Les Caracteristiques Du the de Luxe

The characteristics of a luxury tea How to define a luxury tea? Charihane Benstaali April 2011

April 2011

The characteristics of luxury tea HEC Paris 2011

Table of Contents Table of Contents.............................................................................................. 2

Special Thanks .......................................................................................... 6 INTRODUCTION ............................................................................................ 7 HOW IS THIS STUDY ORGANIZED? ................................................................................... 8 FIRST: Define the Market...................................................................................................... 8 SECOND: Identify the market leaders and their strategies .................................................. 8 THIRD: Draw the main conclusions ..................................................................................... 8

KEYS ELEMENTS .......................................................................................... 9 I. MARKET FUNDAMENTALS .................................................................... 10 1. How was tea born? ...................................................................................... 10 1.1 What are the legends surrounding the tea’s birth? : The tea dream potential ................ 10 Chinese legend ..................................................................................................................... 10 Indian Legend ...................................................................................................................... 10 Japanese Legend.................................................................................................................. 10 1.2 Legend aside, how was tea born? ................................................................................... 11

2. How is tea made? ........................................................................................ 13 2.1 What is the tea producing process? Why tea cannot be a flawless product? ..................... 13 Tea categories...................................................................................................................... 13 White teas, Chinese specialty from the Fujian region. .................................................................. 13 Wu Long (Oolong) teas, specialty of the Fujian province in China and of Taiwan...................... 15 Black, Smoked and dark teas......................................................................................................... 15

2.2 How is tea classified?......................................................................................................... 17 The five main tea grades ...................................................................................................... 17 Dust –D.......................................................................................................................................... 17 BOP – Broken Orange Pekoe ........................................................................................................ 17 OP - Orange Pekoe ........................................................................................................................ 17 FOP – Flowery Orange Pekoe ....................................................................................................... 18 GFOP Golden Flowery Orange Pekoe .......................................................................................... 18 TGFOP Tippy Golden Flowery Orange Pekoe ............................................................................. 18 FTGFOP Fine Tippy Golden Flowery Orange Pekoe ................................................................... 18 SFTGFOP Super Fine Tippy Golden Flowery Orange Pekoe ...................................................... 18

2.3 What are the types of choice of tea from around the world? ............................................. 18 Darjeeling Tea ............................................................................................................................... 18 Assam Tea ..................................................................................................................................... 18 Nilgiri Tea...................................................................................................................................... 19 Earl Grey Tea................................................................................................................................. 19 Smoked tea .................................................................................................................................... 19

3. Assessing the quality of the tea: what are the characteristics that will matter while implementing a luxury strategy? ............................................................ 19 4 French tea market overview ......................................................................... 20 4.1 What are the key characteristics of the French tea market?............................................... 20

5 French luxury and premium* tea market overview ....................................... 20 5.1 Who are the players? .......................................................................................................... 20

6 Understanding the structure of supply and demand...................................... 22 2

The characteristics of luxury tea HEC Paris 2011 6.1 Who are the suppliers? ....................................................................................................... 22 6.2 Who are the consumers? .................................................................................................... 25

7 Brief overview of the main premium and luxury tea brands.......................... 27 7.1 Luxury, fashion and premium positioning triangle of the traditional French tea market .. 27 7.2 A shift in positioning and a refreshed French tea market. ................................................. 28 7.3 How about the mass market and its premiumization? ................................................... 29 Part 1 in a nutshell.................................................................................................................... 30

II THE MARKET LEADERS......................................................................... 32 1 Luxury tea and packaging: Loose tea or in bags? The importance of packaging in the definition of a luxury tea ....................................................................... 32 1.1 The Lipton product range example .................................................................................... 32 Lipton, the business model................................................................................................... 33 A global success ............................................................................................................................ 33 A business model of vertical integration ....................................................................................... 34 A global and unified strategy......................................................................................................... 35 A broadened product range with the introduction of pyramidal tea bags...................................... 35 Huge investments in communication ............................................................................................ 35

The Lipton repackaging strategy ......................................................................................... 36 The pyramidal tea .......................................................................................................................... 36 The box packaging......................................................................................................................... 37 Future and performances of the new packaging ............................................................................ 38 Where does the price increase come from? ................................................................................... 39

How did Lipton calculate the premium based on hedonistic values?.................................. 40 Targeting the top and lower end of the market through product differentiation ........................... 41 The Lipton Product range .............................................................................................................. 41

Analysis ................................................................................................................................ 44 A very competitive first price ........................................................................................................ 44 A wide range of product ................................................................................................................ 44 Important price variations based on this diversity......................................................................... 44

Conclusion ........................................................................................................................... 45 Some downsides I would like to point out in the Lipton trading up strategy................................ 46

1.2 Bags yes but not any bags .................................................................................................. 46

2 Mariages Freres: The French luxury tea?..................................................... 47 2.1 History of the Brand........................................................................................................... 47 2.2 The dream starts in the stores............................................................................................. 48 2.3 The products and services .................................................................................................. 49 How to create a luxury tea?................................................................................................. 49 How to organize the product range? ................................................................................... 49 No luxury product without services: How to create the shopping experience? .................. 51 Here, the service is part of the product and it is all the more important since the customer is not very knowledgeable in this market. In this sector it is very easy to create a luxury experience guiding the customer through the wide tea selection............................................. 51 Product Extensions .............................................................................................................. 51 2.4 Very selective distribution ................................................................................................. 51 2.5 Traditional communication based on positive word-of-mouth and public relations ......... 52 2.6 A high relative price........................................................................................................... 52 2.7 Competition........................................................................................................................ 53

3 Maison des Trois Thés: Example of a strong luxury store and a weak brand. 54 3.1 The importance of direct sourcing ..................................................................................... 54 3.2 “The ingredients of the luxury product: complexity and work”* ....................................... 55 3.3 The physical scarcity of the products and technical scarcity of the store. ......................... 55 3.4 Exploration of the travel dream: a travel through time and space. .................................... 56

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The characteristics of luxury tea HEC Paris 2011 3.5 Why does it fail in creating a luxury brand? ...................................................................... 56 “On the importance of the label” ........................................................................................ 56 “Luxury: the product and the brand”.................................................................................. 57 It lacks the strong cultural dimension.................................................................................. 57

4 TWG: A Copy Paste of Mariage Freres business model in South East Asia, how to create luxury in Asia? ................................................................................. 57 4.1 TWG History...................................................................................................................... 57 4.2 TWG’s successful strategy ............................................................................................. 58 International Presence .............................................................................................................. 58 A very selective distribution................................................................................................. 58 A brand platform similar to Mariage Freres....................................................................... 59 BRAND PLATFORM ........................................................................................................... 59 4.3 The reasons for success ...................................................................................................... 59 Luxury and Tradition ........................................................................................................... 59 Luxury and services ............................................................................................................. 60 The tea grand crus selection ................................................................................................ 60 Key figures ........................................................................................................................... 60

5 THE KUSMI CASE: A thousand year old product sold in the 21st century style ....................................................................................................................... 61 5.1 Small introduction to the history of KUSMI...................................................................... 61 5.2 The brand renovation ......................................................................................................... 61 5.3 The French-Russian tea brand of the 21st century.............................................................. 62 The tradition and modernity .......................................................................................................... 62

Kusmi fashion, premium and luxury triangle ...................................................................... 63 First: A Premium Strategy ............................................................................................................. 63 Second: A Fashion strategy ........................................................................................................... 63 Third: Luxury dimension............................................................................................................... 64

5.4 The strength of the brand lies in a very coherent marketing mix....................................... 65 A strong positioning............................................................................................................. 65 A coherent marketing mix with the premium, fashion positioning.......................................... 66 Price: A simplified range of prices nearing an average of 12 to 13 Euros .................................... 67 Place: A selective yet not exclusive distribution model ................................................................ 67 Promotion: a traditional communication model targeting young women ..................................... 68 Product: A simplified offering....................................................................................................... 69

5.5 What evolutions for the brand? .......................................................................................... 70 On the necessity to innovate ................................................................................................ 70 On the necessity to strengthen the retail network.......................................................................... 71 Possible Product extension ............................................................................................................ 72

5.6 The International Development.......................................................................................... 72 ASIAN DEVLOPMENT: turn a premium experience into a Luxury one through a pricing and localization strategy...................................................................................................... 73 JAPAN.................................................................................................................................. 73 Highlight the Paris Origin.............................................................................................................. 73 Trading up Strategy ....................................................................................................................... 73 How to communicate the message to Asian people?..................................................................... 74

USA Development ................................................................................................................ 74 A market with a high potential in the high quality loose tea ......................................................... 74 A different approach to fine tea ..................................................................................................... 76 An adapted strategy focusing on female consumers aged 30-40, highlighting the fashion and well-being aspects.......................................................................................................................... 76

Conclusion to the international development of Kusmi....................................................... 77

6. Special T ..................................................................................................... 77 6.1 Market context ................................................................................................................... 77

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The characteristics of luxury tea HEC Paris 2011 6.2 The Special T value proposition......................................................................................... 78 The product .......................................................................................................................... 78 Individually portioned aluminum capsules.................................................................................... 78 Patented Special T machine but might license their production to manufacturers in the future ... 78

The Special T universe ......................................................................................................... 79 The pluses of Special T ........................................................................................................ 80 6.3 Comparison with Nespresso............................................................................................... 81 Brief reminder of the pluses of Nespresso: .......................................................................... 81 Why Special T could do better in its promises to the customer? ......................................... 81 In term of Design ........................................................................................................................... 81 In term of perceived functionality ................................................................................................. 84

6.4 The challenges around the product..................................................................................... 85 The environmental impact ................................................................................................... 85 The multiplication of the machines ...................................................................................... 85 6.5 How to reach the success of Nespresso?............................................................................ 86 Strategy enhancement .......................................................................................................... 86 The coffee bean and tea leaf example .................................................................................. 86

7. Le Palais des Thés, the passion of the “oenology of tea” ............................... 87 7.1 The Brand history............................................................................................................... 87 7.2 Le Palais des Thés’ universe .............................................................................................. 88 A selective distribution model, a wide range of “tea selections”........................................ 88 An unperceived differentiation through the value proposition ............................................ 88 An unusual selection process: the expression of a passion ................................................. 88 An unconventional supply chain model ............................................................................... 89 A Strong corporate culture .................................................................................................. 89 7.4 The high luxury potential in contrast with the brand identity:........................................... 90 The elements of luxury positioning ...................................................................................... 90 Anti-law number 6: The brand dominates the client ..................................................................... 90 A tea school .............................................................................................................................. 90 A blog ....................................................................................................................................... 90 A book....................................................................................................................................... 90 Anti-law number 17: Cultivate closeness to the arts for the initiates ............................................ 91

The first fruits of the creation of a club through the theophile card: .................................. 91 The magazine “Bruits de Palais” ................................................................................................... 91

SWOT of a luxury strategy (based on the characteristics of a luxury strategy as developed on the luxury strategy) ......................................................................................................... 91 “A luxury brand is a brand first and luxury second”* : The challenge of Le Palais des Thés. ..................................................................................................................................... 92 PART 2 in a nutshell ................................................................................................................ 93

III RECENT EVOLUTIONS AND GENERAL CONCLUSION ..................... 94 The culture of luxury tea .......................................................................................................... 94 Mariage freres’ succes.............................................................................................................. 95 The image of tea:...................................................................................................................... 96 And the sustainable Development? .......................................................................................... 97 Some examples of TEA BRANDS IN THE USA: A very innovative market ........................ 97 Rishi: “Gifts for any tea lover” ..................................................................................................... 97 Teavana “Opening the doors to Health, Wisdom and Happiness”............................................... 98 Adagio Teas ................................................................................................................................... 99 Harney & Sons “Fine Teas” “Master tea blenders” .................................................................... 100 Tea Forte Pyramidal shaped teas ................................................................................................. 101

Bibliography................................................................................................. 102 ANNEXES.................................................................................................... 105

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The characteristics of luxury tea HEC Paris 2011

Special Thanks I would like to give my special thanks to the people who contributed to this report and for the time they dedicated to answering my questions: Jean Noel Kapferer, professor at HEC Paris and Europe’s leading authority on brands Vincent Bastien, professo rat HEC Paris and co author of The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands. Mohammed Al Baroudi, president SITI Sylvain Orebi founder and CEO of Kusmi tea and Lov Organic tea Francois Xavier Delmas, founder and CEO of Le Palais des thes Bessiere Cyrille , manager of Le Palais des thes USA Sophie Villemain, brand manager Lipton, Unilever Stephen A Graph, Marketing Director Special T, Nestle NOTES I based a major part of my analysis on the book co-authored by J.N Kapferer and Vincent Bastien, the Luxury Strategy. This study has used many references and theories from this work. At times, I give my personal opinion on how some brands enhance their strategies through the use of Marketing. In these cases I have assumed that Marketing serves the purpose of communicating something intangible by tangible means. In other words, the message and the product quality, should be consistent. No Marketing message should be a lie.

