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The Genesis of an Idea: How the Tea Campaign was born
At the beginning, there was just a thought: that it might be possible to organise
tea trading in a radically new manner, and that it might be possible to offer
high quality at a low price.
Neil Churchill, an expert on entrepreneurship, has written that for a good idea to turn into a reality, up to 50,000 pieces of information may need to be processed. It may take up to 10 years before the idea has matured enough to become the basis for a successful entrepreneurial startup.
The history of ideas that went into the Berlin Tea Campaign also resembles
a puzzle whose pieces took years to come together. It began with academic studies
at the St. Gallen business school in Switzerland, and with shopping at one of
the Migros stores, where a Swiss Franc would buy you about two and a half
chocolate bars. Thus the founder of Migros, Gottlieb Duttweiler, became a
figure of interest: his focus on genuine, unadulterated products and high quality,
and his search for a favorable value/money ratio became parts of the puzzle.
Later on: visits to Tanzania and other third-world countries. Prices there, for products such as coffee, tea, cocoa, bananas, or sugar, were about one tenth of what one would pay in Central Europe or the United States. Why then were our consumer prices so high? Because of freight and insurance? Because of the profit margins?
It turned out that the culprit was neither freight nor insurance, but a pair of other factors: the packaging material for the small quantities used in the tea retail business, and the high costs of distribution. So, save on packaging and find a simpler path to the consumer? Slowly, the puzzle began to take shape.
What about preserving the quality of the tea? This is important if consumers are to be weaned from small packages. The traders say that tea keeps well for two to three years. Even if it kept well for only one year, customers could purchase their annual supply in one order. Then one could sell in bulk and hand over the price difference to the customer. But what about brand variety? Can you reduce it? If variety drives up costs, why not just sell one brand? And with a big enough order, doesn't it make economic sense to buy at source, circumventing the middleman?
Can consumers be persuaded to choose only one brand of tea out of 140 and to drink the same brand for an entire year? For a moment it looks as if the idea might founder right here. If customers are used to choosing between many brands, why should they restrict themselves? After a long break to think things over, optimism returns. Better to cut back on variety, after all! If the purchase price of the tea is a secondary factor (because it is relatively low), you can reach for a very expensive tea; in fact, why not the best tea in the world? Experts agree that it grows on the southern slopes of the Himalayas and takes its name from a district: Darjeeling. If consumers can get such an excellent tea at such a good price, they may put up with a limited choice. The puzzle is completed.
The Tea Campaign sells only pure Darjeeling tea. This also helps the Indian producers, because they have been complaining for a long time that what is often sold as "Darjeeling" is not real Darjeeling. The Tea Board of India estimates that worldwide the supply of Darjeeling tea is much bigger than what is produced in the district. The higher the demand for the real Darjeeling tea, the higher the prices producers can get for their original product, which is labor-intensive and of high quality. If the tea is not adulterated, then the tea traders have to compete for the existing harvest and consequently have to pay higher prices to the producers.
If you can sell the best tea for so much less than the competition, can't you ask customers to pay in advance? You can, and thereby get rid of most of your financing problems. (When we started selling tea by mail order, we asked customers to send in a check with their order. They accepted our request.) Would the banks have given us capital? Probably not. Banks want securities, not unconventional (and, to them, unsafe) ideas.
Initially, the Berlin Tea Campaign's entrepreneurial gamble was to convince buyers to get their annual tea supply in large packets, which would give them a considerable price advantage. This was based on the assumption that customers would reward an effort to enlighten them about their own best interests; we hoped to "educate" consumers (contrary to accepted marketing wisdom) to embrace a new concept which, however unusual, would ultimately offer them significant advantages. At its very core, this was an attempt to create the economic framework for a new simplicity.
Today, the Berlin Tea Campaign has over 140,000 customers, sells more than 400,000 kilograms of Darjeeling tea per annum, employs 15 associates, is the largest mail order tea business in Germany and, according to the Tea Board of India, has become the world's largest importer of Darjeeling tea.
An exceptional case? I do not believe so. The entrepreneurship researcher Peter Goebel, who studied 50 entrepreneurs of varied backgrounds and origins, found out that they had one thing in common - the ability to bring one idea to fruition; to keep circling around the same problems again and again, with a persistent stubbornness that may appear psychically questionable and peculiar to "normal" people.
(Translated excerpt from:
Günter Faltin, "Das Netz weiter werfen" ["Cast the Net Wider"]. Entrepreneurship: Wie aus Ideen Unternehmen werden [Entrepreneurship: From Ideas to Enterprises]. Ed. Günter Faltin, Sven Ripsas, Jürgen Zimmer. Munich: C.H. Beck, 1998. 10-11.)
