Tetley USA Inc.

views updated

Tetley USA Inc.

100 Commerce Drive
Shelton, Connecticut 06484
U.S.A.
Telephone: (203) 929-9200
Fax: (203) 929-9391
Web site:http://www.tetleyUSA.com

Wholly Owned Subsidiary of Tata Tea Ltd.
Incorporated: 1913 as Tetley Tea Inc.
Employees: 28 (corporate)
Sales: $79.8 million (2005 est.)
NAIC: 311423 Dried and Dehydrated Food Manufacturing

Connecticut-based Tetley USA Inc. is part of The Tetley Group, a subsidiary of India’s Tata Tea Ltd. Tetley USA offers a wide variety of hot, iced, green, herbal, and specialty teas. The company also sells decaffeinated black tea, drawstring tea bags that allow drinkers to wring out every drop from a bag more easily, and a line of herbal, green, and specialty teas sold in stay-fresh canisters. Products are sold in most supermarkets and other retailers in about three dozen states. The company maintains its headquarters in Shelton, Connecticut.

19TH-CENTURY BRITISH ORIGINS

Tetley USA is an offshoot of Joseph Tetley & Co., which was established in Yorkshire, England, in 1837 by brothers Joseph and Edward Tetley. They had started out 15 years earlier selling salt from a packhorse and eventually added tea, then a luxury item, to their wares. The peddlers were not getting rich from their enterprise, but they wisely invested their profits in the new railroads that were transforming the country. This provided them with the funds needed to establish themselves as tea merchants in 1837, a time when tea was dropping in price and gaining mass appeal. They set up shop in Huddersfield in Yorkshire, buying raw tea, blending, and packaging it. While there was business to be done in the countryside, the center of the tea trade was in London, where the era’s tea clippers, laden with tea chests from India, delivered their wares to the docks, and dealers distributed the leaves to the regional packers. In 1856 the brothers relocated the business to Cullum Street, London, a stone’s throw from Mincing Lane, the heart of the world tea trade. Apparently due to a falling out, the brothers soon parted company. Joseph took a partner, Joseph Ackland, and the firm took the name “Joseph Tetley & Co., Wholesale Tea Dealers.”

In 1871, Tetley’ son, Joseph Tetley, Jr., became a partner. The company began blending teas from around the world and packaging them, developing the blend of orange pekoe and pekoe cut black tea that has since become a mainstay in both the United States and Britain. In 1888 the Tetley company looked to the United States to supply further growth and reached a distribution agreement with the New York firm, The Wright & Graham Company, founded by Scotland-born David Wright and his cousin. From their offices on Franklin Street in what is known as the TriBeCa section of Manhattan, they primarily imported cotton, but they also began to import tins of Tetley brand Indian and Ceylon loose tea, selling it from a nearby White Street site, mostly to department stores such as R.H. Macy. At the time these black teas stood out in the United States, a market that had previously been dominated by green tea and Formosan (Taiwanese) teas.

TETLEY TEA INCORPORATED FORMED: 1913

Joseph Tetley, Sr., died in 1889, leaving the business to his son. Under his leadership the firm continued to grow the Tetley name in the United States. In 1913 he acquired Wright & Graham, incorporating it as Tetley Tea Incorporated, the predecessor to Tetley USA. The company established its own manufacturing facilities on Greenwich Street, where it also maintained its headquarters, while continuing to foster a close relationship with the British parent company. In time the American firm would provide the firm’s only profits, due to a slackening of the tea dealing trade in the United Kingdom. Much of that growth came from the rising popularity of tea bags in the United States, a concept foreign to England’s tea drinkers.

The invention of the tea bag was purely American and entirely accidental. At some point between 1904 and 1908, New York tea merchant Thomas Sullivan began sending tea samples in small silk bags to his customers in an effort to save on the cost of shipping several ounces of tea in heavy tins. Some of his customers, however, thought Sullivan’s bags were a clever new way to brew tea and dropped them straight into the pot. They had one complaint, however. The silk mesh was too fine and did not allow the water to pass through easily to release the flavor of the tea. If the customers wanted to order tea in bags rather than loose in tins, that was fine with Sullivan, who developed sacks made out of gauze, the first tea bags actually made for the purpose. In the 1920s tea bags went into commercial production, eventually making use of paper instead of gauze, available in a small size for individual cups and a larger size in order to brew a pot. For the sake of convenience, they came with a string and decorative tag.

