Reply To: Business News: Sara Lee buys Tea Forte

[peter]

Interesting, there is something I took away from Mr Hewitts blog post that speaks volumes about the operational success of the company:

“I spent time in our workshops, talking to our staff as they crafted and filled each tea pyramid with amazing care and artistry.”

I always wonder how such a non-standard shape was created, filled and prepared. They don’t make machines for that, so I always thought that the reason for the expensive tea was because Tea Forte had to invest in a custom-built packing machine, or, they were doing laboriously by hand. It seems that the latter is more true. Chinese labor is notoriously inexpensive (and is one of the great advantages of doing business with China). I don’t point this out in a colonial/empire-building sense (oppressing the poor and all that) – I highlight it, because it illustrates that Hewitt did something clever to make his business operate efficiently.

He bought a farm in China and used it as a base of operations to assemble his tea products. It certainly makes for expensive tea since he still had to import that product to the US, but the flipside of it is that it is no doubt more cost-efficient than buying a custom-tooled machine to handle a non-standard item and produce those filled tea bags in the states.

That one statement gives an interesting look into how he runs his operation that I didn’t know before. It also means something else that is highly significant. I’ve often criticized Fair Trade as not doing enough and once said, “shortening the supply chain is the best fair trade”. Even if he buys the majority of his teas from other sources and has them shipped to the farm in Hangzhou for packaging (a single farm cannot provide all the quantity he needs for his inventory), then he has created a more vertical supply chain than most small tea companies around. These vertical channels are more efficient than broad, spread-out, horizontal ones (but they are also more expensive and come with their own set of problems). It also cheaper to ship teas to the farm, than it is to aggregate them into the US from a variety of places. But by doing so, he has employees (not contractors, or suppliers) in China who he is directly affecting with his business decision.

Interesting how it is possible to infer so much from a single sentence by a CEO….

Its no wonder that Sara Lee set their eyes on the operation. As a company, Tea Forte was certainly doing something exceptional. Well done, Mr Hewitt.