case3

LookoutLipton,herecomesOolong!
Heatingupanoldproduct

ChineseEmperorShenNungwasboilingwaterunderaCamelliasinensistreein2737BC.Whensomeleavesfell

intothepot,hefoundtheresultinginfusionpleasant.So,thelegendhasit,teawasborn.Fromthisaccidentflowed

theOpiumWars,theannexationofHongKongandritualsthathavemadeteafarmorethanjustadrinkinthe

greatteadrinkingnationsofChina,JapanandBritain.
ThomasJ.LiptonCompanyhasbeenintheteabusinesseversinceCuttySarkandotherteaclippersraced

aroundCapeHornandtheCapeofGoodHopetobethefirsttotheEuropeanandAmericancoffeehouseswith

theircropfromtheOrient.Bythe1990stheexcitementhadleftthedecliningteamarket.Toenliventheold

fashionedproductmarketleader,UnileverresortedtosellingLipton,alongwithitsotherleadingbrands,Brooke

Bond,PGTips,RedLabelandTaaza,usingfranticsalespromotionsandcomicalcharacters.Then,theboring

businessheatedupbycoolingdown.
Chalkupthechangetothosefickleconsumers.Forgetsoftdrinks.Theyweretherageofthe1980s,asthe

colacompaniesaddeddieteverythingtotheirlinesandexperimentedwithallsortsofflavours.Forgetsports

drinks.Theybecametheglamourdrinksoftheearly1990sasthesoftdrinkmarketlevelledandthecola

companiessearchedforgrowthopportunities.Forgetthoseflavouredsparklingwaters,likeOasisandPerrier.They

hadawildrideintheearly1990sandbecameahealthsensation.Forgetcoffee.Afterbeingbatteredbysoftdrinks,

thevenerablestandbyhasrisenaspeoplehavebeguntoturnawayfromalcoholicdrinksandentrepreneurshave

rediscoveredthecoffeehouse.However,todayshotdrinkisicedtea.Yes,icedtea.Infact,itsicedteainabottle

orcan,alreadypreparedandreadytodrink.Nofuss,noboilingandnoteabags.
Icedteaisnotnew.Wecantraceicedteasinventiontothe1904WorldsFairinStLouis.Richard

Blechynden,apromoterofIndianandCeylontea,founditimpossibletopeddlehishotteainthestiflingMissouri

heat.Indesperationhedumpedsomeicecubesintohisteaanddiscoveredthatthespectatorswerewillingtogulp

anythingcold.Icedteainacanisntneweither.Thatsbeenaroundsincetheearly1970s,butithadneverbeen

morethanabliponthebeveragemarketsradarscreen.

Addingflavour

Flavouriswhatsnew.Snapplestartedthetrendbybuildingaregionalcultfollowingbasedonbottledicedteas

thatfeaturedzanyflavourslikecranberry,peachandraspberry.Snapplesflavoured,hotfilledtea(the

manufacturerbottlestheteawhileitisstillwarmfrombrewing)offeredconsumersabettertastingtea.Before

Snapple,Liptonandothersofferedicedteasinplainandlemonflavour.Young,trendsettingconsumersbought

Snappledirectlyfromicecabinetsinconveniencestoresanddelicatessensanddrankitstraightfromthebottle.
Theflavouredteashitabullseyewithconsumers.Theywerewillingtomoveawayfromtraditionalcolasin

searchofnewflavours.Consumersseemedtohaveashortattentionspanfornewproductsandwerewillingtotry

newdrinks.TheywereinterestedinsocalledNewAgebeveragesdrinksthatappealedtotheirdesirefor

healthier,lighterrefreshment.Consumersrespondedtotheallnatural,nocalorie,relaxingandrefreshingclaims

thatthenewagebeveragesmade.Increasinglyonthego,consumersalsolikedtheconvenienceandavailabilityof

readytodrinkteas.