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The characteristics of luxury tea HEC Paris 2011

INTRODUCTION To whom is this report addressed to? Welcome! Whether you are a tea lover who knows the difference between a Yunnan and a Fujian tea or perhaps you just enjoy a hot cup of tea once in a while. If you would like to know more about tea, here you will find interesting insights about the French premium and luxury tea business. My name is Charihane Benstaali, Master Student at HEC Paris Business School. I decided to spend a few months working on the question of luxury teas. I spent a lot of time in the tea section of Carrefour, Auchan, Monoprix, Fauchon, specialty tea stores in Paris, and online. Why did I choose this subject? I was wandering around the tea section of a luxury food store in Paris, Hediarda and came across a tea that cost one hundred Euros for 100g. I asked for the more expensive tea in-store and the saleswoman showed me a Darjeeing tea selling for 500 Euros. Naturally, I wondered how such a commodity could cost this much? How can some teas cost a few cents whereas others can reach “luxury prices”. How do you assess the quality of a tea? How is it made? How is it sold? What are the different kinds of tea?

500 EUROS

0.50 CENTS

There are very few brands that are qualified as luxury tea brands by consumers. The idea of a luxury tea is unintuitive since it is not typically considered a luxury industry. It would then, be more accurate to define brands as premium rather than luxury. I will try to clarify this distinction through brand analysis. It will be seen, that many brands draw elements from luxury brand strategy to enhance the public perception of their brand. Finally, this report will attempt an understanding of consumers’ perceptions and valuations of tea quality: whether it is the store, the packaging, the fact that it sold loose or in bags, flavored or pure, or how it is priced. I went on a journey into the tea world. I discovered the history of tea, the different tea categories, the brands that are selling teas and their business model. It is a Marketing tour in a world where something is sold as a fine product when in fact, the quality is difficult to assess.

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The characteristics of luxury tea HEC Paris 2011

HOW IS THIS STUDY ORGANIZED? In order to answer the question of the characteristics of a luxury tea in France I divided my report into three main parts: FIRST: Define the Market In order to understand why a luxury strategy can apply to the tea market, it seemed important to me to get a clear cut definition of the scope of my study. I tried first to identify “the dream” potential of this product. As it is the companies that make the sector and not vice-versa, I identified the key characteristics of the players in the luxury and premium tea market as well as the structure of the supply and demand. SECOND: Identify the market leaders and their strategies In this section, I will introduce the players that will be analyzed in this study. It will provide a clearer view of the brands’ existing position and thus detect how they managed to use a luxury strategy in a sector that is made commonplace by the mass market brands. It will be interesting to study the recent trading-up strategy operated by mass market brands using luxury codes and the effect on the traditional luxury brands' strategies. THIRD: Draw the main conclusions Drawing from the knowledge from this study, I will debate on the main conclusions of this analysis.

Bonne Lecture!

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The characteristics of luxury tea HEC Paris 2011

KEYS ELEMENTS •

Tea production will rise in 2012, thanks to growing demand, as tea consumption is deeply rooted in society’s habit, and as consumers are looking for higher quality products. This growth however, will be hampered by reduced household budget for leisure activities.

•

Demand is increasing as a result of product innovation and a widening product range in existing brands, as well as new brands. This played a major roll when attracting younger consumers to the market as opposed to the traditional 5o year old core target.

•

The French leader in the tea market is Lipton, a pure player with more than 40% of market share in volume of tea in supermarkets.*

•

A general effort of the market is put on environmental and societal responsibility. All Lipton Yellow Label tea is produced under the rainforest alliance certificate.

•

The premium tea market is clearly dual. It is shared between pure players such as Mariage Freres or Kusmi and diversified companies mainly the premium food retail stores such as Hediard and Fauchon.

•

The supply chain of the premium tea market is done either through importers (Tea houses at Hamburg) or directly by the exporting countries. A few companies choose to supply a part of their products directly to the tea producers. The smallest players in the market are supplied by the market leaders (Damman, Mariage Freres etc…)

•

Thanks to innovation and technology, there are more and more ways to consume tea: new pots for loose tea, new tea bags, and machines. In order to find new growth engines, the food industry companies such as Kraft, Nestle are exploring the diversification of the tea market, by enhancing the existing tea selections of their machines or launching new concepts of premium tea machines (Special T).

*

Source AC Nielsen

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The characteristics of luxury tea HEC Paris 2011

I. MARKET FUNDAMENTALS 1. How was tea born? That’s the first step to understanding the tea industry today. We have to go back in time, and learn about the history and legends that are associated with this product. It’s the best way to understand the image associated with tea today and what all marketers call “the dream” around it. It will be explored in this section, why it is considered a fine product reserved to an elite.

1.1

What are the legends surrounding the tea’s birth? : The tea dream potential

There are a few legends that explain the origin of teas, with some differences between the Chinese, Indian and Japanese versions. Chinese legend In the Chinese Legend, nearly five thousand year ago, the Chinese Emperor Shen Nung was boiling a pot of water to purify it for drinking and some leaves fell from a tree into the water and produced a wonderful beverage nowadays known as tea.

Indian Legend The Indian legend is completely different, it is Prince Dharma who was preaching the teachings of Buddha in China and vowed never to sleep during the nine years of his journey. He discovered, on the third year of his journey, the properties of tea leaves. He was chewing the leaves and realized that they made him more alert and gave him the strength to stay awake for the next six years of his journey. Interesting how the properties that nowadays are attributed more to coffee are deeply rooted in the tea history. Japanese Legend In Japan the story goes a little differently too: Bodhidharma furious with his inability to stay awake, ripped off his eyelids. Once fallen to the ground, this eyelids became tea plants. He told the people around him about his discovery and tea began to be cultivated in all the places through which he traveled. 10

The characteristics of luxury tea HEC Paris 2011

Legends aside, it seems that the bush was originally from China, probably from the region around the border between north Vietnam and Yunnan province, and that the drinking of this beverage was first developed by the Chinese.

1.2

Legend aside, how was tea born?

Tea was already a common drink more than two thousand years ago. China is considered to have the earliest records of tea consumption. Born In China Tea was born in China and before it became a common drink, it was popular as a medicine! It sold as a medicine before being consumed purely for pleasure as it is today. There were a lot of teahouses and for the first time tea was a source of artistic inspiration. Lu Yu (723-804 AD), the sage of tea, drafted the first treatise on tea, Traditions of Tea 茶经 "One finds, he writes, in the serving of tea the same harmony and order that govern all things." Tea then was made of compressed bricks mixed with boiling water with additional salt, spices, rancid butter…. Tea is still taken this way in Tibet today. You can buy this old form of compressed tea in tea specialty stores. During the Song Dynasty (960-1279 AD) China began to produce increasingly refined teas and thus became a central country in the world of tea. Alongside this refined consumption of tea, consumption became more widespread through the first unpackaged, loose teas. During the Ming Dynasty (1368-1644 AD) an imperial law prohibited the manufacture of compressed tea and tea began to be taken in its present form - a brew in a pot. Tea was being democratized and it gradually reached all social classes, enjoying even greater economic success with the start of the export trade.

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The characteristics of luxury tea HEC Paris 2011 Imported to Japan Tea appeared later in Japan, in the 7th century AD. However, it wasn't until 6 centuries ago that tea was grown all over the archipelago. Sen No Rikyu (1522-1591 AD) was the first grand tea master: with him tea became a religion, an art and a philosophy. It resulted in the creation of the Japanese Tea Ceremony ("Cha-no-yu" or "the hot water for tea"), best described by an Irish-Greek journalist-historian: "The Tea ceremony requires years of training and practice to graduate in art...yet the whole of this art, as to its detail, signifies no more than the making and serving of a cup of tea. The supremely important matter is that the act be performed in the most perfect, most polite, most graceful, most charming manner possible”. Imported to Europe and to the USA Tea was imported to Europe during the Portuguese expansion trips in the late 16th century. In 1657, Thomas Garraway, the landlord of a coffee house in London, introduced tea on his premises and placed an advert in the local paper, which read: "This excellent beverage, recommended by all Chinese doctors, and which the Chinese call 'Tcha', other nations 'Tay' or 'Tee', is on sale at Sultaness Mead close to the Royal Exchange in London." As the consumption of tea increased dramatically in Dutch society, doctors and university authorities argued back and forth as to the negative and/or positive benefits of tea. It was said to cause men to lose height and good humor, while women lost their beauty. Prior to the 19th century, the Chinese were the sole suppliers for European countries, not being able to answer to the increasing demand, tea plantations were started by the English in India, in Ceylon. Other Asian countries have become important producers, as well as ex-British colonies in Africa and, more recently, in Reunion Island and Argentina. Important dates in the history of rising tea consumption 1662 Charles II took Catherine Braganza of Portugal as his wife. They both drank tea, creating a fashion for it. Its popularity among the aristocracy caused alcoholic beverages to fall from favor. 1835 The East India Company established experimental tea plantations in Assam, India. 1838 A small amount of Indian tea sent to England was eagerly consumed due to its novelty. 1856 Tea was planted in many areas of Darjeeling. 1857 Tea plantations were started in Ceylon, though their tea would not be exported until the 1870’s.

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The characteristics of luxury tea HEC Paris 2011 1869 A deadly fungus wiped out the coffee crop in Ceylon, shifting preference from coffee to tea 1870 Twinings of England began to blend tea for consistency 1904 Richard Blechynden created iced tea for the St Louis World Fair. 1908 Thomas Sullivan invented tea bags in New York, sending tea to clients in silk bags which they began to mistakenly steep without opening. Tea today 5 000 years old, the infusion of the tea leaf is the oldest drink and most popular drink right after water: Globally humans drinks more or less 15 000 cups per second. The universality of tea is the result of a fusion between the East and the West many centuries ago. Tea is not to be reduced to a processed beverage; it requires a ceremony and a preparation that holds a lot of meaning through both history and culture. This explains why the producing countries of tea (India, Sri Lanka…) are not the early adopters of the teabag and it is still difficult to reach these markets. On the contrary, in France where tea remains an exotic delicacy, the posh image of an upper class product remain. The French have started to appreciate the drink, even though consumption is limited to 200g per person per year. Tea is zen, healthy, it is exotic and trendy, relaxing and there are so many choices that it can suit all tastes.  Tea was at first highly taxed and meant for an “elite”. Today this luxury image is still there, Tea is a refined and expensive product.  Often sold as medicine in the past, it has kept to this day its image as a product with numerous health benefits. We can conclude that in France there is a luxury niche for the tea market. The history of the product, its origin bears a high “dream” potential: exoticism and travel, well-being, social aspects, scarcity, preparation rituals.

2. How is tea made? 2.1 What is the tea producing process? Why tea cannot be a flawless product? The tea producing process varies for each tea category and it is the same process that will determine this tea category. Tea categories White teas, Chinese specialty from the Fujian region. These are teas that have remained in their natural state.

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The characteristics of luxury tea HEC Paris 2011 1-Wither the leaves for more than 2 days

2- Dry them for 30 mins

3-Roast them = heat them at 100°C in pans by steam cooking a few minutes. This step kills the enzymes that cause fermentation

4- Roll the leaves, which give them this appearance:

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The characteristics of luxury tea HEC Paris 2011 5- Firing Process: dry the leaves with hot air until the moisture level is below 6%.

The tea production process will vary in some of the steps to give the different kind of teas. White teas are non-fermented. Here is an the example of a fermented tea. Wu Long (Oolong) teas, specialty of the Fujian province in China and of Taiwan. These Wu Long teas are fermented teas 1 Wither the leaves a few hours, and then put them in the shade to cool. The fermentation process begins. 2 Sweating - This is the most important stage in the preparation of semi-fermented teas. The leaves are placed in a room that is kept at a constant temperature of between 22°C and 25°C with a humidity level of roughly 85%, in which they are continually stirred with ever-increasing force. This allows the aroma to be released and facilitates the evaporation of water.

3-Roasting the leaves to stop the fermentation process once the desired degree of fermentation has been reached 4-Roll the leaves Black, Smoked and dark teas The differences between teas comes from the differences in each stage of the tea production process. Black teas are fermented teas where the withering process lasts until leaves lose 50% of their moisture. Smoked teas result from the grilling of leaves on a hot iron sheet, then arranged on bamboo racks, above a spruce root fire. Dark teas are produced with a steaming process that provokes a non-enzymatic fermentation, different from the black teas.

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The characteristics of luxury tea HEC Paris 2011

Figure 1 Processing for Green, White, Oolong, Black, and Post-fermentation teas (source: Wikipedia)

The transformation process, is quite industrialized nowadays. However, a large part of tea manufacture is manual. For some small plantations, the overall process remains unindustrialized. This represents an opportunity to develop luxury strategies as tea is often a traditionally made exotic commodity. It thus abides by the anti law of marketing number 2 (cf Luxury Strategy): the product has enough flaws as it is hand-crafted. Being handmade, each tea will bear uniqueness and a personality different from the other. Other elements such as harvest years, will also contribute to the tea's individuality. 

Many elements such as the weather, the time of picking, the season, will impact the product and will make it impossible, as it is for wine, to ensure a flawless product.

