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Originally published Sunday, December 16, 2007 at 12:00 AM

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Portland tea firm Tazo growing at Starbucks

With its popular chai latte and a taste for the unexpected, Tazo, a Portland specialty-tea operation, is a fast-growing part of the Seattle coffee giant.

Seattle Times business reporter

About Tazo

Headquarters: Portland

Employees: About 70

Beginnings: Tazo co-founder Steve Smith started working on Tazo tea blends in his kitchen in 1994 shortly after leaving Stash Tea, another Portland company he co-founded. Smith retired from Tazo last December.

Most popular teas: Chai tea latte is the most popular tea in Starbucks stores. Tazo's most popular tea-bag flavors are Awake, a black-tea blend; Zen, a green tea with lemon verbena, lemongrass and spearmint; and Calm, an herbal blend with at least 12 ingredients, including chamomile, hibiscus, spearmint, rose petals and sarsaparilla root.

Getting the tea out: Tazo packages some of its tea in-house but most is sent to companies in Vancouver, B.C.; Italy; California; and elsewhere in Portland for packaging in tea bags, bottles and chai concentrate boxes.

PORTLAND — Tazo's Tony Tellin is a tea-drinking wonder.

He samples new blends and ingredients for hours a day, hosts special tastings for guests, then settles back with a cup of tea for pleasure when his work is done.

On a busy day, Tazo's manager of tea procurement figures he tastes 200 to 300 teas.

Tellin's dizzying tea consumption is driven by the breakneck growth of Starbucks, which has more than 15,000 coffee shops worldwide and is adding about seven stores a day.

Tazo was a small specialty tea company before Starbucks bought it in 1999. Now it supplies all of Starbucks' stores plus other restaurant clients, and it sells packaged tea in coffee shops and grocery stores — all from a warehouse in Portland that steeps its industrial neighborhood in the scents of tea, herbs and spices.

Tazo bought 5.7 million pounds of tea and botanicals last year, up 78 percent from the year before. To keep pace, it has doubled its number of employees since Starbucks bought it to 70. Starbucks does not disclose Tazo's revenue, but in 2001 it represented 3 percent of company sales.

Starbucks bought Tazo partly to "commit to the same level of innovation, responsible sourcing and quality for tea as we do for coffee," said Wendy Piñero, vice president of Starbucks' U.S. consumer-products group. Before 1999, the coffee-shop chain sold tea under the brand name Infusia, and it does not disclose who made that tea.

Tazo has the potential for even more products and growth, Piñero said.

Tea in cups, not harbors

Coffee drinkers might never notice, but Starbucks stores offer three iced-tea flavors every day, along with hot tea, tea-based lattes and tea frappuccinos.

The most popular tea drink in stores is chai tea latte, an India-inspired blend of black tea, cardamom, cinnamon, black pepper, star anise and milk. It costs about $3.40 for 16 ounces.

Tazo's most popular tea-bag flavors are a black tea called Awake, a green tea called Zen and an herbal blend with at least 12 ingredients called Calm. They run roughly $4 to $5 for a box of 24 tea bags.

The company recently redesigned its boxes to play up the Tazo name and tone down the mysterious, ancient-looking writings and equations that once covered them. They also added simple steeping instructions, figuring some people need a little help in making a good cup of tea.

Although tea is widely considered the most-consumed beverage in the world after water, it was a beverage non grata for centuries in the U.S.

Experts trace the anti-tea bias to the American Revolution.

"When we had the Boston Tea Party, we were not just throwing tea into the harbor, but rejecting some of the cultural values of England," said George Jage, president of the World Tea Expo, the industry's largest trade show.

The Boston Tea Party was 234 years ago today. Finally, tea is making a comeback, with U.S. sales of $3 billion in 2006, up from $2 billion in 2001, excluding restaurants, according to the market-research firm Mintel.

The U.S. market is dominated by three brands — Lipton, AriZona and Snapple — with smaller players like Stash and Numi growing fast.

Specialty tea companies had trouble with rapid growth in the past because tea growers were not producing enough high-quality tea for them, Jage said. That is changing, with more growers providing top-quality teas now that they see sustained demand for it.

People like Cristine DeMaio, of Seattle, are switching from coffee to tea for health reasons.

"Tea doesn't give me the same anxiety that coffee does," she said.

That's probably because it has about a third less caffeine than drip coffee. Now DeMaio says she's addicted to Tazo's chai tea, which for her means about three cups a week.

Slurping like coffee pros

That's nothing compared to the tastings at Tazo each fall, when the company receives a year's worth of Assam black tea in just three months.

Assam is the ingredient Tazo uses most, in everything from tea bags to chai lattes. It arrives by the 40,000-pound container from India, sometimes as often as four times a day.

The black tea crowds shelves that are already stacked with ingredients such as Chinese tea, Guatemalan lemongrass and Pacific Northwest spearmint, then it fills the warehouse floor and finally moves into nearby storage.

All of Tazo's teas are tasted as they arrive. Very little is returned because Tellin and others sample them before buying, and they buy only about a tenth of what they taste.

The splurping in Tazo's tasting rooms sounds like the slurping of coffee tasters at Starbucks.

After the experts noisily spray tea across their palates and spit, they describe the flavors with language familiar to coffee and wine connoisseurs — "floral without being perfumey" for a jasmine green tea from China; "jammy, full and round" for a Ceylon Dimbula.

Tazo began as a specialty player with a flair for the unexpected.

Back in 1994, co-founder Steve Smith added cucumber to a green-and-black tea blend called Om, and he mixed the warmth of tarragon into the mint herbal tea Refresh. Smith, who also co-founded Stash Tea in Portland, retired from Tazo last December.

By the time Starbucks paid $8.1 million for Tazo in 1999, it had 10 tea-bag flavors. Now there are 23. Tazo has added 10 bottled teas to its original seven and expanded its lineup of tea-latte concentrates and iced teas.

One of Tazo's first new blends after the sale was Joy, introduced in 2001 as a mixture of rare teas sold only during the holidays.

The special ingredient in Joy is so rare that it is not used in any other Tazo blend — Formosa oolong, a light, naturally sweet tea that many believe is the best oolong in the world.

Tazo's style is "the familiar with a little bit of the unfamiliar," said Keith Hutjens, who became director of tea procurement when Smith retired a year ago.

The company wants to keep that spirit with new teas such as Organic Red Apple and Vanilla Apricot White.

Some Tazo teas include natural flavorings, which purists sniff at.

"Anything that's flavored is not good tea," said Shashank Goel, in Chicago, who founded the tea brand Ineeka in 2005 and is part of a family that owns 15,000 acres of tea-growing land in India.

"It's like getting the best chardonnay grapes from the best winery and flavoring them with peach. What good are they? Seriously," Goel said.

Still, he considers Tazo "a good product for the price point" and likes that Starbucks and others are drawing more attention to tea.

"Whether people want to drink milk, sugar, strawberry or whatever, tea needs to grow," Goel said. "It's good for the industry."

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Copyright © 2007 The Seattle Times Company

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