Formingteams
Despitethesmallsizeoftheicedteamarket,thebigplayersnoticedthegrowthrateandjumpedin.CocaCola

madethefirstmovebyteamingupwithNestltoformCocaColaNestlRefreshments,combiningCocaColas

powerfuldistributionnetworkwithNestlsteaexpertiseanditsNesteabrand.PepsiColafollowedbyjoining

forceswithThomasJ.LiptonCompany.BarqsenergiseditsLuzianneteabrand,A&Wannounceditwouldmake

anddistributeTetleytea,CadburyuncoveredlittleknownAllSeasonstoserveasitsteapartnerandPerrierjoined

forceswithCelestialSeasonings.
Liptonwasalreadyno.1intheteamarket,butlikeCocaCola,Pepsistopmanagementarguedthatthe

companysalliancewithLiptonwouldleveragePepsisdistributionstrengthwithLiptonsleadershipinteato

produceacantmissproposition.LiptonspresidentobservedthatthenewpartnershipwouldmakeLiptonas

widelyavailableasPepsi.
TheentranceofPepsi,CocaColaandtheircompetitorsshouldinvigoratethereadytodrinkteamarket.One

observernotedthattheicedteamarketwasstillasmallmarketanditwasgettingveryovercrowded:almost200

newreadytodrinkteas.Thecompetitorshopedtogenerategrowthbydustingoffteasboringimageandrecasting

itasanatural,betterforyoubeverage.Further,scientificevidenceemergedthatteainhibitedcertaintypesof

cancerinlaboratorymiceandseemedtobelinkedtolowercholesterolrates.Lipton,NesteaandSnapplelured

customerswithnewflavoursandpointedoutthatlackofcarbonationmakesicedteaeasiertodrinkrapidlyandin

quantity.
AlthoughCocaCola/NestlsNesteasalessoared,SnapplesandLiptonshavegrownevenfaster.Asa

result,Nesteanarroweditspromotiontotarget18to29yearoldswithapromotionalblitzconsistingof

sponsorshipsandsampling.Itdispatchedfive18wheelerdemonstrationtrucks,whichitcalleditsCoolOut

Caravans,tosportingevents,themeparksandbeachesin60markets.
PepsicontinueditscolastylemarketingforLiptonteas.ItsradioadsarguedthatSnappleismixedupfroma

powder,butLiptonisrealbrewed.PepsialsopromotedLiptoninsupermarketsbyofferingcustomersvalue

packsthatcontainedonebottleeachofthreenewdrinks:LiptonOriginal,OceanSprayLemonadeandAllSport

sportsdrink.PepsialsopursuedsponsorshipofaRollingStonesconcerttour,towhichitwouldlinkamassive

samplingprogramme.
Becauseofitsefforts,LiptonsteasseemedreadytounseatCocaCola/Nestlwhich,despiteitsearlymarket

entry,wasfallingbehindintheicedteawars.LiptonwastakingmarketsharefrombothSnappleandNestea.One

observernotedthatPepsihaddoneabetterjobwithLiptonandnewagebeveragesthantheCokesystemhad.

Perhapsasaresult,CocaColaandNestlannouncedtheyweredissolvingtheirrelationship.CocaColawould

taketheprimaryresponsibilityformarketingreadytodrinkNestea,whileNestlwouldfocusonreadytodrink

coffees.AnalystssuggestedthatthenewarrangementwouldgiveCocaColamorespeedandflexibilitybecauseit

wouldnothavetodealwithNestloneverydecision.

OolongentersfromtheEast

JustasLiptonseemstobepullingaheadinthenewteamarket,athreatloomsfromteashomeland.ShinShii

IndustrialCompany,alittleknownbeveragecompanybasedinadustyindustrialcityinsouthernTaiwan,has

emergedasagiantkillerintheTaiwanesebeveragemarket.ShinShiioriginallylaunchedKaiShiioolongtea,a

cannedreadytodrinkicedtea.AlthoughicedteawaspopularinotherPacificRimcountrieslikeJapan,the

Taiwanesehadneverheardoficedtea.Theydrankonlyfreshbrewedhottea.
ShinShiianditsadvertisingagencyMetaphysicalPunctualityAdvertisingCompanyusedanoffbeatmulti

milliondollaradvertisingcampaigntopropelKaiShiifrombackshelvesinmomandpopstorestoprominent

spotsinrapidlygrowingconveniencestorechains,grocerystores,hypermarketsandwarehouseclubs.Theads

proclaimedthatKaiShiiwasthechoiceofanewbreedofpeopleinanewworldandfeaturedneopeople

whospannedallagegroups,eventhetraditionboundoldergeneration.TheadspresentedKaiShiiasanatural

drinkthatfitswithpeoplesconcernsfortheirhealthandtheenvironment.Someadsmadefunofinebriated

businesspeoplethatdrankforeignliquors,picturingthemalongsidefreshfacedKaiShiiteadrinkers.
Next,KaiShiisadvertisingteamtravelledtoChinatofilmscenesofChinesepeasantscladincolourful

traditionalcostumes.TheyputthesescenesinKaiShiiadsthatplayedontheemotionsgeneratedbyTaiwans

growingtieswithmainlandChina.TheadswonafirstplaceawardattheCannesFilmfestival.
Throughaggressiveadvertising,KaiShiinowdominatesthenearly100brandsintheOolongsectorof

Taiwansreadytodrinkteamarket.KaiShiidoubleditsshareto25percentoftheoverallmarketand70percent

oftheOolongteasegment.

