It is hard to imagine how many inventions civilization would lose if some of them were not spontaneous, invented by chance or by the will of a combination of circumstances. Starting with Archimedean "Eureka!" and the discovery of the hydrostatic law, ending with the first iPhone model, long called the “Jesus phone” by journalists. In between these events were matches, Velcro, corn flakes, and a number of other ideas and merchandise little known and popular. The production of tea bags was not originally conceived as an offshoot of the traditional bulk trade. The public embraced the packaging of tea in small bags as a new type of packaging that saves time in brewing.

Brief business analysis:
Business setup costs:225 thousand dollars
Relevant for cities with a population:from 800 thousand people
Situation in the industry:high competition
The complexity of organizing a business: 3/5
Payback: 16-17 months

Business Relevance

Man has been drinking tea since the beginning of the 7th century AD, and there is no reason why he would stop doing it. A product, the demand for which is constant, and there is no risk that this demand will sharply decrease, is axiomatically a product that brings income to the business owner. Thus, the question of whether the packaged drink business is relevant is not considered. Another thing is that in order to understand and calculate the prospects in the market, the simplest economic knowledge and analysis of the situation are needed.

Analyzing the demand for the product, let us mention that 6 billion kilograms of tea are consumed annually in the world. Think about this number. It is noteworthy that Russia ranks 4th in the world in terms of tea consumption per capita, although lagging behind Turkey by 2.5 times. Our southern neighbors drink 3.2 kg per person per year.

The popularity of the drink in the world does not lend itself to any dependencies and patterns: the historical traditions of tea drinking in a particular region are important. So, in the top five in the consumption of tea leaves, along with Turkey and Russia, are Great Britain, Ireland and ... Morocco.

The market is highly competitive. Raw materials are grown in 40 countries, the number of producers cannot be accurately estimated, but only in India, 20 million people are involved in the tea industry. This is more than the population of 2/3 of the countries on the planet. For these reasons, the importance of marketing research and market analysis in making a decision is great.

Types of tea bags

A common stereotype says that the production of tea bags uses low-quality raw materials or even waste. Stereotypes appear in order to confirm or refute them. Like bulk, packaged product is made from raw materials of various qualities:

• whole tea leaves, coarse or medium-ground, an option used by image-conscious companies;
• broken leaves - crushed raw materials of a certain fraction; popular brands of average price are made from such leaves;
• cuttings - fragments of a tea leaf of a small-sized fraction. Contrary to popular belief, they are not low quality raw materials, on the contrary: tea made from seedings is strong and tasty;
• tea dust - both production waste and a special grinding fraction for subsequent packaging in bags. Dust is the raw material for the production of product with fruit additives due to its ease of mixing.

In other words, a large tea leaf can be a low-quality raw material if the cultivation or storage technology is violated. On the contrary, tea dust is sometimes a high quality raw material, crushed only for the production of tea bags. For these reasons, the composition on the packaging and the taste properties of the product will say much more than the appearance.

The same types that are available on the market in a different package are packed in disposable containers. Black, green, flower tea, used in the manufacture of packaged products, is also sold in 100-gram cardboard packaging, 500-gram cans and other containers.

Tea is also divided into types depending on the material from which the bags are made. The cheapest packaging material is filter paper made from:

• wood fiber - 71% in the composition of the material;
• thermoplastic fiber - 19%;
• abaca fiber (manila hemp) - 10%.

Tea in paper bags was produced unchanged until the mid-1990s. When the market was saturated, there was a diversification of manufacturers towards the modification of bags, packaging made of fine-mesh plastic mesh, nylon, corn starch appeared.

Business organization

The production of tea bags is not a high-tech type of commercial business. The result of a business largely depends on the correct organization and choice of a market niche. The segment of a high-quality and expensive product is attractive due to the low degree of saturation with competitors and high margins, but is characterized by small sales volumes.

In turn, the distribution of a low-quality and inexpensive product implies a large number of distribution channels for the product. Due to the existence of thresholds for entry into attractive retail chains and low profitability, an inexpensive product has a meager profitability.

Answers to questions about the choice of goods that consumers need will be given by market research and negotiations with retailers through which the finished product is sold. Marketers of supermarket chains and food wholesalers have a picture of sales performance. Such primary information will help to make a decision about entering a particular segment of tea bags. Let us consider in detail the stages of production, taking into account possible difficulties and technological features of the business.

