Private Label Tea

Wikipedia: Private_label
Last Updated: Oct. 31, 2013
Private label tea is tea that is manufactured or imported by one company, and then sold wholesale to another company, which sells the tea under its own brand name. Private labels are common in generic brands of various food products, such as supermarket brands. In the world of tea, however, private labels often serve different purposes. Private label teas are sometimes sold by restaurants, hotels, or spas, allowing these businesses to sell their own brand name of tea without having to maintain the overhead associated with sourcing tea themselves.

However, private label teas are sold by companies that operate primarily as tea companies. This is true both of small tea shops, and tea companies that sell tea online and by mail order.
Chart Showing 3 Stages: Private Label Tea Company, Brand Name Company, Tea Drinkers

Private label tea as a business:

The Tea and Coffee Trade Journal identified private label as one of the highest profit-margin sectors of the tea and coffee trade.[1] In addition to being lucrative to the companies selling private label tea wholesale to other businesses, there are benefits to the companies selling the tea under their brand name as well. The establishment of a brand of tea for a business can both bring in new customers and can improve customer loyalty. However, such an approach is better suited for some businesses than others.[2]

Tea companies selling private label tea:

Many tea companies that sell directly to individuals also offer private label teas for sale. Harney and Sons was one of the earliest tea companies to sell private label tea, selling tea in 1986 under the Williams Sonoma Label (which has now shifted to selling the same tea under the Harney and Sons name). SpecialTeas was also a major player in the private label tea market, although this was only a side endeavor, not their primary business.[1] When Teavana bought out and closed SpecialTeas, some smaller tea companies went out of business rather than find new suppliers.

There are other tea companies that are important in the private label market that do not sell directly to individuals. Qtrade Teas & Herbs is a major player in the private label market, and specializes in organic and fair trade teas; this company claims to maintain confidentiality about its relationship to specialty tea brands. However, according to the Tea & Coffee Trade Journal, Numi Tea and Zhena's Gypsy Tea are clients of Qtrade.[1]

Impact of private label on the tea market:

Private label is a growing niche within the tea market.[1] BeverageDaily.com identified competition from private label tea as one factor in the decline of Typhoo brand tea in the UK.[3] Private label, however, has potential drawbacks for society as a whole, in particular, by creating barriers to transparency in how products are produced and distributed, which can have negative implications in terms of sustainability. Private label tea can create the illusion of diversity within the tea market, by presenting shoppers with a myriad of different brands, whereas in reality the private label tea market is dominated by a smaller number of large players.

Private label tea & sustainability:

Sustainable Industries has identified private label products in general as posing problems for sustainability. For example, Trader Joe's sells organic products under its own private label, but the Cornicopia Institute has warned that some of these products come from factory farms that do not embrace and uphold the values associated with the organic label. In addition, Trader Joe's makes numerous claims about how their goods and products are produced, but because the identity of their suppliers are kept secret, there is no way for independent, third-party auditing of any of these claims.[4] This same statement is true for providers of organic and fair trade certified tea that do not identify their sources: although certifying agencies ideally guarantee that the minimum requirements for certification have been met, the person buying the product has no idea whether or not the company and its suppliers are actually committed to the values and principles behind the organic and fair trade movements, or whether they are simply satisfying the minimal requirements for certification in order to profit from the premium prices and image associated with the organic and fair trade labels.

This problem highlights another major problem with private label tea: while it can be a lucrative business for both suppliers and clients, it does little to nothing to empower the farmers and producers of tea, or to alleviate the conditions of poverty that exist in many tea-producing regions. SOMO's Centre for Research on Multinational Corparations released a 2008 report on sustainability issues in the tea sector which identified poverty, poor working conditions, a lack of stability and job security, and serious environmental problems in six major tea producing countries. This report identified the later stages of tea production, including blending, packaging, and marketing, as the most profitable stages, remarking that this stage of the business is controlled by a handful of multinational packers and brokers, with little value reaching the farmers and those closer to the beginning of the supply chain.[5] By hiding the source of tea, private labels can hinder the empowerment and pursuit of economic justice for tea-producers suffering from poor working conditions and a lack of opportunities. In the light of these facts, the profits of the private label market can be seen as coming at the expense of the workers and producers at the earliest stages of the tea supply chain.

RateTea seeks to promote transparency in tea production, and encourages people to buy from companies that clearly identify the source (including location of production) of their products. Ideally, companies would also be more open about their finances, enabling people to identify the portions of the final price that actually reach people at each stage of the supply chain. Until this ideal is achieved, we would encourage you to ask questions about where your tea comes from, and buy from companies that are open about the sourcing of their teas.

References:


1. Randy Altman, The Secret and Lucrative Private Label Tea Market, Tea and Coffee Trade Journal, Vol. 179, No. 4, 2007.


2. Serena Norr, Private Label Tea To Brand Your Business, Tea and Coffee Trade Journal, Vol. 178, No. 8, 2006.


3. Typhoo sale shows UK tea market shift, BeverageDaily.com, Oct. 13, 2005.


4. Amy Westervelt, Something fishy at Trader Joe’s?, May 3, 2010.


5. Sanne van der Wal, Sustainability Issues in the Tea Sector(PDF), SOMO Centre for Research on Multinational Corporations, June 2008.



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