Unless it is blended as the Yellow Label from Lipton which is a mix of over 30 different tea dusts (the lowest grading), it is difficult to ensure the same quality for each product. The branding can be highly valued in this sector: in other terms, there is a huge opportunity for creating strong brands. We can draw a comparison here with Australia’s most famous wine: Penfolds grange which is unlike most expensive wines from single vineyards in France, is made from grapes harvested over a wide area. This means that the precise composition of the wine will

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The characteristics of luxury tea HEC Paris 2011 change from year to year and it is the branding and expertise of the wine making which purchasers value, rather than the qualities of the specific places where the grapes are grown or the particular vines. However, unlike for the wine market, we will see that France managed to create tea “brands” that are exported and valued abroad. These brands dared to value the branding more than the specific places where the tea is grown.

2.2 How is tea classified? The five main tea grades As there is a recognized classification for wine, there is one for tea as well. There are grades for classifying tea mainly depending on the size of the leaf:

Dust –D This is the lowest grade in the classification of black tea. It actually consists of small pieces of tea leaves and tea dust. It is a low grade. BOP – Broken Orange Pekoe This consists of small tea leaves or pieces of large leaves. It is considered a medium grading for the classification of tea leaves. OP - Orange Pekoe This consists of large, whole tea leaves picked without the flower bud of the tea plant.

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The characteristics of luxury tea HEC Paris 2011 FOP – Flowery Orange Pekoe These are the whole tea leaves together with the flowering tea plant. In addition to the five main categories of tea there are two further important qualities or traits. The first of these is Golden, where gold hues occur in the tea leaves evidencing their quality. The second is Tippy, which signifies an abundance of young tea buds. The following classifications relate to tea choice consisting of whole leaves and complemented by one of the above traits: GFOP Golden Flowery Orange Pekoe These are whole, young tea leaves whose tips are golden and are complemented by the flowers of the tea plant. TGFOP Tippy Golden Flowery Orange Pekoe This consists of the tea bud and two uppermost leaves of the tea plant complemented by the flowers of the tea plant. This is the highest category in the grading of tea. However, in this highest grading of tea leaves there are also two further quality refinements distinguishing the best of the best: FTGFOP Fine Tippy Golden Flowery Orange Pekoe for choice of tea leaves SFTGFOP Super Fine Tippy Golden Flowery Orange Pekoe which is the highest existing grade for tea leaves.

2.3 What are the types of choice of tea from around the world? There is another form of tea classification other than the size of the leaf. As there are regions for wine across France, there are regions for tea across the world, some of which, being commonly known as better than others or as the “royal lands” of tea. Tea trees are known to grow better high up in the mountains. Darjeeling Tea Darjeeling tea is considered to be a tea type of the highest quality, the tastiest and the most expensive. The origin of this tea is the Darjeeling region, which is located in North -Western Bengal in India. The tea bushes grow on the high and steep slopes of the Himalaya Mountains and benefit from the warm mountain sunshine during the day, and from low temperatures during the night as well as an abundance of rain. Darjeeling tea has a fine flowery aroma, a light body and a taste reminiscent of Muscatel. Sipping the tea causes a slight tingling feeling on the tongue and this is proof of its quality. Darjeeling Tea has been called the "champagne of tea" because of its rare quality, its prestige and its exclusivity. Assam Tea The Assam regions sprawls along the two sides of the mighty Brahmaputra River in North-Eastern India and it is the area where the largest amount of tea is grown in the world. Assam black tea excels in its color, taste and strong aroma. Assam tea is especially suited for sipping in the morning with breakfast. It is largely used as a principal ingredient in blending popular teas such as English Breakfast Tea.

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The characteristics of luxury tea HEC Paris 2011 Nilgiri Tea Nilgiri is a tea growing area in South - Western India. Nilgiri tea leaves are dark and from them the golden tea infusions are produced bearing rich, fruity tastes and aromas. Most of the Nilgiri tea is sold to meet the local Indian consumer demand, but the choicest selected yields of Nilgiri tea (the whole tea leaves) are traded on the world exchange for large prices. Earl Grey Tea Earl Grey Tea is not a variety of tea but is blended from black teas and seasoned. It is named after the British diplomat Earl Charles Grey who customarily blended black tea leaves and seasoned them with the essence of Bergamot (a small acidic orange) in accordance with an ancient Chinese recipe which came into his hands. In the eighteenth century A.D. the drinking of black tea was a widespread custom of the British nobility. Only the rich could drink tea because of its high price and the nobility would show off their wealth by inviting friends to parties featuring tea drinking and the eating of light meals. At these parties Earl Grey tea gained a place of honor. As far as it is known, Earl Grey tea is the first seasoned tea produced in history and it has enjoyed, to this very day, the status of the most famous seasoned tea in the world Smoked tea In France tea is a foreign delicacy, and its appreciation always appeared to be difficult. Smoked tea was introduced in Europe after the mistake of a tea planter in China in the early 19th Century. The plantation owner, having being told to free up the drying room, found himself with a considerable quantity of wet leaves. As he didn't want to lose them, he decided to try to dry them out quickly. He dried the leaves in a few minutes leaving a particular smoked taste. A foreign trader seduced by its aroma took it with him to Europe where it was met with great success.

3. Assessing the quality of the tea: what are the characteristics that will matter while implementing a luxury strategy? In conclusion, in evaluating the quality of tea, the tea experts will thus give consideration to: • • • • •

the variety of tea the tea grading (or size of the leaf) the region where the tea was grown the stage of picking of the leaves the tea manufacturing process

These qualities of assessment mirror that of wine assessment. Two further tests help in determining the quality and the taste of the tea brew and these are: The Scientific Test: A critical assessment of the quality of the tea by chemical and

19

The characteristics of luxury tea HEC Paris 2011 physical means such as an analysis of the chemical composition of the tea, use of the “electronic nose” and other tests. The Sensory Test: Classification of the quality of the tea by way of the senses – the taste, smell, the physical feel of the leaves to the touch, and the appearance of the tea which includes the shape, size and color of the leaves. This sensory test is a subjective evaluation of the quality of the tea and is the result of the knowledge and experience of the expert tea tasters. The sensory test is still the most widely accepted means of evaluating the quality of tea.

4 French tea market overview 4.1 What are the key characteristics of the French tea market? 

According to the Food and Agriculture Organization of the United Nations, the average consumption of tea per head is a 0.3kg in 2009, 2010 and 2011. France tea consumption is still low and shall be increasing in the years to come. The traditional markets are people aged from 50 and above.



The mass market tea industry is going through a difficult period with increasing numbers of store brands and the offensive of Lipton who have put increasing investment into product innovation and communication. Lipton managed to maintain its market share by broadening its available selection to appeal to the younger market. Is this what you mean? I have guessed what you mean by offer here and in the next paragragh.



In the luxury and premium tea market it is another story, product choice is widening with the entry of new brands, and the demand is increasing to a new emerging younger market (below 40 years old).



In the French Premium tea market, there are two types of brands. The tea specialty stores: Mariage freres, Damman Freres, Kusmi, Le Palais des Thés and, the premium food retail stores: Hediard and Fauchon, the latter being supplied by tea specialty stores and as consequence profiting from smaller margins on this product. I will dig deeper into each of these categories later in this report, but here is a brief overview to start with.

5 French luxury and premium* tea market overview 5.1 Who are the players?

*

In order to simplify the picture I use the terms premium and luxury to define this market, I will clear the confusion while studying the brands involved more thoroughly. To get a first clear picture of the market, we will consider both in the broadest way possible.

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The characteristics of luxury tea HEC Paris 2011

We can divide the market into three players: -The main player: through the specialty tea stores such as Mariage Freres or Damman Freres. -A player in decline: the premium food retail stores that sell tea like Hediard -A dangerous threat: through the mass market brands such as Lipton, Tetley and Twinings who offer some premium products and are operating a trading-up strategy 

The core sector through the specialty tea stores is growing both internally through the apparition of new brands: Kusmi, Luv organic and externally with the increasing demand for high quality tea that is both a consequence and a cause of the increasing choice of products.



The food retail stores make smaller margins and are in decline in comparison to the specialty tea brands’ growth. It is due to their supply structure, as they buy their teas from specialty tea stores and they have low competitiveness in term of product innovation, product differentiation and brand identity.



Last but not least, it is important to include the mass market brands in this study as these brands are expanding in the premium tea segment through a recent trading up strategy. The best example is through Lipton that launched its first concept “tea stores” in French supermarkets.

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The characteristics of luxury tea HEC Paris 2011

Figure 2 “La boutique à thé” : Lipton concept tea store at Auchan Soisy-sous-Montmorency, 2011

Figure 3 Enhanced packaging by Lipton for “La boutique à thé”

6 Understanding the structure of supply and demand 6.1 Who are the suppliers? Tea producing countries across the world: tea, an exotic delicacy for French consumers

Source: ratetea.net 22

The characteristics of luxury tea HEC Paris 2011

China and India together represent half of the global tea production

Source: Graph made based on the figures found in Cyclope 2010 Uganda not Ouganda Supply Structure in the Premium and Luxury Tea Businesses in France

This graph represents the numerous intermediaries that exist between the tea planter and the tea retail store. It starts in the producing countries, where most of the plantations sell their merchandise for exportations at tea trade ports or tea auctions. In Europe, the tea houses in Germany buy the tea from these exporters and sell it to the

23

The characteristics of luxury tea HEC Paris 2011 main specialty tea stores: Damman Freres, Mariage Freres, Kusmi etc. Some of these specialty tea stores act as importers, for example Damman Freres sells a large part of its products to other specialty tea and retail stores - up until recently it was supplying Fauchon. Example of a supply structure of a specialty tea brand

The key players in the premium tea business often have diversified sourcing and buy parts of their products directly in the producing country. It is, for example the strategy of Le Palais des Thés, who wish to have a larger control on the quality and conditions of tea products sold. By and large, most of the brands are supplied by tea houses in Germany and direct sourcing is still very scarce. However, this distinction is rarely communicated to the customer in stores, as most brands selling origin teas claim to have a direct supply chain structure. The supply chain is a key element for the brands that have the highest luxury image. For a product such as tea, spices, or any luxury “natural” product, the first step to a Luxury strategy is the control of the supply chain. The way the product was chosen and imported matters because it is a part of the consumer dream. It has to have been selected carefully by tea experts, traditionally transformed and processed. That is why if you ask a salesman at Mariage Freres why their tea is the best they will tell you: “It was selected among the best species in the world and cultivated in the best conditions to deliver the best aroma and flavor”. Even though for Luxury brands, the production and supply chain is often very industrialized and will know many intermediaries and actors. In the case of Mariage Freres, it is very important to keep suppliers that are trustworthy and keep an eye on the many intermediaries who intervene in tea selection, which is the basis of their Luxury products. One can associate this with the anti-law of marketing number 18 (cf Luxury strategy): “do not relocate your production” in other words, you must not “lose contact with the raw material and the means of production to be able to clarify it as a luxury product.”

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The characteristics of luxury tea HEC Paris 2011

6.2 Who are the consumers? Who are the consumers of fine tea across the world? If one looks at the flow of tea trade around the world it is clear that most producing countries of fine teas export their rare teas to Western countries and are not consumers of it. Only China and Japan absorb a good part of their upscale tea. For India and Sri Lanka for example, the tea consumed is often low quality dust and the highest grades are exclusively reserved to export. This can be explained by the price versus the purchase power of such a refined product but the main explanation remains cultural. In these countries, the preparation of tea is more important than the tea itself. It is usually prepared with milk and sugar and is consumed in a transformed state or used as an ingredient for a recipe rather than a drink in itself.

Figure 4: Preparation ritual of chai tea (source: travelpod.com)

Who are the consumers of French fine tea*? The traditional French premium tea market targets the upper socio-professional categories. They are usually wealthy customers, most likely to be in their fifties and highly brand sensitive. However, recent developments in the market are creating changes. Customers are increasingly younger, in partcular women who are driven by the explosion of choice and the expansion of flavored teas, especially sweet flavors such as chocolate, vanilla, and caramel appealing to the new, younger target.

*

Under the term “French fine tea” I include the premium and luxury brands in the broadest sense.

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The characteristics of luxury tea HEC Paris 2011

Internationally, Japan represents one of the main markets of French luxury tea brands after Europe. It has been noticed in the tea business that Japanese people prefer to buy their own tea through French brands at a higher price. According to Frank Desains, one of the five Deputy Managing Directors of Mariage Frères “they appreciate the French tea processing, the work on tastes, the creation of new flavors…” added French value is in the conception of flavors and in the selection. There is indeed, a French expertise recognized abroad in the premium tea market even though France is not a producing country of tea. Europe remains the main market for French transformed tea as shown in the graph bellow. Exports in value of French transformed tea and coffee in 2010: Concentrated in Europe

Source: Xerfi report 2010 based on Customs reports.

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The characteristics of luxury tea HEC Paris 2011

7 Brief overview of the main premium and luxury tea brands As it was discussed earlier, the tea market is not a traditional ground for a luxury strategy, however through the example of Mariage Frères success, Kusmi tea and the many players in this business it will be seen that a lot of elements of luxury strategy have been applied. It will be explained in more detail that there are no Luxury brands in the tea industry that have adopted a complete luxury strategy but rather premium brands adopting the luxury rules successfully. I demonstrated earlier that tea has all the necessary characteristics of a luxury strategy: a travel and health dream, its scarcity, its hand-made as well as its unique dimensions. I will first draw a brief overview of today’s players in the premium tea market and how they implement the luxury rules in order to understand what are the characteristics that differentiate a premium tea from a luxury one?

