How much tea is being sold online
Tea start-up Fitvia : How this founder turned 500 euros into a 50 million company
In the beginning, Sebastian Merkhoffer had nothing more than an idea. And 500 euros. And they were only borrowed from his parents. That was in 2014. Five years later, the 29-year-old turned this purple banknote into a company valued at 50 million euros. And some of these millions flowed into his pocket last week, because Merkhoffer just sold his company called Fitvia to Dermapharm. 70 percent of the shares now belong to the pharmaceutical company from Grünwald near Munich. How did he do it?
The Fitvia story begins in the Hessian Taunusstein, in the living room of Merkhoffer's parents. The business informatics graduate and business economist did not have an apartment of his own at the time - because of the tuition fees - and was looking for a business idea.
“I've always drunk a lot of tea myself,” he says. “Before exams, after sports.” And he noticed that all tea products on the market had a rather old, dusty image. No trace of innovations or new product ideas. Then he had his business idea: tea in cool. “With my product, I wanted to focus on two aspects of tea: the health benefits and a young, trendy image,” he explains.
"The whole house smelled of tea"
But how do you start when you want to sell tea on the Internet? In Merkhoffer's case, with the whole family. “My sister designed the design, my mother filled the tea with me in the living room,” he looks back. He fetched different types of tea from the wholesale market, mixed them according to his ideas and filled them in his own packaging. “There was a smell of tea all over the house,” he says. "We then walked the parcels to the post office every day until we needed a car for them at some point."
Because the demand increased quickly. According to its own information, Fitvia was profitable after just four weeks. In fact, with the tea market, Merkhoffer discovered a growing business area at exactly the right time. The annual turnover with tea in Germany in the years before 2014 was always in the range between 530 and 550 million euros, it has increased significantly since then. In 2018 it was 649 million euros, in four years it should be 723 million. It is interesting that sales remained and should remain constant at 26 million tons of tea. This means that Germans are ready to spend more and more on their tea.
This development goes back to the trend that Merkhoffer anticipated in 2014. Tea has become younger and more hip in the past few years. "Drinks with tea are ready-to-drink teas from the bottle and fit perfectly with the urban lifestyle of young people," said Maximilian Wittig, Managing Director of the German Tea Association, in view of the latest business figures. From his point of view, tea is more in demand than ever “especially in the form of beverages with tea, which offer refreshment to the young scene looking for the hottest trend”.
But in order to benefit from this development, Merkhoffer first had to get anyone to know that tea was being bottled in a living room in Taunusstein. And so he developed a marketing strategy that was still relatively new at the time.
Influencer marketing when it was new
“I needed range,” he says, describing his approach. He summed up: Ads on Google and Facebook cost a lot of money. But there are many people with many fans on Instagram. So why not use their range? "At that time, Instagramers with a few thousand followers often received a few free copies as payment for placing them in a post," he says.
So he asked some of you to take a photo of your tea after all. He relied on faces from television, for example from “Deutschland sucht den Superstar” or “Berlin Tag und Nach”. With success. After every post he noticed how his orders were going up. Merkhoffer discovered influencer marketing even before it became a branch of its own.
Today the whole thing is professionalized. Although Instagram is still the most important marketing channel, Merkhoffer says. In addition, he also uses all other marketing activities from Facebook to Snapchat and maintaining existing customers. Has his sales model been less popular now that influencers have to mark their paid posts as advertising? “After around a year, experience shows that labeling does not change anything at all,” says the founder. “I think that the followers knew beforehand that money would be paid for such posts. The reference "Ad" doesn't change anything. "
Fitvia now has 65 employees and is active in six other European countries. Here too, Merkhoffer works with local influencers. In addition to tea, he has added other products to his range that fit a health-conscious lifestyle, such as muesli and dietary supplements. Fitvia wants to convert around 20 million euros in 2019.
The sale to Dermapharm is intended to initiate the next stage of development. "Dermapharm has its own large development department and its own plants," says Merkhoffer, describing his motivation for the deal. Fitvia can manufacture even more of its own products here. "Dermapharm's experience can also help us with scaling in areas such as logistics or accounting."
The family company, which specializes in off-patent skin and allergy medication, can in turn benefit from Fitvia's modern sales channels. In any case, Merkhoffer remains on board despite the sale and wants to see his company continue to grow. “Together with Dermapharm, we could target the Asian market, for example,” he says. With that, his tea would finally have made it out of his parents' living room all over the world.
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