A Canadian entrepreneur with a track record of retail turnarounds is launching a chain of tea shops across the U.S. and Canada, out of recently closed DavidsTea locations.
Doug Putman, the owner of Sunrise Records, is set to open 45 locations across nine Canadian provinces and six U.S. states this weekend.
Named T. Kettle, the chain will have about 250 employees when they open, which is expected to happen this Sunday, Nov. 1. And the chain hopes to expand beyond that.
Waylaid by the COVID-19 pandemic that walloped foot traffic to malls and stores, DavidsTea went into insolvency proceedings this summer and shortly after announced plans to close about 200 locations and focus more on selling tea online. The Montreal-based tea shop says it will still have 18 locations when all is said and done, but that’s a drastically reduced retail footprint.
The tea shop is just one of many retailers to have been hit hard by the pandemic including clothier Reitmans, fashion chain Le Château, outdoor gear sellers MEC and Sail, fashion chain Mendocino, the company that owns Ricki’s Cleo and Bootlegger, and shoe retailer Aldo.
Retail sales overall only recently got back to the level they were at before the pandemic, and even then unevenly so, as there are wildly different situations in different areas and sectors.
But while the carnage is continuing in some sectors of retail, Putman sees an opportunity.
“When we found that they were filing for bankruptcy we were thinking about it, and then when they said they were closing all their stores, I started reaching out to landlords,” Putman told CBC News in an interview. “Sure enough everyone was pretty interested.”
Putman has a track record of turning around retail chains in sectors others think are doomed. In 2014, he purchased music store chain Sunrise Records. In 2017, he bought up the leases of 70 HMV locations across Canada when that chain went bust and converted them to Sunrise locations.
In 2019, he bought the HMV chain in its home market of Great Britain, and while several locations were closed, nearly 100 are still in operation. Then late last year he spent $10 million US to buy For Your Entertainment, a music, film and pop culture outlet that operates across the U.S.
Now he seems to be trying the same thing in the hot drink market.
“Everyone asked why would I buy a record chain as well, [but] we’ve always done well with the contrarian view so we’re sticking with that,” he said. “It’s definitely a tough time but there’s always opportunity in the tough times if you can see it.”
Food industry consultant Robert Carter with StratonHunter says the plan is a “bold move” considering how niche the tea industry is. Canada is predominantly a coffee-drinking culture, with more than three billion cups consumed per year. Tea, meanwhile, is only about 500 million cups a year.
“It’s going to be a challenge for sure,” he said, adding that sales in the food category overall are only at about two-thirds of what they were before.
Carter says he assumes the rent on those locations must be extraordinarily advantageous. “His deals must be off-the-chart sweetheart deals,” he said.
Retail consultant Farla Efros, president of HRC Advisory, says while restaurants and retail are still hurting, sales of hot drinks such as coffee and tea are faring comparatively better because they are seen as badly needed escape from consumers wary of being locked up at home.
“People want to support local,” she said in an interview. “So people are still going out to coffee shops and get some air and clear their heads.”
Although she had no inside knowledge of the financial terms of the deal between Putman and his landlords, she suspects the endeavour is probably fairly low risk for him.
“He’s probably getting the real estate for dirt cheap, landlords are desperate at this point,” she said, adding that she would not be surprised if the rent on the locations is something like a percentage of sales.
And taking over former tea shops is smart because the infrastructure is likely already in place. “He just needs to paint the sign and turn the lights on,” she said. “He’s such an idea generator, and if anyone can do it he can do it,” Efros said.