7.1 Luxury, fashion and premium positioning triangle of the traditional French tea market I will start with a simplified picture of the main actors in the market and their position in the luxury, fashion and premium triangle, a concept taken from Luxury Strategy. For a long time, tea brands operating in the luxury market had a very traditional image. There was not much difference between Hediard, Fauchon, Mariage Frères, Le Palais des Thés, in terms of shopping experience and product offered. Product range were similar and the marketing mix (product, price, promotion, place) differed very little. In the specialty tea stores, there is no clear distinction between Damman Frères and Mariage frères in terms of positioning. They both offer a wide selection of tea sold in traditional old fashioned stores, loose as it was in the 18th century. The retail experience is reminiscent of the early stages of the tea trade era, when the stores were still supplying the Royal Courts. Hidden stores in luxury areas, dim lights, sober and refined decoration, black tea boxes, salesmen in black suit, the image of these brands harbor the traditional luxury codes. It is austere and sad. At the same time, all these brands kept a few dimensions of the mass market tea:  The distribution is opened to French department stores (Galleries Lafayette, Printemps) and sometimes upscale supermarkets.  The product range is so wide that some teas are very low quality from an expert point of view.  The production and innovation centers are more often than not externalized.  The prices are set according to a quality and price ratio. 27

The characteristics of luxury tea HEC Paris 2011 On the Mariage Frères online store, products can be classified according to price

Figure 5 Screenshot from Mariage Frères online store

Most of the brands are therefore stuck between luxury and premium classification.

7.2 A shift in positioning and a refreshed French tea market. The birth of new brands such as Kusmi tea (brand renovation to be more accurate) along with the shift in position of some food retailers, changed the traditional perception of luxury tea. These brands moved to an unexplored part of the triangle in the food industry, they became trendy and fashionable. A lot of parallels were drawn between the luxury fashion industry and the premium food one. They chose a more fashionable and trendy position, targeting younger customers, and having a more accessible image. Even though, the facts show that the prices are the same, these brands managed to build some luxury feelings without keeping the luxury codes of the tea trade era.

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The characteristics of luxury tea HEC Paris 2011



This dichotomy between trendy and premium tea brands adopting luxury codes on one hand and traditional luxury brands on the other made the distinction between luxury tea and premium tea more blurry.

Kusmi plays with the fashion dimension of the brand and the travel dream (being the Russian brand of the European Royal Courts) where as Fauchon sells in supermarkets and communicates prices, thereby mixing luxury and mass market codes. While Mariage Frères keeps the image of a “comptoir de the” that supposedly, has not changed since 1954. The difficulty being, the quality and price ratio that seems inherent to the product that is commonly drunk, that is tea. 7.3 How about the mass market and its premiumization? It is also an interesting area of study for luxury brands; as the recent changes are going to affect the perception of luxury tea. In the supermarkets, Lipton has started its “tea stores” concept, offering a wide range of loose premium tea, with a very competitive price, compared to premium tea brands. This could be considered a threat if their premiumization is completely developed in France and if they choose to offer real added value and not just a better price like they did with the introduction of new recipes and flavors in the lower tea market. Twinings and Tetley are also famous for having a more premium image than Lipton but the recent innovations of Lipton are more interesting in this study as they represent a bigger threat to premium tea brands, especially because in some supermarkets (Monoprix) you find both products.

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The characteristics of luxury tea HEC Paris 2011

Part 1 in a nutshell Now we went through a good third of my report, let’s go through a brief overview of what we already saw together and the main points that are to be kept in mind to go through the second part of my analysis.

Here is a small sum up of the major points we got to discover together: In a nutshell, tea origins hold a lot of dream potential • •

• •

A lot of legends and myths from the East surround the origin of tea, and emphasis its mystic healing powers and profound taste. Tea was born as a medecine before being a common consumption beverage. Its health properties were much debated upon in Europe and are still nowadays not completely unravelled. However, its health benefits in term of digestion are widely accepted. Born in China, its cultivation expanded later in Eastern Asia, and Eauropen colonies to fit the Europen needs. It thus holds in Europe the meaning of an exotic delicacy. Tea was at first highly taxed and meant for an “elite”. Today, the social meaning of tea consumption faded away with mass market tea but the luxury potential remains. Tea can be a refined and expensive product.

The categorization of tea is very complexe, making a product for connoisseur • •

• •

•

The production process and place of production is at the origin of the different tea categories. Often industrialized throught the CTC process (CTC= Crush, Tear, Curl), it still requires a lot of manpower, especially for picking. The traditional production is still widely spread across the world and some tea brands found there a ground for luxury strategies. As for wine there is an admitted classification tables for teas according to the size of the leaf and weather or not it includes the flower bud. The bigger the size the better. Tea quality will be determined by many elements such as weather, origin, transformation process, conservation, making it impossible to keep a flaweless taste across time, and giving tea harvests the same scarcity dimension as it exists in wine. The complexity of categories, make it a product that needs “guidance” from the brand

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The characteristics of luxury tea HEC Paris 2011

The market is divided between luxury and premium tea speciality stores, premium food stores and premium products from the mass market. A centralized supply chain in Europe for fine tea • •

There are many intermediaries between the plantations and the consumption, whereas the marketing speech in store claim a complete control over the supply chain. All imports of tea in Europe are centralized in Germany and sold by importers (tea houses) to French tea brands.

The consumers of fine teas are getting younger • • •

The traditional consumer of tea is above 45 years old The market opened to younger customer (bellow fourty): a recent trend initiated by the changes occurred in the mass market through the introduction of appealing design (pyramidal tea) and the hyper choice The Renewal of tea brands such as Mariage freres, Kusmi, Lov Organic put tea back in fashion.

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The characteristics of luxury tea HEC Paris 2011

II THE MARKET LEADERS In this section I will go thoroughly through all the main players of the industry and analyze their strategies. I will thus extract the luxury components of these strategies and determine the characteristics of luxury tea expressed in the brand. I will show that the tea market in general, is evolving fast in France and that many breakthrough innovations and shifts in strategies have influenced the definition of premium tea and the perception of luxury tea from a customer’s point of view. It will seen that most brands adopt mixed strategies (cf. The Luxury Strategy), between premium and luxury.

1 Luxury tea and packaging: Loose tea or in bags? The importance of packaging in the definition of a luxury tea The most noticeable difference between the high luxury tea store tea and the lowest priced tea at Carrefour is the bag. It is the first price and quality differentiation between a luxury and non-luxury tea. Loose tea appear to be the first step to higher quality in the customer mind. This is why tea bags at Mariage Frères and Hediard are a bit more like the bags business for LV, it brings cash but does not contribute to the luxury brand image as the fashion sector does or the high tea selections do for Mariage. The Lipton brand is a good area of study to understand the importance of packaging in the tea industry. A 200g of Earl Grey loose tea box from Lipton will cost 6 Euros whereas the same product in bags will cost up to 70% less.

As the black coffee at the coffee counter made coffee a daily and cheap habit, the tea bag made the tea a popular mass product. Today, 80% of the tea consumed in France is consumed in bags. The introduction of the bag in 1908 made tea consumption cheap, easy and quick but, the taste and quality of loose tea remains superior and a gap will rise between the mass market tea (mainly in bags) and the luxury loose tea.

1.1 The Lipton product range example You must have noticed while walking down the tea aisle of Carrefour the different

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The characteristics of luxury tea HEC Paris 2011 boxes of Lipton tea that are offered, along with the difference in prices.

2.40 Euros adviced price by Unilever

1.30 Euros price advised by Unilever

The difference in prices however does not come from a difference in the price of production; it is a perceived difference of quality from the customer who is ready to pay a premium for the tea. It is then, interesting to study the attributes of tea in the supermarket tea industry and how the quality is assessed by the customer. Lipton is the number one tea brand in the world.

Lipton, the business model Before going through the analysis, I will start with a brief overview of the Lipton tea industry and its business model. A global success Lipton is the second most drunk beverage after Coca Cola in the world, holding 2.8% of the world market of drinks against Coca Cola with 5,5%. The figures speak for themselves; Lipton is a winning business model. A few figures (2008) 130 countries 52 Billions of bags sold a year 33% increase in sales in 5 years 40% of the tea market 24 Millions Euros of sales Market shares of tea brands in supermarkets (in volume) : a highly concentrated market

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The characteristics of luxury tea HEC Paris 2011

Source : Xerfi report on the French tea market based on distributors panels from June 2010September 2010

A business model of vertical integration Kericho (Kenya): The “flagship” plantation of Lipton

Lipton is the only brand on the shelves to control the whole production process of their tea, from the picking of the leaves to the shelf stocking. Lipton has suppliers in over 35 countries across the world and owns plantations in the main tea producing countries: Kenya, Oriental Africa and Tanzania. These are considered small States in the State, huge lands of tens of thousands of hectares, with villages of tea pickers, private schools, etc. They prompt their tea producers to get certified ensuring their commitment. Whereas, its competitors Twinings or Tetley are supplied by wholesalers. In France, the products are manufactured in Fralib factory1 based in Gemenos. It has a turnover of 27.1 million Euros in 2009 (Xerfi 2010) and 180 employees. Fralib factory exports a part of its production to European countries, it exported 1.4 billion bags in 2009 (Xerfi 2010). The tea trade business of Unilever World is managed by Unliever France which had a turnover of 2.2 billion Euros in 2009. 1

Fralib factory should be closed down in 2011 and the production of Lipton delocalized to Eastern Europe due to a steadily decreasing turnover of Fralib sourcing unit since 2004. It went from 63.9 ME in 2004 to 27.1 ME in 2009 (Source: Commercial Courts).

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The characteristics of luxury tea HEC Paris 2011

Lipton enjoys an exceptional position because they can: •

Secure their supplies

•

Reduce the fluctuation of tea prices

•

Create large economies of scale

Lipton also manages the shelf stocking, ensuring better visibility compared to its competitors in the supermarkets.

Highlights on Thanks to this vertically integrated model, Lipton has certified as early as 2007 its own plantations and its suppliers by the NGO Rainforest. It ensures its external suppliers’ commitment along with the trust of its customers through its involvement in sustainable development. The ambitious goal of Lipton is to cover 100% of its supply chain before 2015!

A global and unified strategy Lipton uses a similar way to Nivea in order to set up in a new country. They always enter a new country with the launch of their star product: for Lipton, the Yellow Label and for Nivea the round blue box and then develop a wider range of products adapted to the local market and local taste: Chai tea in India, sweet milked tea in China, Earl Grey in Great Britain. One can find the pyramid shaped bags everywhere in the world. I will discuss later that these teas have one of the highest margins of the Lipton product range. The R&D is centralized and all teas are tasted in the same laboratories.

A broadened product range with the introduction of pyramidal tea bags The tea department in the supermarkets has gained 50cm in length among which 45 cm were for the Own Brand Labeling (+2%). The introduction of the pyramidal teabag was a huge marketing success for Lipton. It managed to attract a new and younger market ranging from 30 to 50 years old than the traditional core market (customers in their fifties). Huge investments in communication In 2009, 60% of the Lipton products were advertised,especially the pyramidal bags that attract a younger market. The advertising is based on three major points : the health, the well being and the pleasure. In France, the budget increased by 52% in 5 years and represents 4 times the budget of its competitor Twinings and 7 times the budget of Tetley.

35

The characteristics of luxury tea HEC Paris 2011 The Agency DDB signed in 2009 for an impressive TV ad where a swarm of women dive into a swimming pool of fruit.

In the supermarket, Lipton takes charge of the shelf stocking to ensure that the competitors do not appear in the middle of the shelf. Lipton also organized many tea tasting operations on site and beautiful, wood set boxes were constructed for the occasion.

The Lipton repackaging strategy I have covered the analysis of the changes undergone by the brand with the introduction of the pyramidal bag. Can the increase in price be explained by an increase in costs of production? The price is reaching 2.4 Euros on average for a pyramidal tea box against 1.3 Euros for the Yellow Label. On average, the prices of all the repackaged goods increase by 15%. This increase in price may come from an increase in the costs of the goods; a higher quality of tea; or a controlled decision to price the product higher based on hedonistic evaluation of the product and higher quality perception from the customer. But, before reaching any conclusion, I will first go back in time and explain the evolution of the tea bag and box packaging for Lipton tea. The pyramidal tea In 2000, the first pyramidal tea bags are introduced in Japan. These bags reach the French borders in 2003. Thanks to its unique shape, the bag can contain longer and larger tea leaves, without crushing them, along with larger fruit chunks, which permits a better infusion of the tea. The objective of Lipton is to offer the experience of an

36

The characteristics of luxury tea HEC Paris 2011 infused loose tea along with the convenience of an individual tea bag.

I will now explain the properties of the tea bag Pyramid® (Lipton has registered the name and the production process of its bags) claimed by Lipton : « •

Gives ample room for hot water to infuse the tea, for better extraction of its rich color and flavor

•

Offers the full flavor of loose tea paired with the convenience of a bag

•

Because the bag is bonded with heat, it leaves nothing to stand in the way of tea taste. »

The box packaging Not only has the shape of the bag changed but the folded container box has undergone many changes in order to modernize the image of tea and reach a younger market.

