Site-Wide Activity Forums Tea Conversations Blue Oceans and tea or, How to succeed in the tea industry

8 replies, 4 voices Last updated by  Xavier 7 years, 4 months ago
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  • #6211

    peter
    Keymaster
    @peter

    Am reading the book Blue Ocean Strategy for my Global Business Strategy class and I have to admit that I get pretty excited when I think about applying this concept to the tea industry. In essence, Blue Ocean talks about creating a market space to operate outside and away from the competition so that your efforts are not competing with the existing marketplace.

    I’m just getting started on writing an assignment doing a general application of the strategy to the tea industry. I’ll be posting my analysis on a blog or maybe in this thread when I am done with it, but the most fascinating part of learning about it is that it is validating many of the assumptions I’ve made about the tea industry over the last 2 years and where the greatest opportunities and profits can be found (the grocery store is one of my biggest hitting points on this).
    I see parts of the tea industry that are very competitive and others that are not, I also see companies that are competing with each other in very competitive ways. There are established companies that have made entrances into new markets that are competing with other companies in that market. I estimate that most of the market movement we have seen in the tea industry in the past 2-3 years has been in what has been called the competitive, and bloody, red ocean environment. Mind you, because of the growth of the tea market, there is a lot of space in that competitive market so there is plenty of room for new entrants into that market.
    But what if someone were to create a true blue ocean market space for tea and jump into it feet first. That idea is what has been called the Starbucks of Tea. However, no one has found it yet… 
    However, if you are still thinking that the Starbucks of Tea is going to be the answer, I would suggest that you are still thinking in the realms of the competitive red ocean. A better analogy, and one that better represents the blue ocean mindset, might be the Yellow Tail of Tea (if you read the book, you’ll know what I mean!).
    Are you familiar with Blue Ocean Strategy? Have you read the book?
    The wikipedia page has a decent overview about the concept: http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
  • #6212

    Anonymous @

    I haven’t read the book, but glanced at the wiki explainer and as a concept, it makes a lot of sense.

    I just wanted to touch on the idea of the grocery store being the “undiscovered country” for tea, so to speak, as you’ve alluded to.  It’s already started being tested as such for both coffee and tea, and the response has been lukewarm.  I wouldn’t really categorize it as the “blue ocean”  If you walk into any major mainstream chain, you’re going to find the same 4 or 5 tea companies competing with each other.  Lipton has even started marketing a loose leaf package of their ubiquitous orange pekoe.  So the tea consumer that has an inkling that loose leaf tea is better than bagged tea will still be reaching for the Lipton rather than trying something different.  You won’t find a Pu-Erh tea for sale in a Kroger or a Super Valu. 
    And the mega-grocers like Target and WalMart brand their own teas alongside the 4 or 5 bag brands.  There’s no room for the smaller, quality tea brands to introduce their wares.  They have more success at stores that market health – Whole Foods and Co-ops.
    The health market for tea was once the blue ocean, now turned red with the number of wagons on board.

    Starbucks has already tried to tap the grocery market with Tazo and their flavored coffees, even re-branding their teas as “full-leaf” and so forth, but I haven’t heard of it being a huge success.

  • #6215

    peter
    Keymaster
    @peter

    One thing that is unique about the ideas presented using blue ocean, is that it actually allows you to plan and visualize your differentiation. One of the fundamental concepts is to create a strategy canvas in which you list all the elements of your industry. Then you rank your competitors and what the industry does as a whole and how they invest in each of those elements.

    Then you decide how you want to address each element. You either want to increase investment in it, reduce it, eliminate it, or create a new element.
    For example, in supermarkets (I use interchangeably with grocery stores), the tea bag is king in probably 90% of the markets. So are small cardboard boxes wrapped in cellophane. The boxes are always pretty. A blue ocean to attack supermarkets would likely involve reducing and eliminating those particular elements (at least they would be my strategy).
    Additionally, another concept to think about in blue ocean is that in planning, the focus shifts away from competitors to alternatives and customers to non-customers. This last part is very important. Who are the non-customers? Those are the folks who stand about 20 feet down the tea aisle near the coffee. So, if you are trying to reduce and eliminate the cold and traditional packaging of the tea aisle (which will be necessary for this approach) then you might as well do the thing that will make coffee drinkers more comfortable. Package your tea in coffee bags.
    Traditional bulk tea packaging is not suitable for grocery store shelves. They don’t organize or pack in easily. Coffee bags do, and they break down the psychological barrier of switching to a frilly-looking box of tea. The other thing that is king in grocery stores is packaging, and this is true on every aisle. Grocery packaging a study in human psychology and behavior – marketing textbooks have whole chapters on it and things like color and shape affect behavior (there is a reason why the majority of the laundry detergents are in blue).
    These are just a few of the ideas about how to a blue ocean approach to tea could be implemented. There is much more to this of course, and this only touches the surface.
  • #6217

    peter
    Keymaster
    @peter

    Am in the process of writing my final project/paper for this class. Have learned a great deal about this strategy and way of looking at business opportunities.

