The leaders of Steven Smith Teamaker transformed the premium tea manufacturer’s business model to survive the pandemic.
Almost overnight, the coronavirus pandemic obliterated Steven Smith Teamaker’s customer base. The Portland specialty-tea manufacturer, founded by Steven Smith in 2009, used to sell half of its product to the hospitality sector. That customer base disappeared after Gov. Kate Brown’s shelter-in-place order in March.
Darren Marshall, CEO of Smith Tea, quickly took the business in a new direction, investing in e-commerce and searching for new customers outside of the Pacific Northwest.
Here, Marshall discusses how the business has achieved double-digit growth and added thousands of new customers during this time of economic upheaval.
This interview has been edited for length and clarity.
What was the main impact of the pandemic on the business?
Historically, about 50% of our revenue came from hotels and cafes, which were doing really well until about March 15 — at which point, 90% of that volume went away.
For us, e-commerce was a relatively small part of our business. Retail and grocery stores were also a small part of our business. We had to pivot quickly and aggressively.
We made two major bets in March: We made very significant investments in our e-commerce channel and into acquiring new customers. Over the past three to four months, we have been able to triple the size of our e-commerce business, adding 30,000 new customers, of which 90% are from outside the Pacific Northwest.
It’s about being single-mindedly focused on consumers, knowing who they are and what they are looking for, and then finding them.
The second thing we did was launch a new iced-tea collection as summer was hitting. We changed our product pipeline to ensure we were providing our customers with a new wellness-focused iced-tea product. That range now represents almost 40% of our mix.
If I look at our business at the beginning of the year, when e-commerce was a small piece and iced tea was a small piece, e-commerce is now the majority of what we do, and more than two-thirds of our business. Of that business, two-thirds of that is iced tea. Both of those things didn’t exist six months ago.
This pandemic has forced us to innovate and innovate quickly.
How were you able to add 30,000 new customers?
We invested every penny we possibly could into acquisitions. We made big investments in social advertising, search advertising and advertising on Amazon.
We repurposed people who were working in parts of the business that were more impacted and funneled them into areas that were still able to grow. Our tasting rooms had significantly less traffic during this time. We moved those folks into customer service or shipping. We went from having a few very large orders to having very many small orders. Our logistics department became the single largest group.
Our salespeople went from nurturing customers to searching across the country for people who were still open. We shifted from a focus on hotels and restaurants to hospitals and nursing homes.
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What kind of customers are you predominantly selling to through e-commerce?
As a premium tea company, we have a good understanding of who buys us. Our customer base tends to be more female than male. Those women tend to be more concerned about their health. They are looking for beverages that are good for them and have a certain nuance and sophistication.
We have been honing in on people like that who are now working from home, homeschooling and cocooning from home.
What disruptions did you face to your ability to source tea?
We source ingredients from around the world. The majority are sources in China and India. We are fortunate to have longstanding relationships with growers and farmers around the world. There have been challenges.
Everyone has been impacted in some way or another. There were shutdowns on farms in India, for example. We have ongoing trade disputes with countries like China. We have worked through those challenges.
Our packaging is sourced locally. We have been able to work with local partners to keep supply chains going. At a micro level, we are an essential service as a provider of food and beverage to consumers. We have been able to stay open every day since the pandemic arrived.
Did you see a big bump in grocery store sales?
On the retail side, everyone did well from mid-March to mid-April, when consumers were buying significantly. Overall, the retail space has done well as people spend more time at home. We have also seen a big difference in how grocers are dealing with the situation.
Certain grocers are doing better than others. Those who are significantly limiting the number of customers in their stores are seeing less impact than those who are aggressively embracing home delivery.
What are the biggest lessons you have learned from operating in this pandemic?
Understand consumers, follow them and deliver what they need — not what you sell. Understand their fundamental needs, particularly as their world has been disrupted. In our case, people during these times are looking for a sense of warmth and comfort and safety. That is what we have been able to provide to them.
Secondly, protect your people. From day one, we kept our employees safe physically, emotionally and financially. We opened up communication so our people felt they could depend on us to keep them safe.
The third thing is to stay agile. We have taken our business, turned it upside down and shaken it. This was not easy, particularly at a time of personal stress. But we have been able to stay agile and keep our business growing by keeping our people safe and delivering on our consumers’ needs.
What advice do you have for leaders whose businesses have been severely curtailed during the pandemic?
I have been fortunate that, through my career, I have worked through crises. I have spent more than a decade of my career working in Asia, where things like SARS and bird flu and economic crises happened.
It is about staying calm and knowing that the situation will resolve itself. But you can’t do nothing; you have to do something.
It is critical to stay cool. People look to leaders to have a path, to have clear and transparent communication. And they look to leaders to be humble and change as they need to. Denying that it is a reality isn’t going to work. Being able to have a plan with appropriate agility is key.
How do you see the business evolving in a post-COVID-19 economy?
I am cautiously optimistic about the future. We have been very fortunate that we have maintained a solid double-digit-growth rate through this trying time. It has allowed us to accelerate our digital transformation by three to five years.
On October 1, we are launching an organic-wellness collection, with a range of products that are very much focused on a post-COVID world. These are products that deliver immunity and flu relief.
When the hospitality industry resurfaces, we are going to be that much stronger. We will be able to add those customers back to our portfolio.
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