The new packaging was done by the agency CB’a design whose mission was to: « Develop the product around the « Natural Vitality » angle. They were to develop a strong visual identity that would enable: •

Universal management of the product range

•

Identify the codes for each branch of the product.

•

Express the natural, indulgence and accessibility aspects. This chart should bring additional answers to the premium issues. Clearly, the objective of Unilever – Lipton was to seek a more premium product, not in terms of quality of tea offered but in terms of perceived hedonism through the packaging, the convenience and the advertising. Thus, for the pyramidal travel products, the idea was to suggest a ritual of tea consumption, as if the consumer was in the country represented on the package. On each box 37

The characteristics of luxury tea HEC Paris 2011 there are three main elements: the pyramidal bag on the left bottom side, now a sign of the higher quality teas of the Lipton brand, the shape of a woman in traditional attire and an architectural black and white design representing the country referred to by the box. There are also exotic titles such as « Bangalore Palace » « Asian Temple » or « Oriental Bazaar » as well as bright, shiny colors. Everything appeals to the senses in this new packaging and invites the consumer to travel. Lipton has also launched a collection named « Collection Exclusive » which, clearly uses the codes used by the luxury industry. They play with mat and shiny gold colors, black background, refined design, a few descriptions, if any on the front, and subtle images. These teas are sold at an average price 2.50 € and are among the most expensive of the product range. The hedonism of the packaging is not the only thing they worked on, it is also a lot more practical and convenient to use. It opens like a chewing gum box and there is no need to open a plastic bag to pick a bag, the pyramidal bags are loose inside the box. This represents an economy of paper for Lipton and a convenience of use for the consumer. The whole packaging gives the consumer a higher perception of the quality of the good. In all, for the consumer the pyramidal tea bag is not just a tea « clearly of higher quality than the normal Lipton bag ». This repackaging has been put in place gradually. It started in 2003, when 20 new product innovations were launched, four times more than the year before. Likewise, in 2008, 13 of the 73 teas and infusion products sold in France were up-dated. Future and performances of the new packaging After going through the changes by Unliver on Lipton’s packaging, the question can be asked: how is the price increase explained? As well as questioning the future of the traditional paper tea bag, will it eventually disappear or will it last? The answers are in this section Pyramidal versus traditional bags

38

The characteristics of luxury tea HEC Paris 2011 I will go through the figures regarding the pyramidal bags before questioning the future of the traditional square shaped bag. •

10 Pyramid® bags are used per second in Europe

•

The Pyramid® bags are sold in more than 30 countries

•

25 % of French tea consumers adopted the Pyramid®2 bags

In regards to sales, this launch enhanced the general tea market, and the flavored tea market in particular, whose growth doubled from to 10 to 20 %. They gained 2.5 points in this sector and 3 points on the overall black tea market. In less than 5 months, 40% of sales of flavored teas in bags, were made in pyramidal tea.3 It can be concluded that this new bag shape was a success for the brand and although the tea market has been falling (by -2.6% in 2009 in tea volume) there is potential for growth in this market, « It is true, sales are falling globally, especially in volumes, but the loss is small if the OBL raid is taken into account. In 2009 the tea and infusion supermarket shelves were enlarged by 2%, to be nearly entirely filled with OBL teas. » Sophie Villemin, manager of the Lipton and Elephant brands declared. « Despite this, our pyramidal shaped bag increased by 20% in value…it is very encouraging, because this new bag is a major factor of the market value, but also because it won over a younger market (between 30 to 50 years old) than the classical Customer in his/her fifties » Attracting a younger market has been one of the top priorities of the brand. It is necessary in order to increase the market penetration rate which stagnates at 70%. This is why the strategy has been so aggressive, with an overall budget increase by 30% in 2009, Unilever now spends more than Procter&Gamble in mass market goods.4 Lastly, regarding the future of our traditional paper bags, they do not plan to take it down from the shelves. It will remain an alternative for consumers. First, because the product cost is slightly lower and their prices in the supermarket are lower by 7 - 8%. It also establishes a difference between classical ranges of flavored teas and infusions with classical and simple flavoring (lemon, caramel, blueberry) and a more sophisticated one (double flavoring and pyramid bags). It helps build a coherence between the marketing and the packaging of the products sold, along with the displayed price. Where does the price increase come from? For this part, I based my analysis on an interview of Mister Mohamed Al Baroudi, PDG of « Société Impériale des Thés et Infusions (SITI) » a company selling premium and luxury tea bags in Morocco. SITI produces each year up to 200 Millions handmade bags and more than 100 millions pyramid bags for high luxury tea brands and multinationals. When I asked him why the pyramid shaped bags were so popular he answered: « The pyramid tea bag market is booming, because of its trendy design, and its transparent 2

Internal source from Lipton by TNS World panel at the end of 2009 Meeting with François-Xavier Apostolo, group manager for Lipton hot tea for Europe for Stratégies Magazine n°1317 4 From the article « Les boissons chaudes voient les MDD pousser et les marques résister » published on the lsa website www.lsa-conso.fr 3

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The characteristics of luxury tea HEC Paris 2011 and original shape…it also the cheaper bag in the premium category. It is binded by ultrasonic Japanese, sound machines. It gives a highly luxurious perception as much as the handmade cotton bag does but it is really cheaper. It is a good compromise between the handmade bag and the paper bag » The graph bellow gives an idea of the cost structure of a luxury handmade cotton bag. I concluded that the cost of a pyramidal bag for Lipton should be close to zero and nearly the same as the cost of production of a paper bag (launching costs aside, of course). If one considers the Lipton supply chain structure, one can take off the 6 cents of luxury tea, as the tea used in the Lipton bags is the dust tea, with the economies of scale, it should cost less than a cent per bag. There is no need to sew the bag by hand since it is binded by a machine, so those costs are irrelevant as well. The fabric is also less expensive than cotton. The economies of scale do the trick for the rest, the cost of a bag for Lipton shall be close to one cent!

The increase of the selling price for pyramidal tea does not come from an increase in production cost but from a valuation a premium product perceived by the consumer. This “premium quality” comes from the packaging change, which is more premium than the yellow label packaging, and from the perception of the bag, which seems to be more luxurious than the paper one. How did Lipton calculate the premium based on hedonistic values? In order to calculate how much the consumer was ready to pay for the perceived added value of this hedonistic packaging, Lipton asked the company Marketing Scan5 to realize a marketing study on site. This study had many objectives: •

Validate whether the pyramid bags should replace the traditional paper bags.

5

MarketingScan is a company with three main activities: the test market in real conditions (75 % of its turnover in 2003), the measure of advertising and promotional actions (25 %) and, since 2004, the establishment of a model for the marketing mix.

40

The characteristics of luxury tea HEC Paris 2011 •

Verify the price increase model to use for this new product: +15 or +25 % ?

•

And to verify the efficiency of the marketing actions to conduct and to optimize the TV communication undergone by the brand.

From April to the end of November 2001, 2 test zones were put in place: a first zone in Mans where a 15% increase on prices was made, and a second in Angers where a 25% price increase was validated. In order to test the hypothesis described earlier, they decided to try the new bag on the standard Yellow Label tea only. The sales were monitored by zone and compared to the sales of the year before. The effects of the TV campaign were tested on two groups, one test group who was not exposed to the TV ads and one who was. The conclusions of this Market Study are described below: •

The pyramidal teabag should not be launched as a replacement of the old paper bag but should be introduced in the product range as a new offer. After 8 months, they noticed a small decrease in sales in volume and value.

•

The 15% price increase had the best results in term of recruitment of new consumers and stabilization of sales.

•

The efficiency of TV ads and promotional operations was confirmed by the on site study.

The Yellow Label was sold 1.5€ for the pyramidal bags instead of 1.30€ for the traditional paper bags. This price increase based on the valuation of hedonism of the bag was applied to all the products of Lipton. Targeting the top and lower end of the market through product differentiation The Lipton Product range •

The infusions The infusions « irrésistibles » 20 pyramidal bags for 2.55€

Infusions « saveurs du soir » 25 paper bags for 1.74€

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The characteristics of luxury tea HEC Paris 2011

Exotic infusions 20 pyramidal bags for 2.34€

•

The Sir Lipton product range The loose tea 200g of tea for 6€

An exotic tea product range 20 cotton bags for 2.34€ to 2.52€

•

The classical teas Lipton Yellow 25 paper bags for 1.29€

Thé du soir (without caffeine) 25 paper bags for 2.62€ •

The green/ white teas

Green teas 25 paper bags for 1.84€ to 2.10€ Pyramidal bags of green tea 20 pyramidal bags for 2.03€ to 2.35€ 42

The characteristics of luxury tea HEC Paris 2011

Tchaé green tea 25 pyramidal bags for 2.55€

Linéa green teas promoted as healthy, diet teas. 20 sacpyramidal bags for 3.10€

•

Flavoured black teas

Classical black teas 25 paper bags for 1.98€ to 2.06€

Pyramidal flavoured teas 20 pyramidal tea bags for 2.07€ to 2.10€

•

The upscale tea The products of the exclusive collection 20 pyramidal bags for 2.43€ to 2.48€

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The characteristics of luxury tea HEC Paris 2011 Analysis A very competitive first price The cheaper product offered by Lipton, the classical Yellow Label is sold on average 1.29€ for a box of 25 tea bags. For the same number of bags, the Auchan breakfast tea is sold at 1.15€ without benefiting from the quality image of the Lipton brand and all the intangibles. The Lipton strategy seems to have a very competitive first price, and must have relatively low margins on this product, which targets the customers with small budgets, and will help gain new customers in order to sell products with higher margins (pyramidal, flavored teas) but are not more expensive to produce. A wide range of product Without even including the brand « Lipton Elephant », One could say that Lipton owns a very wide product range, based on the various ways of grouping teas: •

The kind of tea (black, green, white, dark teas)

•

The flavors (fruits, spices, flowers, milk etc.)

•

The packaging (pyramidal bag, cotton bag, paper bag, and loose tea, ready to drink…)

•

The hedonism (exoticism of the packaging, visual)

The diversity of the products corresponds to a desire to better reach the specific needs of each customer, so that they can pay the premium to have the tea that better suits them. On the other hand, this diversity meets the customers need for variety, which is all the more important since the new position of Lipton is based on hedonism. Last but not least, the pyramidal bag in particular is a very bold innovation as it gives a higher quality perception without resulting in higher production costs (apart from the starting costs from R&D, packaging and marketing) Important price variations based on this diversity In the Lipton product range, the prices can vary up to 50%, even though the quality of the tea is roughly uniform from one product to the other. This segmentation is based on a very clear packaging differentiation, with an emphasis put on hedonism and exoticism. Now with the pyramidal tea bag innovation, it has become easier to differentiate the upscale from the downscale range of Lipton teas.

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The characteristics of luxury tea HEC Paris 2011

Lipton has a lower margin on the Yellow Label but higher margin on higher quality perceived teas. The advantage for Lipton to have both upscale and downscale products is that the brand can thus justify a different pricing for roughly similar products. The upscale products of the range target customers who are ready to pay a premium for their tea consumption, whereas the Lipton Yellow is meant for the others. This gives Lipton the opportunity to reach a higher level of sales than if it had a single product with a single price (and earn two squares of sales in the graph instead of one). Conclusion Lipton did some trading up but did not fall in the trading up trap. The price did increase for the pyramidal tea based on the incremental advertising expenses but not only that. If the production price is not any different for the yellow label and the pyramidal tea, there was an effort done on the product packaging, flavors, product range. You cannot increase the price based on advertising only. The perception of quality comes from many aspects. The tea quality alone is far from being the only component of choice. The packaging hedonism and practicality, the choice of flavors, the intangible (travel invitation), all these help build a stronger perception of quality and justify the premium paid for the red berries pyramidal tea compared to the plain Yellow Label. One question Lipton has to debate now is until which point can it continue the trading up? Since the major sales come from the Yellow Label, which has the image of an affordable quality tea, can it sell premium tea competitive with the premium tea

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The characteristics of luxury tea HEC Paris 2011 brands without risking losing the “affordable” image of Lipton. At the same time, I think it is important for Lipton to strengthen its quality image since the premium tea brands such as Kusmi, Fauchon, Le Palais des Thés are selling first price products at less than 3 Euros for 100g, it is less expensive than some premium products of the Lipton product range. Some downsides I would like to point out in the Lipton trading up strategy  The Loose tea in uncompetitive In France, at the supermarket, Lipton is very present in the premium loose tea ranges. However, in some premium supermarket and specialty shops, Lipton is facing tough competition in this sector, due to Kusmi, Fauchon or Hediard. Contrary to these brands, Lipton does not offer flavored teas in the loose section, nor does it propose any added value in the selected tea kinds. The strength of a chain is in its weakest link, Lipton quality is associated with the Yellow Label and dust tea. It cannot get a sufficient legitimacy in the lose tea section based on the brand name alone. It has to create as it did for the pyramidal teas a trading up strategy based on the product: tea flavors, tea dreams, and packaging. Serving the purpose of drawing a clearer line between Lipton and Mariage Freres, for example. However, I would not suggest stopping their production as it also helps enhance the customer’s brand perception, in order to compete in the downscale range of products with the supermarket brands. 

