Lozenges, chews, bars and bitters may not be what one would expect from a tea company, and that’s the point. It’s part of line extensions and millions of dollars in adjustments to operations by the Sonoma County-based company to compete with tea business heavyweights as natural foods moves further mainstream.
“We’re a botanical wellness company that’s disguised as a tea company,” said Traditional Medicinals CEO Blair Kellison.
While not approved as medicine by the Food and Drug Administration, the category is increasing the focus of consumers.
Now in its 45th year, the brand has long moved beyond the natural foods store and even beyond the natural foods aisle to occupy more than one shelf of some traditional retailers such as Walmart or Target.
Today, Traditional Medicinals is the fourth largest bagged-tea company in the United States.
“It used to be when you’re in specialty foods, you’re just competing with the specialty foods companies, but when you’re up against Lipton and you’re trying to charge them for the medicinal quality, organic and fair trade, you better not be charging anybody an inefficiency premium,” Kellison said. “When you go to Whole Foods (Market), the biggest premium you pay is not for quality, not for organic, not for social sustainability. The biggest premium you pay is a large number of those companies are fairly inefficient at making their product and getting it to market.”
According to IRI’s tally of just the $1.20 billion category for sales of bag and loose-leaf tea sales in U.S. grocery, drug, convenience and dollar stores for the 52 weeks ending April 21, the company ranked sixth, with $79.2 million in sales, up 5.9% by value and 4.8% by volume, behind Lipton owner Unilever, RC Bigelow, The Hain Celestial Group, private label teas and Twinings. While growth for the bagged and loose-leaf category was nearly flat (0.7% in value, -1.0% in volume), RC Bigelow, which launched probiotic and “benefits” lines in 2009 and 2017, and Traditional Medicinals each had over 5% dollar and unit sales increases.
But sales have been on a longer growth trajectory for the local company. The 10-year compound annual growth rate for Traditional Medicinals is around 15%, Kellison said. Three drivers for that growth are consumers’ greater interest in wellness, higher-quality products and the “why” behind the company, he said.
“The what is the product, and the why is the mission, the values we’ve always had as a company,” Kellison said. The what hasn’t changed much since Drake Sadler started the company in 1974 near the dawn of the age of natural foods. Now, the company makes over 60 products that incorporate 125 herbs from 42 countries on six continents.
“We really haven’t changed much,” Kellison said. “We’ve made the product more available.”
But it’s not just where the product is sold that makes it more available for consumers; it’s also the price tag, Kellison said. The company has raised prices just 3% in 11 years, and held prices steady for 10 of those years. To achieve that feat and stay competitive as the major players have moved toward Traditional Medicinals’ sweet spot, it has spent about $20 million over the past five years upgrading the production plant.
“We bought a lot of new technology,” he said. “We did a lot of lean manufacturing. We hired a lot of really good people. And, we just got really efficient at making tea.”