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Tea Party

What do Germans know about tea? More than you think.

Albert Gschwendner began selling loose leaf specialty teas in 1978. Since then, his family-run TeaGschwendner business has boomed.They're now in 130 stores in seven countries, including Brazil and Saudi Arabia. The tea even flies the globe with Lufthansa airlines.

Last year, TeaGschwendner, known as “Tea G” for short, broke into the U.S. with two pilot stores in Chicago, and a third is on its way. If the tea leaves are aligned, there could be more, though the company is mum on exactly where.

Brad Johnson, Tea G's North America managing director says Tea G had been eyeing the U.S. market for a “long time” but it did not make a move until it identified a strategy the company thinks will work — part tea shop and part bistro.

Tea G is also testing a smaller 600-square-foot retail storefront that sells loose variety tea out of drawers like an old-time apothecary — as well as tea to go. But its much larger 2,000-square-foot model, with the chain's first sit-down restaurant service, sells bistro-like sandwiches and tea. The first of this line opened in Chicago's tony Lincoln Park neighborhood. Another is set to open in Algonquin Commons, a lifestyle center outside Chicago, says Kim McGuire, senior vice president of Northern Realty Group, which is handling Tea G's metro Chicago expansion.

The Tea Council estimates there are over 2,000 specialty tea rooms and retail shops. But it's a fragmented industry, says Joseph Simrany, president of the Tea Association. Tealuxe, Ten Ren Tea and Coffee Bean and Tea Leaf are all in the business.

Then there's Atlanta-based Teavana, which operates 35 mall locations. Teavana began franchising its operations, but pulled back on that strategy and now only opens company-owned locations.

Andy Mack, who co-owns Teavana with his wife, says the company plans 500 stores by the end of the decade in better malls, lifestyle centers and major urban street front retail locations. Locations will average 800 to 1,200 square feet.

Experts say the race is on to find the magic retail formula for selling tea. Analyst Brian Keating, president/founder of The Sage Group in Seattle, a specialty tea think tank, says tea retailers are searching for the right formula for rollout a la Starbucks. “Tea is the new coffee,” Keating says. But many are independently operated and don't give out sales figures.

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