Tea for 33 million

Cargo & James Tea puts on the kettle.

Tim Grover, the owner of specialty tea company Cargo & James Tea, has a lofty goal. He wants to “pioneer the café tea business in North America” and one day head a corporation that could rival Second Cup or Starbucks. “I think there's room for a tea shop on every second corner,” the 37-year-old says.

With only five stores in operation — four in the Edmonton area, where he's based, and one, a franchise, in Victoria — Grover is speaking largely out of faith. But this University of Calgary grad has a history of seeing the light long before most entrepreneurs. Grover launched Homexpress, an online grocery delivery service, in 1996, when only one other outfit like it existed in Canada. And while the grocery company popped in the overblown dot-com bubble, Grover thinks growth expectations for tea are based on solid ground.

Not only have baby boomers turned to tea to ward off heart attacks, cancer and weight gain, tea has also become trendy for young people. Piggybacking on a trend hot in Asia, where tea is treated much like wine, several hip tea-only cafés have opened in Canadian cities over the past few years. “Coffee only has a few different basic beans but there are hundreds of different varieties of tea,” says Grover. The Canadian tea market isn't well documented, but U.S. tea sales are promising. At more than $6 billion annually, they've quadrupled in the past decade. By 2010, U.S. annual tea sales are forecasted to reach $10 billion. This growth is driven largely by specialty tea sales, which are also advancing tea's foothold in Canada, says market consultant ACNielsen. Since he first opened in 2001, Grover has seen revenue grow by 30% each year, with individual stores bringing in anywhere from $150,000 to $300,000 annually. Grover expects the market to reach its full potential around 2015 or later, and plans to open 35 to 40 new franchises in the next decade.

Each of his stores sell loose leaf tea in more than 120 flavours, which range from Canadian, a tea blended with maple candy, to the most popular, Masala Chai. Unlike most coffee companies, who often go through two or three brokers for stock, Grover buys most of his tea direct from gardeners in India, China and Sri Lanka, a practice he plans to continue as his business grows. “That's where I have huge advantage,” he says. The store's most expensive tea, a rare Sri Lankan confection called Adam's Peak, sells for $700 a kilogram, while teas by the cup range from $2 to $2.75, about a dollar cheaper than most specialty coffees.

Grover isn't worried about coffee behemoths moving onto his turf. “Incumbents don't transform their business quickly enough to keep up with a new trend,” he says. And he's equally unfazed by the tea-focused cafés that have come and gone in Canada in the past several years. The upstarts failed because they catered too much to a niche, Grover believes, and that's something he's determined not to do. “We're not tea snobs,” he claims, and adds that 30% of his sales come from coffee and food. Grover says the Cargo & James environment attracts just as many males as females, and he also serves tea to the odd trucker in overalls, a fact he's “most proud of.” After all, if he can get truck drivers in Edmonton to warm up to oolong and chai, no wonder he feels ready to take on the rest of the nation.