Scottsdale tea company defies recession with steep growth

SCOTTSDALE – Two tea aficionados have taken a 5,000-year-old beverage and given it a new twist.

Over the past two decades, Dan Schweiker and partner John Martinson have turned China Mist Brands Inc. into one of the most widely served iced tea brands in restaurants and hotels across America.

They hope to have that same kind of success abroad, where iced tea is considered a novelty.

On a recent tour of China Mist's Scottsdale headquarters, Schweiker showed off machines swiftly measuring and packaging tea and explained how his company is carving out a niche in what might seem a saturated market.

It all comes down to ice.

Ice cubes and drinks go hand in hand in America, but that isn't necessarily the case abroad. While tea is the most popular drink in the world other than water, according to the Tea Association of the U.S.A., an industry trade group, most of the world is used to drinking it hot.

But as American-style fast food chains crop up in places such as Dubai, United Arab Emirates, one of China Mist's growth areas, people are becoming accustomed to drinking beverages over ice. As this trend catches on, China Mist has opened distributorships in countries where ice is readily available.

"We like to tell people that we follow ice cubes around the world," Schweiker said.

China Mist has targeted countries like United Arab Emirates and Mexico, where the climate is warm, there are plenty of American tourists and there is the fast food infrastructure for ice cubes.

With the company's wide variety of organic iced tea blends and flavors, unique Asian-motif label and names as lively as Prickly Pear and Fiesta Fria, China Mist is growing at its fastest pace since 1999, according to company estimates.

"This is a company that finds new and innovative ways for executing business," said Rick Kidder, president and CEO of the Scottsdale Area Chamber of Commerce. "They are brilliant marketers and go out of their way to find those niches in the market."

Iced tea has been described as a uniquely American beverage. When China Mist first began to sell its products overseas, the company focused on hotels and restaurants frequented by Americans.

But now, with iced tea beginning to spread all over the world, China Mist is following the demand.

"Internationally, iced tea is where it was in America 30 or 40 years ago," Schweiker said as he poured two cups of steaming tea. "Which means there is tremendous opportunity for growth."

Although most of the company's sales are in the U.S., global sales represent a growing portion of China Mist's business. Its newest distributorship opened in Dubai about a year ago. The business venture markets iced tea to hotels, restaurants, and grocery stores in the bustling city center.

American restaurants and hotels are widely popular in the region – as are American products. The country also has many other characteristics that are amenable to the spread of iced tea: it's hot, American-style chains are plentiful and locals can easily sweeten the tea to satisfy their taste for sweetened foods and beverages.

Globally, China Mist tea is sold through more than 65 domestic and 10 international distributors, which Schweiker said makes it impossible to get an exact count of customers. He estimates the company has 15,000-20,000 customers in America, Mexico, the Caribbean, the Pacific Rim, South Korea and the Middle East.

Not all of the company's growth is abroad. China Mist is also having an up year domestically.

Most recently, the company booked deals to sell iced tea at Sky Harbor International Airport and under a private label at Love's Travel Stops & Country Stores. These ventures will expand China Mist's iced tea sales by about 15 percent, according to company estimates.

"These deals are huge for us," Schweiker said. "We went out and took market share during the recession."

China Mist partnered with the Phoenix-based Black Barons Group, a minority-business enterprise that distributes food and beverage products, to develop the new venture at the airport, which ranks amongst the 20 busiest in the world. China Mist iced tea will be sold at concession locations owned by HMS Host, the U.S. division of Italian-based Autogrill S.p.A., the largest airport food and beverage provider in the world.

Consumers want healthy, organic alternatives to soft drinks and other sugary beverages, according to Chris Champion, a partner at the Black Barons Group.

"China Mist is at the forefront of this trend," Champion said. "People are much more health conscious."

The tea industry anticipates strong growth in the next five years, industry data shows. China Mist is betting that iced tea in particular will have that kind of explosive growth globally.

"We knew from the beginning that if iced tea was going to be big in this country, it was going to be big in other countries," Schweiker said.