Five Ways Restaurants Are Cheating Themselves in the Beverage Category

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Tea is the second most consumed beverage next to water, but mysteriously it is rarely given its due.

Our own Tea Category Manager Marshall Malone weighs in on a few ways restaurants are missing out with consumers -

As the most profitable item on the menu (or not on the menu), managers often snub profits that are right in front of their noses. With a few simple changes, they can rectify the situation, recognizing first that there is indeed an opportunity.
Tea generates about $13 billion a year in the US, 25% of that in the RTD (Ready-to-Drink) category, and about 80% of that is over ice. That said, restaurateurs mostly serve it sweet and unsweet, or hot tea with a generic teabag. This defines the conventional tea category, which is simple, but can be viewed by the public as old and tired. Check please. Managers who serve tea this way often report that customers don’t ask much for tea.  In contrast, we see the specialty tea category and RTD market skyrocket at 12-15% annually. Starbucks responded to this trend by purchasing Teavana, which is outperforming their sales projections and increasing their profitability.  Meanwhile, restaurant managers stonewall on the concept, citing operational or wait staff challenges.  
The market; further defined as “people who spend money in restaurants,” are craving tea. Millennials now report that they are just as likely to order tea as they are coffee, reporting flavor and experience over the need for java. Men are the largest consumers of loose tea, and women 18+ enjoy the social and comforting elements around a cup of tea. 
Here are the numbers: traditional tea bags cost pennies, but can only generate a dollar per cup on average. Quality tea costs more at $.15 cents per serving, but can generate an average of $3 per cup, $4 for specialty beverages (think tea latte’s or martinis), and $5-10 per pot.  Doing the math, a $24 spend per pound of tea can return $400-700 in profits.  Some restaurant chains are discovering that tea profits can offset food costs. This is something that soda, which is nationally in decline, cannot do.
Here are 5 simple things you can do to increase your profitability:

  1. Forget the cost. Improve Tea Quality:
    Lifting tea quality improves the customer experience. Better tasting tea will increase profits and customer loyalty. This will also increase incidents of tea over water. No matter if you are serving iced tea or hot tea, your customers will thank you. 
    Consider artisan quality iced tea or a single origin Ceylon or Darjeeling for hot tea instead of traditional grocery store tea. Loose tea is best, but if that is a stretch use more attractive specialty tea bags. If it looks appealing and tastes appealing, it is appealing.  
  2. Add Flavored Tea:
    A Technomic beverage consumer trend report shows that 58% of customers choose flavor as their number one attribute when deciding where to purchase a beverage.  This goes double for the millennial generation, who are looking for a safe adventure. Flavor combinations excite their anticipations and increase incidents of tea orders.  Try a two-flavor combo like Apricot/Peach or Blackberry/Jasmine, flavors that are both familiar and exotic.
  3. Clean your equipment:
    Proper care of your equipment removes bacteria that may have a negative impact on flavor. Professional brewing equipment, like any other kitchen tool, needs tender loving care. Add this to your daily or weekly routine; wipe or rinse off spray heads, remove and clean the spickets where bacteria can hide, and soak the tea urns in tea urn cleaner on a regular basis. This is simple to do and protects you and your customers from a bad experience.
  4. Feature Tea on the Menu:
    Learn from the wine industry that when they pair with foods, customers order more. Use pictures of a frosty glass, throw in exotic flavors, tell your customers about the origin of the tea, or have your waiters upsell your customers. When your customers get the image of a frosty glass, or steaming cup, they will order more. 
  5. Be Creative with Specialty Beverages:
    It did not take long for consumers to learn how to order coffee-related beverages like Caramel Macchiato, or non-fat latte in their local cafe. Tea Latte’s are on the rise, which is driving the success of Argo Tea Chain. Consider specialty drinks like the Arnold Palmer, tea martini’s, matcha latte’s, or a simple well prepared pot of Earl Grey Le Crème.  A little creative thought will reap a healthy return.

Here are some great examples of restaurants that do it well:

Cheesecake Factory: They filter their water and offer Tropical, Mint Green, Sweet and Unsweet iced tea. This selection offers a nice return and customers are very loyal to the teas they like.
Cheddars: this up and coming franchise takes pride in keeping their equipment clean, and are beginning to use urn liners as added insurance. In addition to rolling in a newer and solid tea product, they are giving their customers what they want every time.
Argo tea: This Chicago franchise offers tea latte’s front and center.