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BREWING UP AN EXPANSION

WHITTARD OF CHELSEA IS ENCOURAGING AMERICA TO STOP BY FOR TEA

By Neil Janowitz

"Ooooh, let’s ’ave a nice cuppa tea!”

For years this was a frequent refrain and a universal solution to all woes in England, and perhaps it still is. But this is not the customer that Whittard of Chelsea, London-based purveyor of fine teas and coffees, goes out of its way to attract. And yet the company has become an institution in that country.

“There are three strings to our bow,” is how Paddy Prowse, the company’s managing director, refers to Whittard’s tea, coffee and gifts business. And none of that tea or coffee is prepared, by the way, so please don’t confuse the store with Starbucks, let alone come in and start asking for “a nice cuppa.”

“We’re a niche retailer — an indulgence,” said Prowse. “By offering mid-to-premium-quality products, we’re able to play on the specialty of tea and coffee.” This has been the company’s philosophy since its founding in 1886. By the 1970s and ’80s the company was opening more and more storefronts around England. In late 2005 Icelandic investment giant Baugur acquired Whittard, which now has about 140 stores in the U.K. and roughly 30 more overseas, including one in the U.S.

“Our typical customer ranges in age from 25 to 55, but we have a few very distinct types,” Prowse said. “The first is the high-frequency regular customer. They’re very discerning in palate and taste and have specific requirements. They won’t buy anything else. After that, we have high-frequency students, who come in on a bimonthly basis to get fresh coffee. Finally, there are the infrequent customers, who come in for gifts for their mom or girlfriend.”

In London and England’s other large cities, Whittard stores place an additional emphasis on high-end merchandise to attract tourists who want to experience English afternoon tea, Prowse says.

The U.K. stores are of three types: intimate shopping mall units, discount-oriented outlet centers and High Street stores. “We have a variety of presences throughout Europe,” said Prowse. The company also operates stores in Australia, Dubai and Japan. “We’re primarily stand-alone, but we come in and out of department stores, as well. Beyond that, our brand heritage allows us to venture into concessions and to function as a wholesale operation.” Whittard has an online presence as well.

The company’s experience in Boston has been no tea party, as it were, though it should be, says Lisa Macmillan, Whittard’s U.S. national operations manager. “Boston has a strong tea history,” she said. For a start, chests of the stuff were thrown into the harbor in the Boston Tea Party protest that marked the beginning of the American Revolution. The company’s first stateside store is on that city’s historic — and posh — Newbury Street. “They understand our approach to tea, with the English-style traditions.”

But the company has learned some tough lessons since opening that Boston store in April. “We picked up a store from London and dropped it in Boston,” said Macmillan. “We figured the best sellers from London would sell as well here, but that wasn’t the case.” Though the process of building a customer base has been slow, Macmillan says she was surprised to find that 80 percent of customers know the Whittard brand.

Whether the company continues to draw customers will depend on how it positions itself in the highly competitive American market, says James Maher, an equity research analyst at ThinkEquity Partners. “They have good products and a nice following, but it’s interesting that they see the U.S. as a compelling market,” he said. “We Americans are busy people, and I’m curious to see how a concept designed around taking a break for tea and coffee will fare. Starbucks and Peet’s tend to be more transaction-oriented: Buy it and take it on the road. If Whittard isn’t working that angle, I wonder what it’ll take to successfully market it here.”

Furthermore, the sheer number of established coffee shops in America is a challenge too, Maher says. “Starbucks is obviously at the top, and Peet’s, though not nearly as big, is still a strong second,” he said.

After that, it’s difficult to name companies in that industry that are having success. Caribou has the coverage across the U.S., but they’re not doing well. Now Whittard is trying to enter that robust, competitive environment.”

Beyond the conventional coffee shops, Whittard has to watch for unexpected rivals, too, Maher says. “Now you’ve got places like Dunkin’ Donuts and McDonald’s, both of which are well established with a significant number of locations, expanding and moving upscale with their coffee offerings.”

That’s no concern, says Richard Kave, director of international retail at Winick Realty Group, exclusive broker for Whittard’s move across the pond. But in any case, tea is the ace up the company’s sleeve, he says. “Green tea was thought to be a fad, but it’s become a staple in America,” Kave said. “And companies like Whittard that do tea right are proving to be very successful. Ten years ago people never expected Starbucks to be on every corner. It’s a natural progression.”

Prowse agrees that tea will help Whittard gain its footing. “In Boston we’ve discovered that the American palate is very sophisticated in terms of tea,” she said. “We expected that from coffee, but have been surprised by the demand for tea.”

Encouraged by this niche appeal, the company is moving forward with U.S. plans. Kave says the primary focus is the coasts first. Then the company hopes to open a second store in Boston and is scouting California locations in San Diego and Canoga Park. Kave has been looking predominantly at roughly 1,400-square-foot sites, in urban and suburban areas alike. Kave says he prefers mature markets with large numbers of women. Further, Williams-Sonoma, The Body Shop and the like, whose demographics skew toward higher incomes, are desired neighbors.

The company wants to open as many as 20 new stores next year, including what Macmillan calls a “necessary” expansion into New York City, but that all depends on how it continues to adapt its concept to the U.S.

“We’ve had to Americanize our mix,” Macmillan said. “It’s been all about identifying the trends in America. A big one is that the United States sees tea as an alternative to coffee because of the health benefits. Things such as the anti-oxidant aspects of tea, which aren’t important in the U.K., are driving tea sales, particularly for women. Subsequently, it’s been a constant tweaking process, to the point where we’ve even had to change our training.”

Tea drinkers on both sides of the Atlantic, though, can expect a nice cuppa. “We’re trying to maintain our British theme,” Macmillan said. “But it might not be happening in the same way.”