Workshop room

The correct choice of premises depends entirely on the characteristics of the selected production line. Until the conclusion of a contract for the purchase, supply and installation of equipment, it is impossible to calculate the amount of the required area, the availability of specific premises for the stages of the technological process. Mandatory components of production include:

• warehouse for acceptance and storage;
• manufacturing facility;
• warehouse for finished products;
• utility rooms equipped with showers and sanitary areas;
• office part for staff and manager.

Raw materials and finished products are subject to increased requirements for moisture content, for this reason, the premises are equipped with air conditioning systems, air dryers. An important stage is the correct calculation of electrical power during the installation of power supply.

It is likely that the equipment will operate continuously, in three shifts, for this reason, a negligent approach to the installation of power supply will lead to equipment failure. Integral components when choosing a room of the desired type are water supply and sewerage.

In addition, when registering a business, the sanitary and epidemiological control authorities and the fire inspectorate will contribute to the requirements for premises. It will be necessary to install fire alarms and automatic fire extinguishing systems.

Raw material supply channels

In the production of packaged goods, the raw materials are tea leaves of the desired fraction and material for bags and packaging. Quality affects business outcomes. Choosing a reliable supplier of raw materials of consistent quality is a guarantee of business success. The supply contracts contain requirements in terms of humidity, required fraction, methods of delivery and storage.

You can buy raw materials on the domestic market, but in order to optimize costs, it is advisable to initially pay attention to tea producers. Prices of suppliers in the domestic and foreign markets differ by 1-2.5 times. Major suppliers are Sri Lanka, India, China and Indonesia. The supply of fermented tea is supposed to be ready for consumption and does not require additional processing with enzymes. Supply channels to the domestic market are established, and the delivery process is not difficult.

As noted, the choice of raw materials for tea bags directly depends on the market segment. When choosing the lowest price niche, tea is packaged in filter paper - this is the cheapest material for bags. Finding a supplier in the domestic market is not difficult.

If it is decided to produce an expensive product, special attention is paid to the material and design of the bags. A plastic mesh pyramid automatically transfers the product to the upper price segment. In pyramids, unlike flat rectangular or round bags, high-quality large-leaf tea is packed.

The company's marketers or outsourcers will help develop the original bag shape. There are bags in the form of a goldfish, clothes hangers, an umbrella. Even handmade knitted bags. There are no obstacles to the development of the original form of the bag, which will increase the recognition of the product at times. In a market saturated with competitors, it is necessary to be different, and packaging that is not similar to competitors' products can make a product successful, recognizable and sold.

The final packaging, pouch containers, is the third type of raw material needed for the production of tea bags. The requirements here are similar to the requirements for the shape and material for sachets. The manufacture of an inexpensive product involves the use of cheap cardboard packaging in the smallest possible color range. Such packaging is produced on its own or enter into a contract for the supply of finished packaging.

In the production of high-quality tea for the upper price segment, the packaging must be original, different from the forms presented on the market. Pyramids can be packed in tin tubes, wooden boxes - there is no limit to imagination and creativity.

Production technology

The technological process is quite simple and does not include complex labor-intensive stages. In general, the production process consists of several interrelated stages:

1. Supply of raw materials, subsequent quality acceptance, including defectology and the presence of impurities.
2. Crushing to achieve the desired fraction.
3. Finished product packaging.
4. Quality control and sampling.
5. Delivery of goods to distribution points under concluded agreements or trade from our own small wholesale warehouse.

Tea raw materials are delivered to the acceptance warehouse in multilayer paper bags. Upon receipt at the warehouse for acceptance, a mandatory acceptance for quality in accordance with GOST 1936-85 follows, followed by the signing of an act of acceptance and transfer of products. Quality indicators are fixed in the contract, each batch contains a quality certificate, issued by the Chamber of Commerce and Industry upon import. Significant acceptance criteria include:

• humidity 8% +/-1%;
• homogeneity and absence of impurities;
• fractional composition and mass fraction of fines;
• date of manufacture and shelf life (usually up to three years);
• number of packing places and net weight;
• other indicators according to the supply contract.

