“Don’t let tea farmers get f****d, buy directly from the source. Don’t let the financial system f*** us, use bitcoin!”
Elyse Petersen, founder and CEO of Hawaii-based farm-direct tea marketplace Tealet, felt these were the right words to accompany her company’s announcement that it would begin accepting bitcoin payments starting 17th September. They echoed Tealet’s core values, illustrated bitcoin’s utility and grabbed attention.
Unfortunately, some of Tealet’s partners didn’t appreciate the message.
“With the bitcoin audience, the value proposition that we knew would be able to get their attention was that our business model is similar to bitcoin in that it’s trying to cut out the middlemen,” Petersen explained. “We really tried to play on that part of it, and we tried to use the voice of revolution.”
Petersen said negative reaction to the message was particularly strong among Tealet’s domestic grower network. Farmers in the south, she noted, had a tough time connecting with the accompanying video – it featured famed venture capitalist and 500 Startups founder Dave McClure giving a profanity-laced version of Tealet’s social good message at one of the company’s early accelerator events.
Luckily for Tealet, its decision to accept bitcoin has proven to be a better choice. In its first week accepting the popular cryptocurrency, Petersen revealed Tealet has doubled its sales, and even generated buzz in a previously untapped market – the Philippines.
Founded in 2012, Tealet facilitates tea purchases between small tea farmers and the beverage’s global connoisseurs, many of whom wouldn’t otherwise be able or willing to pay growers directly in their native currency.
Today, the company aspires to become a $20m-a-year business. And even after the ups and downs of its opening trial, Petersen says she sees the alternative coin movement becoming an essential part of its business strategy.
Planting the seeds
Peterson first heard of bitcoin in the summer of 2011, back when her ideas were more “far-fetched” than they are today. She said she believed bitcoin could one day be used as a way to pay tea farmers directly.
Without the middlemen, she reasoned, it was possible to eliminate the market inequalities that deprive working farmers of revenue and push the younger generations to abandon the centuries-old craft for city jobs.
This idea was fitting, according to Petersen, as it was tea that was used by many early merchants as a form of currency. With its long shelf life and its relative scarcity, Petersen noted tea served the purpose gold, cash and credit do today.
She said she felt “it would be very appropriate to go full circle [with the idea], and for the next innovation in currency to be applied to tea”.
The market’s need for the solution was easy to identify. Tealet’s website indicates that Japanese tea farmers lose 85% of the value of their product to distribution costs. The company estimates that the average price Japanese farmers receive for a pound of tea from a local government agriculture cooperative is just $16. By comparison, in the US market, this tea can sell for as much as $105 per pound.
Even Tealet’s business model, while more producer-friendly, features a built-in loss of 7%, according to Petersen. This figure represents the cost Tealet pays to use major remittance players like Western Union and PayPal and cover foreign exchange fees.
By choosing to accept bitcoin payments, however, Petersen saw a way to reduce this loss, one that when multiplied with the company’s profitability, added up to the potential for big savings.
An idea begins to brew
Petersen may have seen bitcoin’s potential, but it took the tech knowledge of an employee, web developer Cody Moniz, to convince her that the alternative currency was practical enough for Tealet to integrate. By this time, Petersen said, the availability of processors such as BitPay and Coinbase was enough to put her fears to rest.
From there, Petersen estimates the implementation process took two weeks.
“Putting up our bank accounts, that was the biggest pain point,” Petersen said. “The main thing that held us back was that, but as far as actually implementing the API and setting up on our website, it was quite fast.”
In addition to the monetary benefits of bitcoin, Petersen says she has been taken aback by the excitement bitcoin users have brought to Tealet in such a short time. Rather than just sales, Petersen says she has received something far more valuable – engagement.
“[Our online customers] usually just buy the tea and wait for it to come in,” Petersen said. “We had people who are really interested in what we’re doing and bitcoin enthusiasts were really excited to see that we started to accept bitcoin.”
Petersen said one reason for this similarity is a synergy between both fanatics and the bitcoin faithful, noting that the company has its biggest following among tech-minded men aged 23 to 36 years old – roughly the same demographic as bitcoin users, studies show.
Tealet serves up education
Petersen admitted that the way she marketed Tealet’s decision to accept bitcoin led to a lot of shock-filled emails. However, this messaging misstep wasn’t without its silver lining.
“It ended up serving as a really good education platform,” Petersen said. “I had people calling and emailing me, and I was able to explain the purpose of that voice, why we were talking so direct and with such a heavy theme of revolt.”
Petersen said she was also able to educate her grower network on how they could implement bitcoin into their businesses. In particular, she noted an interest from farmers in India’s famed Darjeeling region. There, she says, farmers have now started researching bitcoin, learning more about it and extending this knowledge to their networks.
“I was really pleased with it,” Petersen said. “I felt like ‘Wow, we did something more than just launch with bitcoin.’”