Established Online Tea & Health Food Business
Solihull, West Midlands
Business overviewThe owners are selling this profitable online tea business due to an emmigration. Websites are built in multiple languages and the established customer base extends across Europe.
The business is, at its core, an online tea merchant which grew from a physical tea shop. The business experienced strong growth online from 2012 onwards and was fully online by mid-2014 following the closure of its physical high street tea shop, which was experiencing neutral growth and increasing costs.
With a broad tea offering, the business specialises in 'matcha' green tea from Japan and China. The registered company name is Chah Limited, but the company also trades under the names “Matcha Factory” and “Mycomia” (a new dried/powdered mushroom offering).
Matcha tea is gaining a growing following in the West and the Matcha Factory websites are by far the most successful activity of the business and domains have been purchased across Europe with several TLDs including .fr (France), .it (Italy) and .es (Spain). The websites are multi-lingual and multi-currency for the end user, but in English at the back end. Customers only contact via e-mail, so any non-English speakers' emails are translated with Google Translate, as are the replies; no language skills necessary.
The business also makes some selected products available via Amazon (both Amazon and seller fulfilled), and there is opportunity for more work to be put in here to drive revenue.
The business’ matcha offering is well established and diversified to include:
- Low cost Chinese variety; ideal for mixing with other ingredients and popular with bulk purchasers.
- Medium, high and very high end Japanese grades.
- Organic accreditation across the matcha range from The Soil Association.
- Great Taste Award since 2014 on the top grade.
- No MOQ; customers buy from 0.03kg to 500kg at a time.
Further to the primary matcha offerings, the company has some other main revenue and profit drivers:
-Tea making and storage accessories.
-Health food roots/berries; dried/powdered.
-Health food mushrooms; dried/powdered.
All of these offerings are synergistic with the core products and these serve as both add-on and complimentary products, as well as attracting some customers in their own right.
With a broadly even mix of retail and wholesale revenue streams, the business has an established customer base in the UK and across Europe. The business has demonstrable repeat customers and all contacts will be transferred to the new owners.
2018 has been a challenging year due to GDPR and its effect on our direct marketing, a Google policy change in late 2017 lowering the ranking of some of our organic links and Brexit is the suspected reason for one company we supply in France failing to continue to order; thankfully, while this was a large customer, this seems relatively isolated. Competition has also increased in line with the growing popularity and awareness of matcha tea.
The business has responded and adapted by offering more competitive wholesale prices on our matcha range for larger orders and improving the quality of the retail offering. Costs have been reduced by improving the Google Ads, reducing packaging (in line with current plastic reduction trends), as well as bringing in larger amounts of stock per shipment to reduce freight costs per kilo. Google Ads, being the primary marketing tool, has also been significantly re-focussed to target new bulk customers. The company is in the process of adopting a CRM system to track the success for RFx requests from existing and speculative buyers. Steps have been taken to regain permission from existing customers to directly market and our mailing list is beginning to recover and is wholly offered for transfer as part of the business sale.
The product range has grown over the past year to incorporate a diverse range of dried and powdered mushrooms, which is a market in its infancy. This has been an important area for recovering revenue lost to the aforementioned challenges faced during 2018 and again, this is fully part of the business sale offering.
As a snapshot of the level and consistency the business e-commerce activity has achieved here are some rounded figures:
2014: Turnover £112,000; Net profit £36,000
2015: Turnover £153,000; Net profit £57,000
2016: Turnover £162,000; Net profit £60,000
2017: Turnover £158,000; Net profit £54,000
2018: Turnover £140,000; Net profit £49,000
Barriers to entry to the organic matcha market exist. The Japanese growers have experienced a massive increase in demand from Europe and North America. More than 90% of matcha produced is already sold on the domestic Japanese market and the remaining produce that is given to export is only recognised as organic within the UK and EU in very limited quantities. Our links to our Japanese supplier have been carefully cultivated, including a face to face meeting in Japan, which included a thorough vetting of the farm, farming practices and organic export licence certification. No new UK customers will be accepted by the supplier, but they have agreed to co-operate with new ownership.
The current owners are willing to provide coaching and advice to the new owner(s), subject to location and negotiation.
In summary, a basic SWOT analysis might look like this:
-Existing, established repeat customer base; particularly wholesale
-Established supplier links closed to new market entrants
-High margin to cost ratio
-Diverse range; market knowledge
-Strong synergy amongst product offering
-No social media presence
-Limited marketing expertise; trial and error approach
-Websites becoming old fashioned
OPPORTUNITIES (growth and development potential)
-Attain BRC accreditation (£3,000 to £5,000 investment required) to widen potential wholesale customer base
-Establish a presence on social media
-Rework websites; modernise
-Improve Google Ads
-Expand marketing beyond Google Ads
-Revamp Amazon offering
-Offer more grades of matcha (which are available from the supplier)
-Reduce costs through synergy
-Invest in larger stock room and reduce overall costs by bringing fewer, larger shipments in
-Seize on growth in mushroom sales, specialise, diversify
-Bring new life and new ideas to the company
-Brexit, particularly “no deal”
-Future Google policy changes
Located in central England without any lease on premises, the business is entirely relocatable. The footprint of the business is one home office and a 120 sq ft stock room (approx. 1 single garage or small shipping container).
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