After acceptance, the raw material enters the crushing machine for grinding, bringing to the desired fractional composition. The tea of ​​the desired fraction then enters the automatic filling machine. The output is bags weighing about 2 grams, ready for packaging. The last stage can be manual or automated: finished bags are placed in the package and are the final product type. Packages are packaged in cardboard boxes and sent to the finished product warehouse.

Necessary equipment

The complex of necessary equipment depends on the size of own or borrowed funds, production volumes, type and form of products. The line can be complex, including integral units, and consisting of individual elements. The standard line includes:

• crushing machine;
• packing machine;
• packaging machine with the possibility of stacking in boxes;
• cellophane or wrapping machine.

Buying or leasing a production line is easy: equipment suppliers offer domestic and imported lines, new and used. The cost of equipment depends on the capacity for the production of finished products, the price of equipment is from $100,000 to several million dollars.

Business registration

Any business begins with the registration of a market entity - a legal or natural person with the chosen form of taxation. The next stage is obtaining and agreeing with the help of certification centers of technological conditions to ensure product quality. This process is regulated by the Federal Law of June 29, 2015 No. 162-FZ “On Standardization in the Russian Federation.

The conclusion from the sanitary and epidemiological control authorities is an integral stage in the preparation of documentation. The norms of sanitary rules are regulated by SanPiN 977-72 of 05/05/2017, the conclusion is drawn up at the nearest licensing center. Raw materials and finished products are fire hazardous materials, therefore, it is also required to obtain an opinion from the state fire supervision authorities. This document is issued by the regional departments of the Ministry of Emergency Situations.

Structural parts are also equipped with technological instructions on the rules and safety precautions when working with equipment of a certain type. If the budget allows, certification to ISO 22000:2005 (Product Safety Management System) will increase the capitalization and reliability of the business.

Marketing and distribution channels

Self-service and non-self-service stores, as well as wholesale buyers, occupy the main place in the structure of sales channels for packaged tea. In other words, stationary retail and wholesale outlets that sell food products. For this reason, the signing of contracts with these market operators comes to the fore when planning sales.

Sales volumes will be increased by specialized dealers - companies selling tea. Such market entities have well-established sales channels and knowledge about the main players in the market. Finally, the manufacturer enters into agency agreements with independent food retailers who are not major players and do not have distribution networks.

Efforts in advertising and marketing are aimed at increasing the recognition of the product, creating in the minds of end consumers of properties that distinguish them from a number of competitive products. Such distinctive properties are the original packaging, the shape of the bag, the number of bags in the package (for example, not 20, but 22).

A successful product has a memorable name and slogan. Marketing campaigns will help to increase sales and recognition: for example, a tourist voucher to a tea-producing country in every 10,000th package. Or a free tasting in supermarkets with the distribution of souvenirs. There are no limits to fantasy in this area.

Business costs and payback

It was noted that the key to the success of the tea bag business is choosing the right segment to enter. The amount of funds required for the purchase of equipment, the production of containers, and the wages of personnel depend on this. An approximate view of the cost of organizing a production with a capacity of 100 bags per minute looks like this:

• crushing machine: $10 thousand
• Packing equipment: $120,000
• Cellophane: $20,000
• Permits: $10,000
• Bringing the area to the requirements of regulatory authorities: $30,000
• Salary: $5 thousand
• Free working capital, inventory: $30,000

Less powerful equipment will commensurately reduce the cost of entering the business, more technologically advanced and productive equipment will increase costs accordingly. The expenditure part will be $225,000. With one work shift, the production volume will be 46,200 packages of 20 packages each. With a finished product price of $0.7, the gross revenue is $32,340.

In the value of gross income, 15% is wages, 30% is the cost of raw materials and packaging. 5% will be taken away by advertising and marketing of products, 3% - utility costs, 5% - fixed and transportation costs. Thus, the profit before tax is $13,583, the profitability is at the level of 42%, the payback is 16-17 months. Accurate calculation is possible with knowledge of the chosen form of taxation.

Tea is a traditional tonic and healthy drink, the volume of consumption is characterized by seasonality and tends to constantly grow. The market is saturated with competitors, but the potential of the market is open to new players. Current market participants do not have sufficient production or import capacities to fully meet current demand. Competent organization and an exact hit in a niche with an unmet need allow us to talk about the success of the idea for the production of tea bags.

Overview of automatic tea bag production line