The Tea Business
28/04/08 08:25
Lapis Teahouse has been exclusively a
private label packager for about 4 years now, but initially it
began as a retail teahouse and extension of my acupuncture and
herbal practice. Smaller private label projects started by chance,
but our first big break was a project for Yankee Candle. It was a
project that was about a year in the making, and in the end there
was little profit, but big lessons learned.
The Yankee Candle project was too large to pack in house with our resources at that time, so I looked for a co-packer that had the ability to fill larger orders. I went to one of the biggest and most renowned companies in the industry, and with plenty of time to work out the details of production, had them set up to run the order for us. I explained that we had a purchase order in hand, but could not pay until the product was in the customers hands. They said this was no problem.
About six months passed, and the production deadline crept closer. And closer. They delayed and stalled. Finally we were at the last moment when it could be run and delivered on time. And suddenly, the co-packer contacted me and said:
"We are ready to start production, but we need a 50% deposit on the order."
Now, keep in mind that this was the very moment it needed to be packed if the order was to deliver on time. And they knew I did not have $35,000 to put down on the order at that time. Then the other shoe dropped...
"Or, if you do not have the money upfront, you can sign the PO over to us, and we will pay you a commission."
There we had it. They put me in a position of having to come up with $35K in a matter of hours, or of losing my biggest account.
It was an unacceptable choice. I spent the next 3 days calling every contact I could find, and looking for another co-packer to run the order. Finally it was done. Two weeks late, and losing almost all my profit margin. What is the moral? I still am not sure. I think it is that even in a business as seemingly pleasant as tea, some people will act unethically for a buck. Sad really. This was a company with millions in assets, taking advantage of a start-up with an opportunity.
One thing is for sure, it has re-affirmed my willingness to talk openly to anyone about their business projects and plans, without conniving and deceit. Tea, coffee and private label in general are booming industries. There is no excuse to not allow the tide to lift all boats. But be careful out there, folks!
The Yankee Candle project was too large to pack in house with our resources at that time, so I looked for a co-packer that had the ability to fill larger orders. I went to one of the biggest and most renowned companies in the industry, and with plenty of time to work out the details of production, had them set up to run the order for us. I explained that we had a purchase order in hand, but could not pay until the product was in the customers hands. They said this was no problem.
About six months passed, and the production deadline crept closer. And closer. They delayed and stalled. Finally we were at the last moment when it could be run and delivered on time. And suddenly, the co-packer contacted me and said:
"We are ready to start production, but we need a 50% deposit on the order."
Now, keep in mind that this was the very moment it needed to be packed if the order was to deliver on time. And they knew I did not have $35,000 to put down on the order at that time. Then the other shoe dropped...
"Or, if you do not have the money upfront, you can sign the PO over to us, and we will pay you a commission."
There we had it. They put me in a position of having to come up with $35K in a matter of hours, or of losing my biggest account.
It was an unacceptable choice. I spent the next 3 days calling every contact I could find, and looking for another co-packer to run the order. Finally it was done. Two weeks late, and losing almost all my profit margin. What is the moral? I still am not sure. I think it is that even in a business as seemingly pleasant as tea, some people will act unethically for a buck. Sad really. This was a company with millions in assets, taking advantage of a start-up with an opportunity.
One thing is for sure, it has re-affirmed my willingness to talk openly to anyone about their business projects and plans, without conniving and deceit. Tea, coffee and private label in general are booming industries. There is no excuse to not allow the tide to lift all boats. But be careful out there, folks!
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