The Supply Side: Tiesta Tea lands in 420 Walmart stores

Tea is the second most widely consumed beverage worldwide, following water. Dan Klein and his business partner Patrick Tannous, co-founders of Tiesta Tea Co., became tea enthusiasts when studying abroad in 2010. They first tried loose-leaf tea in Prague during a weekend getaway.

“We were blown away by the intense flavor of the loose-leaf tea, and we knew our friends back home in Chicago would love it too,” Klein said.

Shortly after returning to the U.S., they wrote a business plan, paid $250 and incorporated it through a SCORE chapter in Chicago that mentored them through the early days. At age 21, Klein and Tannous set out to formulate their loose-leaf tea and sell it to grocers around the country. They set up shop in their college dorm at the University of Illinois before moving to a large warehousing space in a Chicago suburb. They began to work with a lab in Germany to do the blending, and they now source more than 150 ingredients from more than 40 countries to blend their dozens of flavor profiles.

Klein said there is an education process for selling loose-leaf tea in the U.S., as most tea drinkers are used to buying tea bags. He said the tea is ground up finely in the tea bags and loses some flavor in the process. The loose-leaf tea can be brewed as ice or hot tea, and Tiesta Tea also sells filters for brewing.

Tiesta Tea continues to expand its flavor options with help from its partner lab in Germany. Klein said the best tea blenders in the world are in Germany because the industry has been there for hundreds of years. He said 80% of teas, herbs and spices pass through ports in Germany, and relations grew there over time. Klein said the U.S. taste palette differs from Germany, where tea blends often contain licorice root. He noted that German blenders have decades of generational experience sourcing ingredients, and Tiesta Tea works with them to develop flavors more suitable for American taste buds.

He said the Tiesta Tea is segmented into five functional categories based on each tea’s natural health benefits. He said consumers can choose the tea they want based on their functional needs and select a flavor profile that best suits their taste performances. Teas can either be energizers, slenderizers, provide relaxation, immunity support or eternity/well-being. There are multiple flavors in each function category.

Klein said Tiesta Tea has more than 50 flavors and continues to look for new ones.

Tiesta says U.S. research shows most consumers like Maui Mango tea which includes fruit and needs no additional sweetener. It can be served iced or hot, and it fits in the immunity category with ingredients of pineapple, orange slices, mango, natural flavors, safflowers, strawberries, hibiscus and marigolds. Klein said Maui Mango is one of the three flavors Walmart has chosen to put in 420 stores. He said Wildchild Blueberry and Lavender Chamomile are the other flavors sold in select Walmart stores along with filters. Klein said getting into Walmart stores has been a long time coming after growing sales for more than a decade.

The partners peddled their tea door to door in the early days calling on 500 stores in 20 days. Starting in farmers markets in 2010 and 2011, the partners said they would sell to anyone with a cash register. By 2015, Tiesta Tea had reached $1 million in revenue.

Klein said they got their product into specialty and grocery stores like Milwaukee-based Mariano’s. He said they set up demos and placed tea in all 50 Mariano’s stores. Tiesta Tea got into Kroger and H-E-B and built a growing online business with Amazon before the pandemic hit.

Klein said the pandemic had challenges given that so many ingredients are imported. He said the slower transit time has primarily improved, but shipping and ingredient costs remain elevated from pre-pandemic prices. The blended teas are packed in Tiesta Tea’s warehouse and distribution center in suburban Chicago. He said the company has 27 full-time employees and is on track to reach about $10 million in sales this year.

Klein said demand for premium tea has remained robust amid the inflationary period. He said Tiesta Tea waited to approach Walmart as they wanted to ensure they could fulfill orders on time.

“We met Walmart.com buyers at a trade show sometime back, and they seemed interested in our products. Then out of the blue, we got an inquiry from one of our broker partners who was working with a Walmart buyer looking to expand specialty teas. Walmart asked us to come in and meet about nine months ago,” Klein said.

He said the partners felt good about the timing, and Walmart seemed good with the volume of tea the company was selling through competitors. Klein said all of the flavors of Tiesta Tea and its filters are selling on Walmart.com. He said deciding which stores and flavors to put into stores took some time.

“Walmart does a great job working with you to figure out what you need to do as a supplier and what they need for their customers,” Klein said. “We had 10 flavors that hit their retail price point, so we didn’t have to do any re-blending. We studied where tea was selling well, and our buyers came up with 420 stores. We’re happy where we landed.”

It took three meetings with Walmart over four months, and most communication was in person. Klein said that surprised him, given how busy buyers are. He said Walmart asked them to return once more to discuss the flavor selection and seal the deal. The loose-leaf tea sold in Walmart stores includes the Mall Avenue store in Fayetteville and the store in Russellville — the only two locations in the Natural State.

Klein said anyone can order the tea online on Walmart.com regardless of their address. He said the tea sells at Walmart for $9.88 for 4 ounces, or 40 cups. Klein said the price is competitive with other premium brands.

“It’s a dream for us to be in Walmart and take our Tiesta Tea to the masses,” Klein said.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.