Steeped Tea – $20 Million In Sales In 2015

 

It sometimes takes a terrible event to spark a life-changing epiphany. Tonia Jahshan—happily pregnant for the first time—was headed home from a normal day at the sales and marketing agency she ran with her father.

As she drove, she felt the first symptoms of what every expectant parent dreads: a miscarriage. The loss was devastating. In the weeks that followed, mired in grief, she reassessed everything, including her career. One big question kept coming up: Do I really want to sell electrical equipment for the rest of my life?

It was 2006. Jahshan had been working at the agency for five years. She relished the selling aspect of the job and her $100,000 salary, but the tools she was peddling for clients didn’t exactly stoke her passion. She began to feel restless and disengaged.

In an attempt to shake the funk, she and her husband, Hatem, escaped from their home in Ancaster (a suburb of Hamilton, Ont.) for a getaway at a Halifax bed and breakfast. There, Jahshan was served a cup of cream of Earl Grey tea. “I was so blown away by the taste and smell,” she recalls, her voice zealous. “It was amazing.” The owner told her it was made with loose tea leaves from a shop in Mahone Bay, N.S. The Jahshans drove an hour west, found the boutique and stocked up.

That purchase turned out to be more than a souvenir. Two weeks after they got home, Jahshan turned to Hatem, eyes aglow, and said confidently, “I’m going to start a company! I’m going to have tea parties and sell tea leaves, and it’s going to be great!”

Hatem, a chemical engineer and self-described “numbers guy” who owned three Subway franchises at the time, stared at her.

“And I’m calling it Steeped Tea,” she added.

Hatem knew better than to second-guess her instincts—and not just because he was relieved to see her excited about work for the first time since the loss. Sure, Jahshan knew little about the beverage industry, but her contagious excitement, implacable confidence and natural sales prowess gave him every confidence she’d succeed.

And succeed she has: In the 10 years since, Jahshan’s idea has grown into a loose-leaf empire with annual sales of more than $20?million (and growing) and 9,000 salespeople peddling tea and accessories across North America—enough to earn her the No.?1 spot on the 2016 W100 ranking of Canada’s Top Female Entrepreneurs. She has learned what it takes to turn a hunch into a massive business: a clear vision, yes, and the conviction to see it through, of course, but also an appetite for risk, a willingness to make changes on the go and nerves of highly tempered steel.

For three months after Jahshan’s outburst to Hatem she spent every spare moment working on a business plan. She quickly learned why that Halifax cuppa had been so transformative: the leaves and buds used in loose-leaf tea blends produces a fuller, more subtle flavour than the stale old bags­—which she now calls “the hotdogs of tea”—to which she’d been accustomed.

She discovered benefits to health (loose-leaf tea is packed with antioxidants) and value (blends can be steeped several times) too. So when her research revealed there wasn’t yet much demand for loose-leaf tea among consumers, she didn’t see it as a drawback but rather as an opportunity to establish first-mover advantage—especially since there were no major companies devoted to selling the stuff. Encouraged, she researched suppliers, got a logo designed and printed out labels. Six months after the Halifax trip, she quit her job and poured all her energy into figuring out how to sell something people didn’t even know they wanted—at least, not yet.

To do it, she chose direct selling. The model, also known as network marketing, is as old (and as ubiquitous) as Avon ladies and Tupperware parties. It’s premised on social influence: There are no shops or traditional salespeople, just living rooms and hosts who feel more like pals than product-pushing robots. Jahshan knew the approach well: At 18, she had started selling Aloette cosmetics to her friends, attracted by the promise of reward swag, and quickly became hooked on both the cash and the rush of organizing parties. “I loved the whole concept,” she says. She went on to successfully sell Pampered Chef kitchen gadgets, Mary Kay makeup and PartyLite candles.

Direct sales seemed like a perfect fit for Steeped Tea: The party setting would allow consultants to educate consumers and build camaraderie, and the consumable nature of the product would be an ideal recipe for repeat business. Eager to test her theory, Jahshan organized a two-day open house to evangelize about tea leaves and, ultimately, find her first party hosts. She posted flyers all over Hamilton, made goodie baskets full of tea products and convinced her mom to bake 1,200 shortbread cookies. Only two people showed up.

“That was a very big blow,” she admits. “I almost gave up.” But two weeks later, she learned that a woman in Cambridge, Ont., who had heard about the open house was interested in hosting a party. Nearly 20 women showed up to that soirée, and by the end of it, eight of them wanted to book their own events. A month after her disastrous open house, Jahshan found herself scrambling to help set up 20 “parteas.” It quashed any niggling doubts. “Deep in my heart,” she says, “I knew it was going to work.”

That early success galvanized Jahshan. Her goal was never to create a hobby business that brought lonely people together over tea. She wanted to build a bold, scalable enterprise that would allow people to earn a lucrative income on their own terms; she wanted Steeped Tea to be a household name. And to scale up, she’d need help.

It takes confidence to face potential investors at the best of times. To do it on national television—while eight months pregnant—requires serious moxie. Thankfully, that’s a quality Jahshan does not lack, so it was with calm conviction and a serene smile that she marched her distended belly onto the set of CBC’s Dragons’ Den in 2012 and asked the panel of financiers to buy in to Steeped Tea.

It was a moment two years in the making. By 2010, the company appeared to be doing well: Sales were growing, brand awareness was deepening and new consultants were steadily coming in. But behind the scenes, things were stressful. Jahshan now had two children and hoped to have a third. She was putting everything she had into the business, but despite the top-line growth, she wasn’t making any money.

