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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.