocolate (white-chocolate chips whisked in green-tea powder with steamed milk and organic whipped cream) and the kuromitsu latte (made with green-tea powder and enhanced by Japanese molasses.)”

The founder of Koots, Kouta Matsuda, has experience bringing a new drink to a culture raised on a traditional national drink. Mr. Matsuda operated 300 Tully’s coffee shops in Japan where green tea reigns supreme.

Koots will be aided by a growing demand for tea in the U.S. fueled by a number of reports pointing to the health benefits associated with its consumption.

According to the Tea Association of the USA, there are currently 2,000 tea rooms in operation across the country. This is up from 200 just 10 years ago.

Last year, according to the group, Americans drank more than 50 billion cups of tea. Most of that was black tea (87 percent), which either signals that green tea has limited market opportunities or a tremendous upside.

Interestingly, Koots may have been given a leg up on cracking the American market by Starbucks. Last year, the coffee chain introduced a line of highly successful green-tea drinks,
including the Green Tea Frappuccino.

Moderator’s Comment: What do you see as the market opportunity for tea rooms/shops in the U.S.? What will be the keys to Koots being successful in America?
– George Anderson – Moderator

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10 Comments on "Japanese Tea Shop Looks for Green in U.S. Market"


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Kai Clarke
Guest
14 years 9 months ago

Koots has a difficult road ahead of itself. Starbucks and other established coffee houses already are positioned to maximize the potential of green tea and other coffee alternatives. For Starbucks, it is just another SKU. Koots has to build a business around this, and differentiate themselves from coffee houses which offer green tea. This will be difficult to do, since many coffee drinkers also drink tea. Koots will have some success, but will be limited by their limited approach to a small niche of their market. To become another driving force, they must become more generic, offer products which everyone wants (and uses) and differentiate themselves on product mix, pricing, and a unique appeal to the coffee, community and chat mantra of Starbucks.

Phyllis Palmer
Guest
Phyllis Palmer
14 years 9 months ago

Heck, yes! Starbucks really does a poor job on the tea category and from a tea drinker’s point of view, the US is VERY ready for this. Very exciting.

Craig Sundstrom
Guest
14 years 9 months ago

“…which either signals that green tea has limited market opportunities or a tremendous upside.”

In short, the tea-cup is either half-empty or half-full; though I wish them well, my bet is on the former: growth, yes, but not to the Starbucks – or even one tenth of Starbucks – levels… the U.S. is mostly a coffee drinking country.

Constantine Karvonides
Guest
Constantine Karvonides
14 years 9 months ago

The prospects for growth in this area are indeed unlimited for all of the reasons already mentioned (e.g., healthier alternatives to soft/over-sugared drinks, more interesting and tastier alternatives to plain bottled waters, etc.) plus the growing appeal of such relaxing, socializing gathering places — especially if they can find ways to capitalize on the traditions of Japanese tea houses. Most critical factors are going to be in product and service quality, with staff training and knowledge as top priorities. I wish them luck and look forward to seeing them open up in my area.

Michael Tesler
Guest
Michael Tesler
14 years 9 months ago
The question is like asking if a very good minor league player has a chance of becoming the next Babe Ruth (God forbid Barry Bonds)…lets take this a step at a time…Starbucks is not perfect but they are dominant and they are winning. The next Starbucks will find a new answer in a new place but for sure they will not become dominant or winning by trying to win in an existent space…that is not how to think or win at retail. The Apple store is doing more sales per square foot than anyone right now and they are doing so because they found a space that no one knew existed until they invented it. Tea can work and tea can be big business but it will do so only if experience they create/invent around it is fresh enough and unique enough and they can become big while still delivering a great product and a great experience which is only about the toughest thing on earth to do…kind of like hitting 714 home runs.
Bruce Vierck
Guest
Bruce Vierck
14 years 9 months ago

Anyone who has visited a Koots, Argo Tea or another of the new brand of tea shop knows that this smacks of the next Starbucks. At a minimum, every generation wants to outdo the one before. Starbucks has become so…Starbucks. The new tea shops build on the need for community, but they have greater appeal to consumers seeking products that support health and well-being. A recent visit to Argo also underscored the sustainability of the concept. Of the 9 different patrons in the store, all had a different concoction…some cold, some hot, some caffeinated, some not, some pure teas, some wild combinations of fruits and herbs and tea. I think the trend is coming this way.

Camille P. Schuster, PhD.
Guest
14 years 9 months ago

Certainly there is room for a store that has an interesting atmosphere and has high quality tea. Certainly there is room to expand that concept into many stores. Will they be another Starbucks? Not if they view themselves as a store selling tea drinks. Starbucks does not define itself as a store selling coffee drinks. To compare a new store to Starbucks has to be be done by comparing stores on the goals they are trying to accomplish, their mission, or their customers, not their product.

Bernice Hurst
Guest
14 years 9 months ago

Meandering around London today with an American friend last here two years ago, we were endlessly noticing the proximity of one Starbucks to the next and how they have multiplied in the past two years. Obviously, knowing their well published plans for further expansion, each shop must justify the cost of opening but I cannot help wondering how long this growth is sustainable and when it will turn to cannibalism. How many cups of coffee can people drink? The product range keeps increasing as well in the effort to keep new people coming and regulars coming back over and over again. Starting a tea shop chain will not be easy but with the two USPs of innovation and the perceived health advantages of green tea, there are definitely opportunities. No guarantees of course, but lots of possibilities.

Donna Morris-Calvey
Guest
Donna Morris-Calvey
14 years 9 months ago

People of all ages are looking for exotic alternatives to coffee and coffee bars. Young adults and teenagers seeking alternatives to soda and overly sweetened juice are turning to tea as well. As the owner of a two-year old health food store specializing in loose leaf tea, I believe the sky is the limit for any shade of tea.

Mark Lilien
Guest
14 years 9 months ago

Caffeine is addictive. Green tea hasn’t got caffeine. Yes, Starbucks has more leverage than just the addictive power of caffeine, but it shouldn’t be ignored. Everyone in the food business wants to be “the next Starbucks” just like every actor wants to win the Academy Award. Tully’s grew to 300 locations: certainly a worthy performance. If Koots grows to 1000 locations, it won’t be “the next Starbucks” but it would be a worthy performance. The key: tea margins are comparable to coffee margins, so it doesn’t take many customers per day per location to make a profit. One of Tully’s investors was a key landlord. Certainly Koots would be advantaged if it sold stock to major retail landlords.

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