Neil Churchill, an expert on entrepreneurship, has written that for a good idea to turn into a reality, up to 50,000 pieces of information may need to be processed. It may take up to 10 years before the idea has matured enough to become the basis for a successful entrepreneurial startup.
The history of ideas that went into the Berlin Tea Campaign also resembles
a puzzle whose pieces took years to come together. It began with academic studies
at the St. Gallen business school in Switzerland, and with shopping at one of
the Migros stores, where a Swiss Franc would buy you about two and a half
chocolate bars. Thus the founder of Migros, Gottlieb Duttweiler, became a
figure of interest: his focus on genuine, unadulterated products and high quality,
and his search for a favorable value/money ratio became parts of the puzzle.Later on: visits to Tanzania and other third-world countries. Prices there, for products such as coffee, tea, cocoa, bananas, or sugar, were about one tenth of what one would pay in Central Europe or the United States. Why then were our consumer prices so high? Because of freight and insurance? Because of the profit margins?
It turned out that the culprit was neither freight nor insurance, but a pair of other factors: the packaging material for the small quantities used in the tea retail business, and the high costs of distribution. So, save on packaging and find a simpler path to the consumer? Slowly, the puzzle began to take shape.
What about preserving the quality of the tea? This is important if consumers are to be weaned from small packages. The traders say that tea keeps well for two to three years. Even if it kept well for only one year, customers could purchase their annual supply in one order. Then one could sell in bulk and hand over the price difference to the customer. But what about brand variety? Can you reduce it? If variety drives up costs, why not just sell one brand? And with a big enough order, doesn't it make economic sense to buy at source, circumventing the middleman?
Can consumers be persuaded to choose only one brand of tea out of 140 and to drink the same brand for an entire year? For a moment it looks as if the idea might founder right here. If customers are used to choosing between many brands, why should they restrict themselves? After a long break to think things over, optimism returns. Better to cut back on variety, after all! If the purchase price of the tea is a secondary factor (because it is relatively low), you can reach for a very expensive tea; in fact, why not the best tea in the world? Experts agree that it grows on the southern slopes of the Himalayas and takes its name from a district: Darjeeling. If consumers can get such an excellent tea at such a good price, they may put up with a limited choice. The puzzle is completed.
The Tea Campaign sells only pure Darjeeling tea. This also helps the Indian producers, because they have been complaining for a long time that what is often sold as "Darjeeling" is not real Darjeeling. The Tea Board of India estimates that worldwide the supply of Darjeeling tea is much bigger than what is produced in the district. The higher the demand for the real Darjeeling tea, the higher the prices producers can get for their original product, which is labor-intensive and of high quality. If the tea is not adulterated, then the tea traders have to compete for the existing harvest and consequently have to pay higher prices to the producers.
If you can sell the best tea for so much less than the competition, can't you ask customers to pay in advance? You can, and thereby get rid of most of your financing problems. (When we started selling tea by mail order, we asked customers to send in a check with their order. They accepted our request.) Would the banks have given us capital? Probably not. Banks want securities, not unconventional (and, to them, unsafe) ideas.
Initially, the Berlin Tea Campaign's entrepreneurial gamble was to convince buyers to get their annual tea supply in large packets, which would give them a considerable price advantage. This was based on the assumption that customers would reward an effort to enlighten them about their own best interests; we hoped to "educate" consumers (contrary to accepted marketing wisdom) to embrace a new concept which, however unusual, would ultimately offer them significant advantages. At its very core, this was an attempt to create the economic framework for a new simplicity.
Today, the Berlin Tea Campaign has over 140,000 customers, sells more than 400,000 kilograms of Darjeeling tea per annum, employs 15 associates, is the largest mail order tea business in Germany and, according to the Tea Board of India, has become the world's largest importer of Darjeeling tea.
An exceptional case? I do not believe so. The entrepreneurship researcher Peter Goebel, who studied 50 entrepreneurs of varied backgrounds and origins, found out that they had one thing in common - the ability to bring one idea to fruition; to keep circling around the same problems again and again, with a persistent stubbornness that may appear psychically questionable and peculiar to "normal" people.
(Translated excerpt from:
Günter Faltin, "Das Netz weiter werfen" ["Cast the Net Wider"]. Entrepreneurship: Wie aus Ideen Unternehmen werden [Entrepreneurship: From Ideas to Enterprises]. Ed. Günter Faltin, Sven Ripsas, Jürgen Zimmer. Munich: C.H. Beck, 1998. 10-11.)