The rain forest efforts is not well communicated.

If Lipton is very active on labeling its teas, it does not communicate this. Of course, it clearly appears on the packaging and the corporate website but in the consumer's mind, Lipton is not associated as a « green » and « environmentally friendly » brand. It is a shame, all the more, since it is very active in this field and nowadays consumers are more and more conscious about the environmental issues raised. The risk is that other strong brands will actively communicate this, and Lipton will be seen as a follower in the trend. The innovator is always the first one to communicate on the innovation not the one who launched it!

1.2 Bags yes but not any bags

As for the conditioning, the tea follows this pyramidal structure. On top of the pyramid is the preferred conditioning for the highest luxury teas. Convenience is far from being a priority. A good tea deserves the best ceremony, time and the absence of a bag will give more space to the leaves for a perfectly mastered infusion. 46

The characteristics of luxury tea HEC Paris 2011

After the cotton bag, is the pyramidal bag, as it allows more space for the leaves to expand in the water and has bigger holes to let the flavor out. However, there is a downside to it; it is more costly as it is made by hand and requires high manpower, contrary to the pyramidal bag. The stapled paper bag is used more for dust tea rather than bigger leaves as it will break them. The size of the leaves is a first element of tea grading in the luxury tea market. Heavy tea drinkers have always known that the perfect cup comes from loose leaves. Traditional tea bags may offer tidiness and convenience, but the taste is often lacking. The thickness of the bag means the tea inside must be ground until it is little more than dust, and when wet, the bag collapses onto itself, preventing the water from circulating through the leaves for a proper brew. But, as interest in tea-drinking rises, steeping innovations combining the best of both worlds (the flavor of leaf tea and the ease of a bag) are coming onto the market, changing the look and taste of a tea break. The recent trading up strategy of Lipton does not represent a risk for the luxury tea brands. In fact, for premium brands such as Kusmi and new brands launched in the business, this represents a challenge and an opportunity. They have to offer a product clearly different from what Lipton proposes, a nice packaging, a high price and a nice offer is not enough anymore to define luxury tea. The changes in the market imply changes in people’s perceptions. The new environmental and social changes in the Lipton strategy increase customer’s expectations in terms of social and environmental responsibility. For most consumers, convenience outweighs the superiority of taste that comes from the infusion of loose tea. The nylon triangular-shaped tea bag that allows full-leaf teas to be packaged in a bag for brewing convenience is a good in-between answer to the dilemma between the convenience of bags and the quality of loose tea infusion. This shift to the new tea bag is happening, with an increasing number of suppliers now offering loose leaf teas in this manner. However, the world is still waiting for the sustainable solution in the form of a biodegradable tea bag.

2 Mariages Freres: The French luxury tea? 2.1 History of the Brand When the Mariage brothers set up their business in the tea trade in 1854, they targeted the elite customers of the European Royal Courts and Parisian Salons. In 1984, the company is bought by a Thai entrepreneur, Kitti Cha Sangmanee. The brand starts an up-range retail business with its first boutique at rue du Bourg-Tibourg, in Paris. Many tourists, even from Japan are seduced and find there, a luxury French product. According to Frank Desains, one of the five Deputy Managing Directors of the brand “they appreciate the French tea processing, the work on tastes, the creation of new

47

The characteristics of luxury tea HEC Paris 2011 flavors…” The latter define the Mariage Freres promise.

2.2 The dream starts in the stores The Mariage Freres stores have a strong personality with the trading post decoration, the hushed atmosphere, the salespersons in black suits and white shirt, the black and yellow boxes. The first historical store opened at Rue du BourgTibourg, in the famous quartier Marais à Paris is also the most famous. It is common to see luxurious cars stationed in front, customers are jet set and Mariage Freres wants everyone to know that «Madonna, Elton John, Francis Ford Coppola, Isabelle Adjani, Zinédine Zidane…” came to buy the fine products. They pay particular attention to the store windows and decoration. People are attracted by the atmosphere and the culture of the tea conveyed through it. The tea objects show the delicacy and give a feeling of serenity and authenticity. You will find in the store the old historical tea bricks as they were sold in China centuries ago.

The tea ceremony, which was considered a hassle is now a mysterious and holy ritual, the tea pots are displayed as object of arts. Mariage Freres also have a tea museum. All these marketing creations contribute to the legitimacy of the brand as a tea specialty store for connaisseurs in Paris, even though it is not really the case. They manage to explore the travel dream, and recreate the atmosphere of tea trading posts when tea was a highly taxed product meant for an elite. Everything from the brand history (supplier of the European Royal courts and nobility) to the decorations, the displays, the luxury cars queuing in front of the store, the location…they all participate to this feeling. 

Mariage Freres is the French luxury tea brand meant for an elite that offers 48

The characteristics of luxury tea HEC Paris 2011 the French work on taste on the most refined teas.

2.3 The products and services How to create a luxury tea? Mariage Freres opts for the luxury fashion world recipe as Louis Vuitton or Dior do, the tea brand create its tea collection like a fashion stylist or an “artist” as Kitti Cha Sangmanee likes to call himself. Mariage Freres launches three collections per year for the tea mixes and the tea pots' colors and designs. He wants “French people to find passion in the tea industry as they found passion in the wine”. The correlation with wine is interesting because Mariage Freres' business model is closer to any luxury, fashion brand than a luxury wine store (it is closer to the position of la Maison des Trois Thés). The tea becomes a gift, as any real luxury good is. It is the definition of luxury; it can be considered a gift, even if the product in itself is not supposed to be. The tea becomes a precious product that deserves a precious case like jewelry. The tea packaging is subject to a lot of creativity and innovation. The “Thé des Sources” is put in freshly cut bamboo at le Palais des Thés and the two color boxes of the Tea Party carry stylish designs. The history of tea, how it was cultivated, the harvest, the way it was processed usually have a high place in the selling speech at le Palais des Thés or La Maison des Trois Thés, at Mariages Freres, the emphasis is put on “the dream”. With evocative names such as Marco Polo, Opium Hill or Brumes de l'Himalaya, thé bleu de Thaïlande or thé noir de Darjeeling with silver tips, a packaging that is both luxurious and fashionably designed makes a successful recipe. How to organize the product range? In the tea industry there is not in a traditional luxury sector. The product itself is meant for immediate consumption and cannot hold the “timeless” dimension. The brand holds the timeless dimension but not the product. Mariage Freres has been selecting the best teas since 1854. Here lies, the connection to time that is so important in a luxury strategy. The tea harvests like for wine will change according to the season or the year of production. Thus, assuring a flawless quality and taste through time is impossible. This is why a traditional luxury strategy cannot apply. Unlike for Louis Vuitton where the product range is very limited and each and every product has a reason to exist and its own personality, in the luxury tea market there is a hyper choice situation. Each specialty tea store claiming to have the wider selection of tea: “around 1000 teas on average”.

49

The characteristics of luxury tea HEC Paris 2011 However, in order to create the core products of the brand that will epitomize and personify the brand Kitti Cha Sangmanee, managed to create a limited range of timeless products. These are the tea creations of Marco Polo or the “breakfast tea®” selections. These trademark teas are not designed for the most knowledgeable part of the market. In fact one can say that Mariage does not target knowledgeable consumers and tea connoisseurs. For the simple reason that these teas are branded, one is buying a Mariage Freres tea and not a blended Darjeeling from this summer's harvest. If you ask the salespersons, they will tell you that Marco Polo tea is the same from one year to the other. In the luxury market the quality does not have to be flawless like for a luxury handmade bag, some differences are allowed, or more accurately, the differences are cherished, because each bag will thus be unique. Uniqueness is a characteristic of luxury and here this characteristic fits the product perfectly. Graph of the Mariage Freres product range



Mariage Freres does not have a lot of upscale products, these are very limited. This is why real tea specialists will not find Mariage Freres fitting for rare harvests and exceptional products. This is one of the main downsides of the brand. However, their existence preserves the luxury image of the brand.



The core products unlike for traditional luxury brands are varied and the product range is very wide.



Mariage Freres does not need entry products so to speak, as even if the relative price of Mariage tea is high its absolute price is relatively low. A wide selection of core products can be considered entry products if they are bought in small quantities. Here the quantity and the tea type will determine the price and thus the entry products. The classical famous trademark mixes such as Marco Polo an also be added to this. They can be considered an entry product because no prior knowledge about tea is necessary to buy the flavored teas.

50

The characteristics of luxury tea HEC Paris 2011



Mariage developed a series of tea accessories that significantly contribute to the net profit of the company without tarnishing the brand image, on the contrary, the product extends to tea accessories. No luxury product without services: How to create the shopping experience? Here, the service is part of the product and it is all the more important since the customer is not very knowledgeable in this market. In this sector it is very easy to create a luxury experience guiding the customer through the wide tea selection.

In terms of shopping experience, like in any luxury store you will find an exceptional calm and serenity inside the shop. In order to guide you in the wide selection of products, you will have the help of knowledgeable salespersons. Whether you are knowledgeable or not, no questions will go unanswered. One feels as though they are discovering new things each time you visit, the journey through the tea selections leaves a memorable experience and is often valued more than the product bought. Product Extensions They brand is also extended to the culinary world with the opening of restaurants. “I wanted to do as they do in wine merchants, offering our customers a cuisine with tea suggestions adapted to each meal” explains Kitti Cha Sangmanee. This has been a success since Mariage Freres sells around 500 meals a day in the three Paris stores alone. Another successful extension is the auxiliary merchandise. Chocolates, teapots and incense…generate today 30% of the company revenue. It is common to extend the products to tea accessories. In general, tea accessories take 20% of the store space and represent about half of the sales in luxury tea stores.

2.4 Very selective distribution Mariages Freres has many “concept stores” mixing a tea house, a tea museum and a tea salon. They have stores all over the world. In 1987, Mariage Freres opened its first store in Tokyo. They now have 9 stores in Japan. In the countries where they do not have stores (the US for example) their selected selling points are in fine galleries, luxury hotels and specialty stores. They control their international development like any luxury brand with a selective and controlled distribution channel. The stores and shelves display the same product from Tokyo to Berlin, the furniture, the wall colors, the lightening is the same from one store to the other in order to ensure brand consistency. Since 2000 Mariage Frères have been selling its products on the internet in French,

51

The characteristics of luxury tea HEC Paris 2011 English and Japanese.

2.5 Traditional communication based on positive word-of-mouth and public relations Like nearly all the players in this market, the communication is made through word of mouth only. Franck Dessains declared in an interview “We never went to an agency. When we open a store abroad, we only do a press conference”. The only communication method that is exploited is Public Relations; they have a few partnerships with events. Since the brand is targeting a very small segment of the population, the core target is trendy and from the upper class of society. It is thus important to stay connected with the fashion world for instance. In Milan, they are associated with the magazine Vogue, and in Kuwait they organized a tea tasting in partnership with Louis Vuitton. They are usually sponsoring fashion shows in London, and art expositions in New York. The design of the products Mariage Freres is created by Bulgari. Like Cartier, they play on the history of the brand (seller to the European Royal Courts) and its legitimacy as a luxury brand with its place in art and fashion shows. However, the difference between the fashion luxury strategies and the tea luxury strategy chosen by Mariage Freres is a blur. They do not advertise on TV or in the press as they are selling a traditional product and wish to preserve this aspect of their business.

2.6 A high relative price Absolute price vs relative price If tea at Mariage Freres is relatively more expensive than mass market tea, luxury tea remains an affordable commodity. “If you go to Louis Vuitton at Champs-Élysées you could have luggage for 18,000 Euros or you could walk out with a 100-euro wallet or cardholder. Likewise at TWG Tea, where gourmet blends of loose tea leaves can cost from $4.50 to $4,500 for 50 grams. Its boxes of tea bags cost at least three times the price of Twinings or Lipton, leading store brands.” TWG CEO When it was launched in 1984 Mariage Frères was offering 250 kinds of tea and now have more than 600 varieties. Even if Kitti Cha Sangmanee says that Mariage Freres is not doing Marketing, it is at the heart of the upscale position of the brand. He declares “We sell the finest and most expensive teas in the world”. The prices vary from 3 Euros for 100g to more than 400 Euros for the most expensive ones. In general, the teas that are going to sell are the teas with an average price of 10 Euros for 100g, but their sales depend on the fact that in store there are teas at more than 400 Euros for 100g. This contributes to brand image because they are associated to the scarcity of the harvest and belong to the upscale range of products. Plus because tea is an affordable product; the absolute price will remain low.

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The characteristics of luxury tea HEC Paris 2011

Price and communication The price is not the primary question but there are some discrepancies with the antilaw number 12 which states that “Luxury sets the price, price does not set luxury”.  First because most products are sold on average at a constant price.  Second because it appears that on the website and in the store one can choose their tea according to price.  Third because the prices of Mariage Freres and its competitors are aligned. Finally, and perhaps here lies the main issue, it seems important for Mariage Freres to promote its highest priced teas in order to gain legitimacy in the business, it goes against the anti-law number 12 (cf The Luxury Strategy).