By 1930 tea bags accounted for just 5 percent of Tetley Tea sales in the United States, but it was clearly a growth engine for the company. In 1936 Joseph Tetley, Jr., died and his son-in-law, William Tetley-Jones, who had been well groomed for the job, took charge of the parent company. Unfortunately he died just a year later, and his son, Tetley Ironside Tetley-Jones, fresh out of Cambridge University, took his place. The young man quickly recognized that the firm’s only profits were coming from America, where the tea bag was becoming ever more important. Certain that tea dealing was a dead end, he became determined to cast the firm’s lot with tea bags in the United Kingdom.

Despite resistance from his board of directors and the firm’s bankers, Tetley-Jones acquired some tea-bag machines from New York and the company was on the verge of introducing tea bags to the market in 1939 when World War II broke out in Europe, derailing his plans for more than a decade. The tea industry fell under the auspices of the Ministry of Food and did not return to fair trade status until July 1951, well after the war came to an end.

Tetley-Jones also had to contend with import restrictions imposed by the postwar government, which required that Tetley demonstrate reciprocal export earnings before it could acquire tea-bag production machinery from the United States. An export arrangement was made with a Swedish firm to import enough tea to allow Tetley to procure the necessary equipment and tea-bag filter paper. “Tetley Teabags,” as they were marketed, were introduced in the United Kingdom in 1949. It was a tough go and Tetley-Jones met with ridicule, but he persevered and slowly began to build up the business.

Across the ocean in the United States, Tetley Tea Incorporated was continuing to grow due to the popularity of the tea bag. In 1950 the company opened a plant in Savannah, Georgia, and in 1958 the old Greenwich Street facility was closed and production shifted to a new plant in Williamsport, Pennsylvania. By then, the company’s ownership had changed. Realizing that he needed additional resources to grow the business, Tetley-Jones sought a buyer and in 1957 found it in Beech-Nut Life Savers, the U.S. maker of baby food, candy, and chewing gum. At this point the sister Tetley companies were split off, with Tetley U.K. joining Beech-Nut’s international division.

COMPANY PERSPECTIVES

Tetley Makes It Better, and is proud to offer a complete range of hot, iced, green, herbal and specialty teas for premium-minded tea drinkers.

Under Beech-Nut, Tetley USA became involved in the coffee business in addition to tea. In 1962 Martinson Coffee was brought into the fold. Martinson was founded in New York in 1898 when Joe Martinson began roasting his own coffee beans for sale from a push cart on Manhattan’s Lower East Side. Ten years later he acquired a factory and began blending coffee for sale to area restaurants. In 1928 he began offering a special blend sold in distinctive tins to grocery stores in Brooklyn and Queens. He died in 1949. A year after the Martinson acquisition, Beech-Nut added the Bustelo coffee brand, founded in New York City in 1928 by Gregorio Bustelo, who sold his blend of coffee to Spanish restaurants.

Tetley-Jones, in the meantime, secured the backing from the company’s new owner to grow the tea-bag business in the United Kingdom. Over the next several years sales doubled each year, but it was not until about 1963 that the national tea packers realized that Tetley-Jones was right and they began producing their own tea bags. They had, however, given Tetley a head start and Tetley Teabags continued to dominate the British market. Moreover, the tea-bag share of the market continued to increase. Everyone in the industry, with the notable exception of Tetley-Jones, believed that teabag sales would peak around 10 percent of the market. His prediction that tea bags would garner more than 75 percent of the market was ultimately borne out.

In 1972 Tetley USA and Tetley UK were sold by Beech-Nut as part of its beverage operations to the United Kingdom’s J. Lyons & Company Limited. Tetley USA continued to build up its coffee business during this period, acquiring Miami-based Oquendo Roasting Co., which roasted and distributed quality Spanish coffee. It was not long before Tetley’s ownership again changed hands. In 1976 an agreement was reached to sell Tetley to Liggett Group Inc., the North Carolina tobacco company turned consumer products conglomerate, but the deal fell through in March 1977. A year later, however, Lyons itself was sold to Allied Breweries, resulting in Allied-Lyons PLC, which became Tetley USA’s new corporate parent.