She admits to naively thinking she’d be able to turn a profit right away, but for each of the company’s first four years she spent about $30,000 more than she brought in. Family vacations became trips to the local splash pad; making mortgage payments became an exercise in suspense. It’s a familiar scenario to Jessica Oman, who runs Renegade Planner, a Vancouver-based firm that helps startups plan their growth strategies. “It’s incredibly common for people to underestimate costs [in the early days],” she says.

The situation became untenable. Jahshan—who admits that ledgers and balance sheets are not her forté—decided to bring in a deputy to clean up the books and streamline operations. She found the perfect candidate in her husband. Hatem, who had just finished an MBA program, sold his Subway franchises and came aboard to handle finances and operations. (His title is CEO, but he insists he “sits in the background” while Jahshan, the “impassioned face of the company,” ultimately calls the shots).

With Hatem’s help, Steeped Tea negotiated new supplier agreements, stopped selling low-margin items and hired its first bookkeeper. Profits improved almost immediately. This freed Jahshan to attend to what she knew would be Steeped Tea’s inflection point: expansion into the U.S., an endeavour that would take more cash than even the streamlined business could drum up alone.

When she saw an audition call for Dragons’ Den on Facebook, the solution became clear. “We have to go on!” she told Hatem. “Why would you want to do that?” he replied, bewildered. “The last thing you want is for Kevin O’Leary to call you a cockroach in front of a million viewers.”

But Jahshan insisted: “We’ve taken so many risks at this point. What’s one more?”

The pair spent hours rewatching old episodes, coming up with answers for every question that could possibly be asked. Jahshan memorized her numbers and practised telling the company’s story quickly and compellingly. By the time she got the call to appear at CBC’s headquarters, she was ready. “From the get-go, I knew: We got this,” she says. “How could you not love the company? We create entrepreneurs, which is what Dragons’ Den is all about.”

The shoot was, as is usually the case, much more detailed than what was shown on TV. Jahshan was grilled for an hour about her business model and sales figures. But she had answers for every question, and that—along with her unfazed demeanour—resulted in Dragons David Chilton and Jim Treliving investing a total of $250,000 for 20% of the business. Both remain investors today. Chilton frequently praises Steeped Tea in public, and Treliving, who has since helped the company to, among other things, produce its own branded tea accessories, considers the deal one of his best. “I’m a big investor in people’s enthusiasm,” he says.

The seven-minute segment aired in 2012, during the premiere episode of the show’s seventh season. Its effect was transformative for the business, and not just financially. Two months after the spot aired, Steeped Tea’s consultant roster mushroomed from 500 to more than 3,000. Sales came in faster than they could ship out the tea, which prompted the couple to drive around Hamilton asking people at bus stops if they wanted to make some extra money bagging tea leaves for a few hours. “We literally begged people,” Jahshan recalls. “Thankfully, many said yes.”

For someone who enjoys Downton Abbey–style tea parties and whose idea of indulgence is a cup of Earl Grey every morning—no milk, no sugar—Jahshan is far from boring. She’s got fiery red hair with golden streaks that glimmer in the right light. When she talks about things she loves—especially tea—she does it with the enthusiasm of someone who’s just seen a unicorn.

All that makes for a magnetic presence, and it’s easy to see why she’s been able to recruit so many people into the Steeped Tea fold. The company currently has more than 9,000 consultants selling its wares: 6,500 in Canada and 2,500 in the U.S. The overwhelming majority—some 95%—are women. They come to Steeped Tea for different reasons. Some are driven by dollars: consultants earn commissions of between 25% and 39% on sales. (Last year, the top earner brought in $120,000.)

Others like the simplicity: The company handles inventory, product marketing and technical concerns, freeing consultants to focus on finding customers and making perfect petits fours. Others still are drawn to the idea of side income, a sort of fallback career for the post-recession era. And many, perhaps most, come wanting to build a business with what Paul Skowronek, senior vice-president of public affairs at the American Direct Selling Association, calls “a lot of freedom.”

The Steeped Tea model holds particular appeal for mothers of young kids—especially those seeking a comfortable work-life balance. There are lots of them out there: A 2015 TD Economics report identified an upswing in self-employment among Canadian women since the 2008 recession, with 25% doing so to spend more time at home. This is Jahshan’s ideal consultant: the parent who wants to make a decent income between school drop-offs and runs to the hockey rink.

She considers herself an ally and spokesperson for “mompreneurs,” and sets the tone by picking up her own kids—now aged eight, six and four—at the bus most days and by doing much of her work out of her home office (a six-minute drive from the Steeped Tea headquarters). Her consultants can see themselves in her. As a leader, she strikes an almost Oprah-like balance between being relatable and inspirational.

Of course, it takes more than personal charisma to build a company as successful as Steeped Tea. That the company’s launch dovetailed with the advent of the social media age is a happy coincidence, one that drastically accelerated its expansion. Social networks—especially Facebook—have injected new life into the direct-selling model, giving buyers and sellers an easy, intuitive way to connect with one another.

The Direct Sellers Association of Canada reports that 42% of Canadians have purchased goods from a direct-sales consultant—a number it expects will grow significantly as social commerce becomes more sophisticated. Facebook has been an invaluable tool for Steeped Tea, both internally (via a closed group that allows consultants to share ideas and connect) and externally (as a means to engage customers). The company’s dramatic growth—sales spiked more than 1,100% in the past three years alone—would have been all but impossible were consultants relying on Rolodexes and landlines, Avon lady style, to find clients.

Today, as Steeped Tea settles in to its position as “the” name in direct sales of loose-leaf, it bears a pretty close resemblance to the vision Jahshan had nearly a decade ago. “I could just see where this company was headed,” she says, ever unruffled. “I knew we were going to be big.”

As first appear in Canadian Business