    Interestingly, as I went through the methodology and surveyed the idea – it still seems like a good one. Here is the Blue Ocean Strategy Canvas. The bottom displays the factors of competition and the scale is the level of investment.
  • #6218

    lahikmajoe
    Participant
    @lahikmajoe

    This stuff is so interesting Pete, and I’ve been following your comments as you’ve made your way through this course.

    Can’t wait to pick your brain about more of the ideas before I start my tea-related empire.
  • #6219

    peter
    Keymaster
    @peter

    Here’s a link to my final paper for my class: Blue Oceans of Tea

    The class was called Global Strategy and Competition, was interesting but went by quick. It was only an 8 week class. Anyhow, the paper actually only covers about half of the details of a Blue Ocean strategy, the teacher is lazy and specifically said that they shouldn’t be more than five pages.
    A properly written strategy document for the tea industry (with a focus on grocery store tea), would easily run about 15-20 pages or more. There are a lot of elements in the blue ocean methodology that would need to be covered in a properly prepared document.
  • #6785

    peter
    Keymaster
    @peter

    @xavier I think one of the things that got my attention the most was the section about who the non-customers were. More specifically, how they are divided up into the 3 tiers of non-customers.

    I looked at this in specifically in terms of loose leaf tea.

    Defined this way:
    1. “soon to be non-customers”those on the edge of the market, ready to jump ship
    I looked at these as primarily tea bag users. Since they are convenience seeking customers, they are not loose tea drinkers, but they exist on the edge of the market. Trouble is, a dedicated tea bag drinker, doesn’t know what to do with loose leaf tea.

    2. “Refusing non-customers”those who consciously choose against your market
    Plain and simple, these are coffee drinkers. However, I’ve come to see this group as the significantly most important non-customer base for a new company. According to a Blue Ocean strategy, seeking out non-customers is one of the keys to bypassing the competition. When the competition is fighting over a finite segment of existing loose leaf and tea bag drinkers, a blue ocean strategy will jump completely around those and focus on marketing to coffee drinkers. The important advantage this non-customer group has over the tier 1 tea bag group is that they are already familiar with the format of loose tea because of the familiarity with coffee beans, ground coffee, and coffee machines. I believe that coffee drinkers are an easier transition to loose leaf tea than are tea bag drinkers.

    3. “Unexplored non-customers” those who are in distant markets
    This one is a lot harder to define since the general consumer base can easily be divided into coffee drinkers and tea drinkers, and there isn’t much left but for those who chose to not drink either. Another option here to explore are the ready-t0-drink (rtd)drinkers. RTD products as an experience are significantly different than dry products that still need to be processed by the consumer and they attract a different customer. These customers might even include those who only drink iced tea served in convenience store and restaurants. They are extremely far away from the loose leaf tea market in that they prefer not to handle the preparation of their tea at all….of course, again, they may also be coffee drinkers who might brew coffee at home….

  • #6801

    peter
    Keymaster
    @peter

    I thought about that, but then I look at it from this perspective:

    Our average grocery store coffee aisle is pretty amazing. If you love coffee, an ordinary grocery store is going to give you everything you need. Whole beans, ground coffee and so on. It is extremely common for grocery stores to even have a coffee grinder right there in the aisle so customers can make fresh grounds for themselves. The amount of freshness and quality available is astounding.

    However, about 2 meters away from the coffee section, in the same aisle tea is found. However, because of packaging and product available, there is nothing compelling in the tea section to convert a coffee drinker – for that reason, the coffee drinkers actively decide against tea.

    Enter loose leaf tea. The experience of brewing up loose tea is not vastly different from handling coffee. There is dry product, a filter, a brewing machine or mechanism and hot water. There are strong methodical similarities between brewing fresh ground coffee and brewing loose leaf tea – I don’t think they are an entirely different market. I’m not sure yet that many coffee drinkers are opposed to drinking tea per se, it appears more that they simply chose not to (which would make them refusing non-customers).

    A loose leaf tea drinker has more in common with a brew-it-at-home coffee drinker than they do with a ready-to-drink bottled tea drinker, because there is an appreciation of product, quality, method, technique and equipment. Don’t let the fact that RTD drinkers are drinking tea that they will convert to loose leaf tea – that’s the same group of people that goes onto Twitter and talks about how great McDonald’s sweet tea is. Loose tea companies who start selling bottled tea in an attempt to generate eventual loose tea buyers are marketing to the wrong crowd.

    Mark my word, coffee drinkers are the new tea drinkers…

  • #6834

    Xavier
    Participant
    @xavier

    @peter Point taken and that is if you manage to convince them that tea is not something for old ladies and ill people.

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