2.7 Competition In terms of competition, Mariage is competing against Damman and Le Palais des Thes for the specialty stores and Hediard and Fauchon for the food luxury stores. It seems that contrary to Kusmi who have strong product differentiation, the position of Mariage makes it directly compete with the customers of Damman and maybe less so, of those of Le Palais des Thes which has a different shopping experience. In terms of shopping experience, Damman, Mariage and Hediard are similar because they all are old French luxury houses and all carry the luxury codes of the past century spice trade. They are reserved to the elite, with sober and dark areas of the store, dim light and elegance, as mentioned earlier. It thus, targets a market that is often above 50 years old. Fauchon has somehow managed to change that with the modernization they went through with the arrival of Mrs Capron. They managed to keep their customers and open to a new younger market. However, the fact that Mariage is doing it more thoroughly than the others explains its success. The best one in the game wins. There can be many in the same position, but the one who will play the best cards in this position in the marketing mix will become the leader in this niche market. For example, Hediard and Fauchon have now some differentiation that didn’t exist before and a better segmentation of their markets. It seems that in this niche market, Damman and Mariage are in the same position but Damman obviously became a follower in terms of brand awareness. Le Palais des Thes has still got a blurry image and position but I shall reserve a part of this report to 53

The characteristics of luxury tea HEC Paris 2011 the brand later on. Key Figures and Dates 1854. Mariage Frères is created. 1987. First store abroad (Tokyo). 59 million euros. Global turnover 2010 30% of the turnover is made abroad, mostly in Japan. 6 stores in France (17 distribution placements), 13 stores in Japan among which 4 with restaurants, 2 stores in Germany 1 500 distributors in more than 60 countries. 250 employees in 2007 Between 200 000 and 1 million Euros. Cost of a store opening abroad depending on location. 5,3 million Euros net profit in 2007 500 meals catered a day in Paris by Mariage Frères 9,8 million Euros invested between 2004 and 2006

3 Maison des Trois Thés: Example of a strong luxury store and a weak brand. The Maison des Trois Thés is a boutique store in Paris, it cannot be considered to have created a brand feeling as no one goes and ask for a “Maison des Trois Thés” tea as they ask for a Mariage Freres tea. This company is called according to a Eurostaf study “an outsider of luxury.” Or in other terms, “a competitor thought to have little chance of success” (Oxford Dictionary of Current English). However, it seemed important to me to explore the shopping experience of this famous Parisian specialty tea store as it carries too many of the luxury codes in its product and communication. It could be said that it has, of all the tea stores in Paris, the highest level of luxury feeling. With two tea stores in Paris, one at 1, Rue St Médard, or 33, Rue Gracieuse, in the prestigious 5th arrondissement. They have a tea tasting room which, offers a wide choice of tea claiming to have more than 1000 different types. The secret?

3.1 The importance of direct sourcing “When someone buys a luxury item, they are buying a product steeped in a culture or in a country” (Extract from The Luxury Strategy). If one goes on site and ask the salesmen, they will say that Master “Tseng”, the owner and creator of the Tea House

54

The characteristics of luxury tea HEC Paris 2011 travels around the world and spends most of her time on the tea plantations selecting the teas and harvests. There are no intermediaries between the store and the planters; she even owns some plantations according to the salesmen, thus she ensures the quality of the tea, the origin, and the season of harvest. The salesperson maintains a very secretive aura around the Master Tseng character. I would rather use the term “character” as there is a lot of storytelling around her, something commonly used in the luxury industry.

3.2 “The ingredients of the luxury product: complexity and work”* In terms of products offered, there is the same complexity as in Mariage Freres boutique, as the product range is wider. There is however, a major difference, no teas are mixed with natural flavoring such as fruits, flowers, spices. Here, only pure teas are sold. No mixed or flavored teas in their specialty store. The flavor in the teas if there is one, is a natural flavor that comes from the fermenting of the tea. They chose not to sell any side products apart from specialty books on the tea world. Tea is a prestigious delicacy here. As wine or cocoa for chocolate, the tea has its own lands of production, its “grand cru”, and its seasons. The knowledge, the history of the tea and its origins is the added value of la Maison des Trois Thes. No tea has the same taste as another. Tea has seasonality and inconsistency, like wine does. One can contemplate the size of the leaf, the aroma, the color, the strength, the taste, One can learn all about the origin, when the harvest was and the conditions it was grown in.

3.3 The physical scarcity of the products and technical scarcity of the store. The uniqueness of each tea lies in the uniqueness of the region it was from, the weather it grew in, the harvest, time of picking, and the transformation technique. There is a physical scarcity that is intrinsic and essential to the product itself. But Master Tzeng managed to introduce a technical scarcity through the quantities of harvests imported, and in the shopping experience as well. First, the way the product is handled and weighed as if each gram was precious. Second, there is an artificial queue in front of the store, before they open the sliding door. Last but not least, the pricing is closely linked to the relative scarcity of the tea, scarcity sets the price and it can reach very high levels. You will probably find the most expensive teas in this boutique.

*

Extracted from The Luxury Strategy

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The characteristics of luxury tea HEC Paris 2011

3.4 Exploration of the travel dream: a travel through time and space. Tea has always been an invitation to exoticism. Here, the store’s atmosphere does justice to the East and offers a journey through space and time. One can travel back to the tea trade times when the orders were still taken by hand and the cash register wasn’t yet invented. The tea is weighed with a traditional balance and small weights. The tea containers bear Chinese characters that distinguish them. The salespersons wear traditional Chinese clothes and are very knowledgeable about the tea offered. They know about the tea classifications, grading, and harvests and can offer assistance to both connaisseurs and non-professionals. The store could have been the same four centuries ago, only the use of electricity provides a hint to the true century. The austere image of a drink for connaisseurs is exploited to the fullest. The tea tasting and tea ceremony is given a high priority. The packaging which encourages tea discovery is minimized unlike for Le Palais des Thes or Mariages Freres where tea packaging is essential and the battle for innovation has been fought for years. The tea product is a myth, an art, a dramatized object through a very simplified packaging. From price to store arrangement, product offer and communication through the salesperson, everything is kept in the theme of traditional Eastern luxury tea trade boutique of the past centuries. The salesmen will refer to their boss as “Master Tseng” only. La Maison des Trois Thés is a “trading post” from the past, and as the tea at that time was a luxury product, it has remained so. The communication is built only by reputation and by the employees, even though a website is being built at the moment. There are looming downsides of such a strategy. In remaining traditional, it failed to introduce the 21st century rules of luxury, and thus failed to market a brand.

3.5 Why does it fail in creating a luxury brand? “On the importance of the label” “If there is one striking […] aspect of luxury, it is the visible nature of its logos and brands”. Luxury is meant to be shown and to attract a social status as well as making it visible and recognizable to society. It strongly applies to clothing brands such as Louis Vuitton but also to luxury, food brands. Laduree for example does that quite well, and many tourists, and shoppers proudly display their Laduree green bag full of macaroons. To some extent, the Mariage Freres label is also proudly exhibited and the product is quite well represented in its packaging. It is probably one of the main reasons why some people may specifically ask for Mariage Freres tea but would never do so for La Maison des Trois Thes.

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The characteristics of luxury tea HEC Paris 2011 “Luxury: the product and the brand” “Luxury is located beyond quality it is, [….] ‘that which distinguishes the very good from the emotionally moving’” (extract from The Luxury Strategy). Seeking the highest quality product is not enough, more importantly emotion should be sought after. Emotion takes the shape of recognition of the brand in public opinion. In other words, if I leave La Maison des Trois Thés with my shopping bag, it will not bear any sign or logo, but moreover, even if it did it would not be recognized as a brand with a social standing. It lacks the strong cultural dimension Mariage Freres has a history of being a brand that supplied the European Royal Courts, the myth, the brand is well knowe, it evokes the 19th century tea trade, the luxury cars parked in front of the rue du Bourg-Tibourg boutique in Paris. This is what is going to create eagerness and the brand lovers, who will be the same people who will advocate the brand.

4 TWG: A Copy Paste of Mariage Freres business model in South East Asia, how to create luxury in Asia? "Here we have Louis Vuitton, Cartier, Giorgio Armani, Harry Winston, Dior — and you have TWG Tea." Founder of TWG

4.1 TWG History Manoj Murjani met Taha Bouqdib in charge of a Mariage Freres Boutique in 2004. The two men quickly bonded over their shared interest in tea and created TWG in the hub of Singapore in 2007, close to the major tea capitals of Asia. Murjani, on the strength of a $10 million investment, is chief executive. Bouqdib is president, while his wife Maranda Barnes is the director of business development. And the business is developing. It is most prominent at home — it is served in the 57

The characteristics of luxury tea HEC Paris 2011 front cabins of Singapore Airlines and at top hotels, and recently opened a second tea salon and boutique in the midst of the highest-end shops at the new ION Orchard mall. In its first full year TWG sold 650 tons of tea, bringing in $30 million, and turned profitable in 2008, according to Murjani. "We're comfortable to be growing at five- to tenfold a year," he says, in both revenue and staff. Over the next year the company could invest up to $10 million in a tea academy and a museum in Singapore. 4.2 TWG’s successful strategy

International Presence

TWG expanded in South East Asia, Europe, and the US, with 3 boutiques in Singapore, one in Tokyo, London and New York. More shops in Kuwait, Cambodia and Dubai are to open in the next 18 months. A very selective distribution It is served in the front cabins of Singapore Airlines and at top hotels. It sells through the Dean & Deluca food chain in the USA, and Harrods in London, LVMH is also interested. TWG’s distribution remains within the luxury retail sector.

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The characteristics of luxury tea HEC Paris 2011 A brand platform similar to Mariage Freres

BRAND PLATFORM Brand Identity

Brand Positioning

Physical Attributes Expensive and luxurious Widest range of tea in Singapore Luxurious tea salon with a colonial style Customers High class wages Middle class wages

Values The well-being (Holding company of spas) Creation & fashion (launch of collections) Quality (selection of rare teas)

Personality Sophisticated Elegant Professional Competitors Marriages Frères Le Palais des Thés Harrods…

4.3 The reasons for success Luxury and Tradition TWG reproduced Mariage Freres’ connection to history. “The European brands, steeped in history, draw great self confidence from it, a great uniqueness and a cult of inherited values that translate into products that religiously respect these values” (the Luxury Strategy). Mariage Freres embodies the myth of the tea house that used to supply European Royal Courts. As TWG had no history they invented it, proudly showing the historical date of 1857 59

The characteristics of luxury tea HEC Paris 2011 on the logo, giving to TWG an imaginary history. But writing “1857” is not enough. TWG thus created a link with the Singaporean port’s past as a tea trade post. They thus claimed a link with the role of Singapore as a link between the tea plantations and the exporters. The store design with ancient furniture and massive oak counters is a copycat of the Mariage Freres one. Luxury and services "At TWG you're not just buying tea, you're buying into the experience of the brand that promotes the lifestyle that is evocative of luxury" Murjani, founder of TWG Murjani has understood well the importance of service when shopping. The service experience before and after you buy the product is important. Like in Mariage Freres, the customer will be served get by a knowledgeable salesperson to guide them through the widest range of teas available in Singapore. The tea will be packed in hand painted artisan tea canisters bearing the logo of the brand. The tea grand crus selection Similar to Mariage Freres house, TWG claim the expertise of a tea connaisseur selecting the best available tea on earth: playing on the scarcity of the products sold, the exclusivity, the fleeting character of each harvest. They also explore the travel dream to the fullest, putting the emphasis on the origin of the tea and using evocative names for each tea sold. "We work like a haute couture fashion designer; we choose our leaves carefully The company buys its teas from 36 countries, including out-of-the-way spots like Mozambique, Papua New Guinea and Burma. They go by names like Happy Tea, Magic Flute and Weekend in Moscow. At the Salon and Boutique cafes in Singapore they are accompanied by fine chinaware and an 18kt gold teapot” Bouqdib declared in an interview for Forbes magazine. In the Wuyi Mountains, a Unesco World Heritage site in Chinas Fujian Province, are gardens known for a famous tea called Da Hong Pao. The leaves here are highly sought after and are largely reserved for the government. "It is not easy to get it. We don't have tons, we have very small quantities — but we have it," Bouqdib says. It is selling not only the precious tea accessories but also tea-based desserts and pastries like macaroons, jelly and truffles. Key figures 2008: 650 tons of tea sold Turnover 2008: $30Million

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The characteristics of luxury tea HEC Paris 2011

5 THE KUSMI CASE: A thousand year old product sold in the 21st century style The launch of the new Kusmi brand in 2007 brought a major change in the French luxury tea market. With a colorful and flashy design, floodlit and bare wall stores, a product offer that is the opposite of the overwhelming wide range of traditional specialty stores, Kusmi managed to give a refreshed and younger image to a thousand year old product. People who know tea will not find the most exquisite harvests, however to the novice customer; it won’t be difficult to tell the difference between the teas. The first thing you smell while entering the store are the sweet flavors of chocolate, spices and fruits. Kusmi managed to thus appeal to a younger market. But most of all, he managed to create “a brand”, with the emotional involvement inherent to it. The Kusmi tea almost became a fashion accessory. A mix of premium, fashion and luxury, a very coherent and strong marketing mix, made this a recognizable and strong premium brand in the market. I will go deeper into details to explain its success.

