According to Global News Canada, “DavidsTea is to close 82 Canadian stores amid coronavirus pandemic. Insolvent beverage retailer DavidsTea is closing 82 stores in Canada and all 42 of its stores in the U.S. as it focuses on its e-commerce business and supplying grocery stores and pharmacies”.
Great case study for learning the impacts of COVID, where the giant companies are getting hit massively. David’s tea was a very high-profile company in Canada; it had put Tea drinking on the Canadian map. It started with a grand mission of making tea as an alternative drink in Canada and possibly the USA. It went public in 2015, and shares price was as high as USD 30. It tried to become the Starbucks of Tea, a huge gamble, which fell flat.
However, what David’s Tea did was it spent lots of advertising dollars and attracted lots of excellent public relations attention on tea as an alternative beverage to Coffee. It was timely. Younger and even older generation, who are better informed and are health conscious, are drawn to tea drinking more.
The tea market, especially the specialty tea market in Canada, has been boosted due to what David’s Tea did to popularize tea.
My Take: Asset Lite models for thriving businesses such as “Tea” work the best, keeping the earnings high and assets low, this is the mantra for today’s situation with COVID affecting retail stores.
This business model works well for most start-ups. Mostly new businesses start with a good idea but fail because of choosing the wrong business model. They start with high fixed costs and no revenue. The perception that a heavily invested business would generate high revenues fails miserably. Some companies do well, but most have struggled financially. The focus gets shifted to acquiring operational resources for the company and not on generating revenue, at least break-even.
David’s tea is learning for young entrepreneurs who must adopt an asset-light business model at the company’s very early stages. Businesses can survive, starting with Zero assets and leveraging other factors such as technology, marketing, etc.
As always, I will leave with my favorite business quote:
“I knew that if I failed I wouldn’t regret that, but I knew the one thing I might regret is not trying.”
—Jeff Bezos, founder, and CEO of Amazon
Image Source: https://commons.wikimedia.org/wiki/File:DAVIDsTEA_David%27s_Tea_Chest.jpg
For more on Davids Tea, click here
Recent news on Davids Tea, courtesy https://www.cbc.ca/news/business/davids-tea-restructuring-1.5
Global News, https://www.theglobeandmail.com/business/article-davidstea-closing-82-stores-in-canada-and-exiting-us-market/