Furthermore,consumerdemandforreadytodrinkicedteahascutsharplyintosalesofcarbonatedsoft

drinks.SoftdrinksalesinTaiwanhaveplummetedby16percent,whilereadytodrinksaleshavemorethan

doubled.ThesalestrendhitCokeandPepsiespeciallyhard,andPepsisaiditwouldmovetoreducecosts.
Next,KaiShiisadswentglobal,featuringyoungChineselivinginNewYorkCityandEuropeansliving

inLondonandParis.TheseadswerejusttheopeningsalvosasShinShiiturneditssightsonforeignmarkets.

ItsmanagersplantousetheskillstheyhavehonedinTaiwantoentertheUSmarket.
Inenteringwesternmarkets,ShinShiiwillfacethechallengeofintroducingconsumerstothesmoothtasting,

ambercolouredoolongtea.LiptonandPepsiwillfacethechallengeofanewcompetitorthathasalreadyshownit

cansucceedinsellingicedteaandintakingsharefromsoftdrinks.Thelocalproducersarenotstandingstill.They

nowintendtousehotteatodisplacecolasandothersoftdrinkssoldtopeopletoconsumeonthehoof.Unilever

arenowaddingtoitsLiptonicewitharadicalnewwayofsellinghottea.Havingspent10million([***]16.6

million)developinghotcanstobesoldinconveniencestoresandpetrolstations,itwasreadytotestmarketthe

productinManchester,England.BrookeBondsPGTipswillbesoldinringpulltinskeptat56Cinaheated

cabinetonshopcounters.OnsalealongsidePGTips,withorwithoutsugar,willbeRedMountaincoffee,

sweetenedorunsweetened,andChoky,theleadingFrenchhotchocolatebrand.WatchoutOolong,BrookeBonds

waiting!

Questions
1.

Whatbasescancompaniesusetosegmenttheicedteamarket?

2.

Whatpotentialmarketsegmentscanyouidentify?

3.

Howwouldyougoaboutforecastingdemandintheicedteamarketandinanygivensegment?

4.

WhichtypeofmarketcoveragestrategyshouldPepsi/Liptonadopt?Why?HowshouldtheypositionLipton

icedteasandBrookeBondcannedteas?
5.

IfyouwereadvisingShinShii,whatmarketingstrategyrecommendationswouldyoumakeconcerningits

entryintothemarket?
6.

HowshoulditpositionKaiShii?

SOURCES:SallyD.Goll,Taiwansoftdrinksalesbreakfortea,WallStreetJournal(29July1994),p.A7B,usedwith

permissionofWallStreetJournal.Seealso:LaurieM.Grossman,CocaCola,Nestlareendingventureinteaandcoffeebut

planotherties,WallStreetJournal(30August1994),p.B3;LauraBird,TroubleisbrewingforSnappleasrivalsfightforiced

teasales,WallStreetJournal(9June1994),p.B4;EricSfiligoj,Ladiesandgentlemenandbeveragesofallages,Beverages

World(April1994),pp.427;GerryKhermouch,Nesteaicedteaplanssummerpush,Adweek(21March1994),p.13;Michael

J.McCarthy,Competitionheatsupicedteaindustry,WallStreetJournal(15June1993),p.B1;KevinGoldman,Snapple

goesbigtimefornewagedrink,WallStreetJournal(20April1993),p.B6;GregW.Prince,Teaforall,BeverageWorld

(April1992),pp.2432;MaggieUrry,TeainacanishottipfromBrookeBond,FinancialTimes(13December1997),p.4;

GaryMead,Brewingahealthierimagefortea,FinancialTimes,7April1997(FTwebarchives);Twinings,

http://www.cuttsark.org.uk/twining;Lipton,http://www.lipton.com;TeaCouncil,http://www.teacouncil.co.uk.