Sun, Oct 29, 2006 page12

• Taking on Starbucks ... with green tea

  Kouta Matsuda hopes that US consumers will take up tea drinking as a low-caffeine alternative to coffee

  • NY TIMES NEWS SERVICE
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  Kouta Matsuda once successfully took on Starbucks in the coffee business. Now, Matsuda, a 37-year-old former banker, is challenging Starbucks again -- this time in its own backyard -- by offering new lattes with an Asian twist. They are made not with coffee, but with green tea.

  In May, Matsuda opened the first US store of his Tokyo-based chain, Koots Green Tea, in Bellevue, Washington. Matsuda, who spent his teenage years in Lexington, Massachusetts, says he is betting that the novelty of the drinks, along with rising interest in the health benefits attributed to tea, will entice US customers, even in the nation's most coffee-crazy city.

  "Seattle is the home of Starbucks," Matsuda said in an interview. "If gourmet tea drinks can succeed in Seattle, they can succeed anywhere."

  

  Kouta Matsuda sits outside one of his Koots Green Tea shops in Tokyo on July 21.

  PHOTO: NY TIMES NEWS SERVICE

  Matsuda is hoping to tap into the growing popularity among US citizens of tea as a low-caffeine alternative to coffee. US sales of tea have quadrupled over the last decade, to US$6.2 billion, according to the Tea Association of the USA, a trade group.

  But much of that was chilled beverages like iced tea. In hot drinks, coffee is still king, with US$11 billion in sales last year, according to the Specialty Coffee Association of America. There are 13,900 cafes in the US serving primarily coffee products, versus fewer than 2,000 serving primarily tea, the associations said.

  Tea's proponents point to recent research suggesting that tea -- particularly green tea -- is high in antioxidants that are said to fight cancer. But food industry analysts say it will be hard persuading people to swap their beloved coffee beans for tea leaves.

  "Tea might take off, but it won't be an overnight thing," said Marcia Mogelonsky, an analyst at the Mintel market research group in Chicago. "American culture will take time to embrace green tea, just as it took time to embrace sushi."

  Matsuda said he was trying to overcome such unfamiliarity by making his stores look and feel like specialty coffee stores. His 10 Koots stores in Japan have a similar layout to those of a Starbucks outlet, only with light wood coloring and tatami mats that evoke a Zen temple.

  They also offer a familiar list of drinks, just without the coffee. A large latte made with organic "matcha," the powdered green tea used in Japan's traditional tea ceremony, costs US$3.75. There are also a roasted green tea latte and a matcha Americano. An extra shot of matcha costs US$0.50.

  Matsuda said the Bellevue store had yet to turn a profit, though it was attracting about 400 customers a day -- half the traffic of stores in Japan. He said he spent the first month after the US store's opening standing in front, asking passers-by to step inside.

  "About 6 in 10 took a look at the menu and just walked away," Matsuda said. "But a lot of those who tried it have become repeaters. I started seeing the same faces two and three times a day."

  Matsuda plans six more stores in the Seattle area by the end of next year, the same number he plans to open in Japan. He also hopes to expand nationally, moving into other cities like San Francisco and New York.

  Starbucks has no intention of switching from its coffee-based format, even if Koots takes off, said a Tokyo-based spokesman, Norio Adachi. But in a bow to tea's growing popularity among Americans, Starbucks started selling a green tea Frappuccino last fall in the US.

  Matsuda acknowledges that asking US consumers to switch to tea may be a hard sell. But he has tackled tough tasks before. Ten years ago, Matsuda and his investors won the Japan franchise rights for Tully's, the Seattle-based coffee-shop chain.

  They built it into Starbucks' most visible challenger in Japan, where Tully's has more than 300 stores compared with more than 600 for Starbucks.

  With waved back hair, no tie and a navy blue shirt, Matsuda stands out in a nation of gray-suited businessmen. At age 5, he and his family moved to Senegal, where his father worked for a fish importer. Three years later, he moved to Lexington, Massachusetts, where he played on a high school football team.

  Matsuda says his time overseas has made him more willing to try new things, like quitting a stable job at a big bank 10 years ago to try his hand as a coffee entrepreneur.

  Another was using green tea to make lattes and other espresso-based drinks. He says the idea came to him one evening while operating the espresso machine at one of his Tully's stores.

  He said he tried putting matcha, the green tea powder, into an espresso filter. The concoction exploded, covering him and the counter with hot green goo.

  Undaunted, he finally modified an espresso machine for matcha, which has a finer grind than espresso and does not need filters, Matsuda said.

  He opened the first Koots three years ago in central Tokyo.
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