HEADQUARTERS MOVES TO CONNECTICUT: 1981

In 1981 Tetley USA relocated its headquarters from New York City to Shelton, Connecticut. A year later it received more tea and coffee assets when Allied Lyons bought the U.S. and U.K. businesses of Coca-Cola’s Tenco division. Tenco had been created some 30 years earlier to produce private label instant tea and coffee, sold to Minute Maid in 1958, and then picked up two years later when Coca-Cola acquired Minute Maid. As part of the deal, Tetley USA received a Morris Plains, New Jersey, plant. Later in 1982, Tetley USA added more coffee lines through the acquisition of New Jerseybased S.A. Schonbrunn & Co., picking up the Savarin, Brown Gold, El Pico, and Medaglia D’Oro brands. Two years later the Schonbrunn sales and marketing functions were taken over by Tetley USA. The company expanded beyond tea and coffee in 1987 with the acquisition of Exeter Foods’ Brockton, Massachusetts, manufacturing and distribution center, a deal that brought with it the right to produce frozen foods under the Howard Johnson’s label for retail and food service distribution. The end of the decade also saw Tetley USA sell off some assets. In the summer of 1989 the company sold the Tenco instant coffee business to Chock Full O’Nuts Corp. for $7 million.

Tetley USA expanded internally and externally in the early 1990s. It acquired Southern Tea in 1990, the country’s leading producer of private label and generic teas, sold in supermarkets as well as restaurants. A year later Tetley USA teamed up with A&W Brands, Inc., to get involved in the fast growing ready-to-drink iced tea business. In 1992 the company’s food service division unveiled Brew-Magic, an iced tea bag for use in automatic brewing equipment. Three years later a similar flavored iced tea concentrate was offered under the Liquid Brew-Magic name. In 1993 Tetley USA also introduced the round tea bag in the United States.

KEY DATES

1837:: Brothers Joseph and Edward Tetley establish Joseph Tetley & Co. in England.
1888:: Tetley reaches agreement with The Wright & Graham Company to distribute Tetley teas in United States.
1913:: Tetley acquires Wright & Graham, establishing Tetley Tea Incorporated.
1957:: Beech-Nut Life Savers acquires Tetley.
1972:: J. Lyons & Company acquires Tetley.
1981:: Tetley USA moves headquarters to Shelton, Connecticut.
1995:: Tetley USA becomes part of The Tetley Group.
2000:: Tetley USA sells coffee business; Tata Tea Ltd. acquires Tetley Group.

In 1995 Lyons, now Allied Domecq, sold its worldwide beverage business to a management buyout team, resulting in The Tetley Group, which was composed of three units: Tetley USA, Tetley GB, and Tetley International. Under its new ownership arrangement, Tetley USA took steps to revive the brand. It reintroduced its branded teas with new packaging and a fresh marketing approach in 1996. A similar approach was taken a year later with the relaunch of Martinson Coffee, which also introduced a pair of new products, French Dark Roast, and Colombian Supreme. In 1998 Tetley USA introduced drawstring tea bags. The tag could be separated and pulled apart to squeeze out every drop from the tea bag. In that same year Bustelo introduced an instant cappuccino product.

The new century brought major changes to Tetley USA. In 2000 it divested its coffees assets—selling them to Mother Parker’s Tea and Coffee Company and Rowland Coffee Roasters, Inc.—in order to focus on growing the tea business. In that same year The Tetley Group itself was offered for sale by its owner, Schroders Private Equity Fund. Sara Lee Corporation made an offer for the company but was outbid by Tata Tea Limited, based in Calcutta, India, whose roots dated back to the 1890s. Tata had actually attempted to buy the Tetley Group from Allied Domecq in 1995 but was unable to secure enough financing. Five years later the company was more successful in obtaining the $432 million necessary to acquire The Tetley Group. What made the deal especially appealing to Tata was the upcoming liberalization of the Indian tea market, the world’s largest.

While Tata focused on the battle between the Tetley and Lipton brands to dominate the world stage, Tetley USA continued to tend to its own concerns in the United States market, which was clearly dominated by Lipton. The Connecticut headquarters was sold and then renovated by the new owners and leased back to Tetley. The company also established a web site and began selling tea over the Internet. Tetley USA introduced a new “Classic” blend of hot tea, featuring new packaging and graphics. Organic tea bags were introduced in 2001. The company also sold its private label business in 2002, electing to focus its effort on its branded retail products tailored for the American consumer, who preferred single-cup bags rather than larger ones for the pot, and blends that appealed to their palate.

Ed Dinger