5.1 Small introduction to the history of KUSMI Date of Birth: 1867 Place of Birth: St. Petersbourg, Russia Nationality: French Home address: Paris Story: She started supplying tea to the Royal Russian Courts before running away to Paris after the revolution. She has had different fathers since then and was recently adopted by Sylvain Orebi in 2003 and completely made anew with the help of Yann Marois. She grew up as the young and trendy Russian French she is today. Her trademark creations: Anastasia (Ceylan and Chinese teas with lime, orange tree flower and bergamote), Prince Vladimir (Chinese teas with citrus fruits, vanilla, cinnamon and spices) Detox (green tea with lime and lemongrass)

5.2 The brand renovation Since it became a subsidiary of Orientis, the brand had undergone major transformations. Its new owner Sylvain Orebi worked on the marketing mix for two years and thus created a whole new brand. The brand went through major changes, the packaging was enhanced, the product offering changed to a smaller selection of a better quality, the distribution became more selective; the prices were increased to match Mariage Freres and other fine tea stores. The retail channel through location and design was significantly improved. He worked on the overall visual identity of

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The characteristics of luxury tea HEC Paris 2011 the brand, the work on design was global, it concerned not only the logo, but the store design, the formats. By conducting the changes over all dimensions of the company, he managed to create a coherent and unique brand identity. This lead to a major breakthrough of the brand this past three years seen in the telling figures and brand recognition.

5.3 The French-Russian tea brand of the 21st century The tradition and modernity In a sense Kusmi managed to mix tradition and relevance like a Luxury brand through its communication. It may have been the brand supplying the Russian Royal Courts like Mariage Freres but it is far from a tea trading post boutique. Harmoniously mixing luxury and fashion codes, Kusmi’s relationship with time is dual, both fleeting and timeless, with both timeless products such as Prince Vladimir, and new tea concepts like Energy Boost or Be cool. All these dimensions make Kusmi a modern brand, and it explains why it is often qualified as the tea brand of the 21st century, like the Luxury brand Chanel or Louis Vuitton it managed to keep the history and heritage but live with its time and modernize and refresh the image.

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The characteristics of luxury tea HEC Paris 2011 Kusmi fashion, premium and luxury triangle

The above diagram shows the position of Kusmi in the triangle. We can say that Kusmi has a bit of each of the three dimensions in its strategy: Premium, Fashion and Luxury. However the premium dimension and the fashion one are most relevant. First: A Premium Strategy Kusmi is first and foremost a premium brand. The distribution is not exclusive yet selective. The prices are relatively high, yet they are all around an average of 13 Euros and this is communicated. The in store experience changes radically as you do not need the guidance of a salesman to choose a tea here. Contrary to a Mariage Freres store where the exploratory experience is part of the product and part of the luxury. The Kusmi customer will seek a good quality/ price ratio. In luxury, quality is important but the ratio is not taken into account in the customer choice, the dream matters more, this is why when you buy a Chanel perfume, you buy more than just a nice smell, but the social meaning, the saga of the brand, the French luxury, the fashion shows, the myth and the reputation around it. Take the perfume industry for example, to produce a perfume cost around 1 to 5 Euros, and is on average sold from 50 to 100 Euros. Quality/ price strategies that neglected the dream dimension (example of BIC perfume) have failed in this industry. A premium product has to offer a consistent and flawless quality to justify the price, whereas in the luxury industry it is not just a good quality product at a good price but a dream where price is not the question. When prices are displayed and one slides into the bottom-down strategy one loses the status of a luxury brand to become a premium brand like what happened to Audi cars as a premium product. The pricing strategy of Kusmi is a premium one. Indeed, the communication on prices makes it premium : even though its prices are similar to Mariage Freres, the price list is more limited, the prices are closer to an average, and the difference between the lowest and highest prices is less blatant making thus seem cheaper than Mariage. Second: A Fashion strategy

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The characteristics of luxury tea HEC Paris 2011 I must point out the fashion dimension in the Kusmi brand. It has put emphasis on trendiness and seduction through the design of the product, the choice of colors, the communication in fashion magazines... One can draw a parallel with Fauchon strategy that associated a fashion strategy with its marketing of food. A work on the design It put the emphasis on the hedonism through the product offer and marketing. Tea doesn’t have to be austere and stern. For once, tea packaging is trendy. The design is like the Burberry tartan very visible and specific (In contrast to luxury that is meant for oneself, fashion is for others). Thanks to this strong visibility, Kusmi teas can be associated with fashion accessories. A work on taste and products It is a trend in the food business, the French consumers wants sweeter and stronger tastes. If we draw parallel with yogurts, they contain more and more flavoring than before, because a vanilla yogurt will not seem like a real vanilla yogurt if it does not strongly taste like vanilla. Kusmi has understood that well and broke the traditional tea selection offering. Subtle natural aroma is replaced by strong flavoring and original recipes. We don’t sell an origin and a harvest but an arrangement and a work on taste. At Kusmi, you don’t come for a Bordeaux or origin bottle of wine, but for a coktail. It sure makes a big change, and someone had to dare it. Third: Luxury dimension A timeless dimension Luxury brand products have a long life cycle, some last forever. In a sense the Kusmi brand with its timeless Prince Vladimir and Anastasia products, supposedly dating from the 19th century goes into the luxury codes. They thus kept the historical date of creation visible on the logo, and communicated the myth of the brand that used to supply the Russian Royal Courts _ as commonly done by luxury brands (“The bee serum abeille from Guerlain was used by pharaohs and a man unveiled its mystery 150 years ago”) _. A store as a jewel case The outlets stores are very bare and sober to highlight the products. It is close to the feeling of a museum with white walls, lots of light and a very limited range of colorful products exposed. The location of the store also contributes to the luxury feeling of the brand. The exploration of a dream Kusmi also carries a luxury dimension through the exploration of the travel dream. It is nowadays explored by every tea brand however, for Kusmi, the Russian roots participate in the travel dimension more than the countries of origin of the teas. Contrary to other brands from Lipton to Mariage Freres, Kusmi insists more on the country of origin of the brand and explores the travel dream through the brand origin that is, the Russian roots as Mariage does with the French roots. It also emphasizes the well-being properties of tea. The pure and simple design of the store which is reminiscent of a pharmacy, the health message that they give on the communication of the brand, the marketing of the products (one of the star products is 64

The characteristics of luxury tea HEC Paris 2011 called “Detox” and is marketed as a health product), everything in the brand puts the emphasis on health and well-being which is an important dimension in the construction of the brand. 

I conclude that Kusmi tea is a premium fashion brand with notes of luxury codes in its marketing mix. The traditional 4Ps model perfectly applies here (In luxury it is often a useless tool). Kusmi managed to create a strong brand thanks to a very coherent marketing mix. The positionning of Kusmi is coherent in all dimensions of the mix. Coherence is the key. Let’s go through a brief overview of Kusmi’s 4Ps.

5.4 The strength of the brand lies in a very coherent marketing mix A strong positioning I would like to start this analysis with three concepts taught during the brand management class with JN Kapferer: • • •

The brand platform analysis “To take a position is to choose and to eliminate, it is to decide which are the main values that are going to be associated to the brand in the future and organize all the internal coherence to achieve this goal ” “Building a brand is building a UNIQUE value perception and the perception is built through coherence only ”

When Kusmi defines itself as the French premium tea brand of the 21st century for the modern woman of less than 50 year old (core target, not all customers are included), all the marketing mix should be coherent with this positioning. Brand Platform Analysis: If the brand platform is outlined, a concept that represents what the brand wants to be, it results in the table below:

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The characteristics of luxury tea HEC Paris 2011 Above table: attributes, personality, Mariage Freres, Le Palais des Thés What makes the brand strong is its positioning, in this case it is quite an interesting one since it is successfully addressed to a younger market in a market traditionally dominated by customers over fifty years old. Finally the traditional core target of the customer in his/her fifties is left and Kusmi dares to target young women in their thirties/ fourties. 

Mariage Freres has an identity by selling the tea the same way it was sold hundreds of years ago, reserved to an elite (Royal Courts) through selective distribution (Stores in dim light that seem to be hidden and reserved to an elite). The tea is an austere delicacy; the salespersons wear suits, selling the finest Lapsang Souchong and Darjeelings, Tea from China, Nepal, and Thailand by harvest. Mariage thus creates the necessity and desire to go through an exploratory shopping experience. Whereas Kusmi is closer to the mass market shopping experience as the act of buying surpasses the shopping experience. Kusmi shopping experience is at the opposite, the store is easy to find, open, transparent and well-litm it doen’t suggest elitism like the Mariage store. Even through the product offering, it is quite easy to chose one tea from an other and one doesn’t need assistance for that.

Kusmi delivers a simple message through a simple pricing, simple product offering, targeted communication and coherant distribution model.

A coherent marketing mix with the premium, fashion positioning The strength of the brand lies in its coherence. The unique value proposition and the uniqueness of the message through the marketing mix.

Kusmi managed to keep a large tea offering SIMPLE.

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The characteristics of luxury tea HEC Paris 2011 Price: A simplified range of prices nearing an average of 12 to 13 Euros The entry price today is low, but not any lower than its competitors. In the customer mind however, Kusmi appears as a cheaper brand, because the product offer is simpler and the pricing of this offering follows suit. Most boxes are priced around 12 to 13 Euros which help the customer associate Kusmi to this price. Even though you can buy as cheap a tea at Mariage, you get the feeling it is more expensive, due to the in store experience but also to the product offering: you have many products at a very high price and like in the luxury stores, prices are not on display (it is one of the main codes in The Luxury Strategy). However, improving the product with a more premium offer could help Kusmi enjoy more revenues and keep its premium image on the luxury side. Today the highest price in store for a tea is under 100 Euros. We could imagine an offer of luxury teas at Kusmi stores with no communication on prices for this category of products. 

One good model that can be followed is the one used by Pierre Herme. Pierre Herme managed to attract its core customers through its macaroons, like Cartier with its Trinity jewel. The macaroons have a very small entry price (< three Euros), pretty much everyone can afford a macaroon at Pierrre Herme, but the macaroons will attract customers to the shop to buy the cakes which are more highly priced and have higher margins (> 40 Euros) and represent a smaller part of the product offer. In store, it represents less than 40% of the window display.

This is what Mariage Freres does with its accessories, they like the luxury fashion brands have very high margins on these products and thus make a lot of profit on the tea pots which are very expensive. However, they keep low entry price since you can buy tea starting at 3 Euros. Place: A selective yet not exclusive distribution model

Kusmi Tea opted for a selective distribution strategy in order to align the retail to the quality of its product. However it remains more accessible than its competitors Mariage Freres, Damman… 67

The characteristics of luxury tea HEC Paris 2011

Different point of sales: • • • • • •

Private retail stores: all over the world. Corners in the famous and prestigious department stores: BHV, Galeries Lafayette, Colette… Corners in the specialized stores (coffee and tea): Café Meo On line sales: on the brand website In premium supermarkets : Monoprix However, the stores are still different from one another. It works for the luxury stores, but for premium positioning, it would strengthen the brand to keep the same store design.

Promotion: a traditional communication model targeting young women •

• • • •

The promotion starts with the store and products’ design which is trendy and fashionable (Modern Art, White walls, colorful boxes) Word of mouth Women magazines (in the gift sections) Web marketing PR with fashion shows

In a way, communication is close to the traditional luxury communication model according to which “you communicate but do not advertise” (cf The Luxury Strategy). Every marketing decision nurtures brand identity. Their partnership with sushi shop (the premium brand that revolutionizes sushi) shows the coherence of a brand that made anew the oldest drink of human history and brings it back into fashion. The latter along with the participation to fashion shows and other PR event create a positive word of mouth and participate to the birth of a Kusmi world. On the other hand the online advertising, and low quality banners displayed on some websites threaten the brand image. Indeed, the strength of a brand depends on the strength of its weaker point.

Picture 1 : A Kusmi banner on a website

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The characteristics of luxury tea HEC Paris 2011 The marketing message conveyed “Le magasin est l’ecrin et l’ecran d’une marque.” J.N Kapferer (“The retail store is both a jewelery case and a show case of a brand”) Kusmi managed a real revolution in changing the image of tea through its store design both baroque and chic. The colors of the store mix a pure white and a shiny red, the tea boxes are not an austere black but are all colorful and nicely designed. The store itself is well lit, the smell is strong, and you do not smell Japanese tea or Darjeeling but chocolate and spices, vanilla and caramel. It is sweet and appeals to a younger market. The windows are transparent, this place is vibrant, and contrasts with the usually austere and hidden traditional tea stores, it does not give the impression that it is reserved to an elite. The values it conveys are also positive. Tea is not the foreign yunnan and the latest harvest of Zhejiang, it is something healthy and pleasant. Health is a strong value, the store itself looks like a clinic with the white walls and white lights, it has the advantage of drawing attention to the colorful Kusmi boxes. Promotion helps develop the trendy image, as the first thing that was done by the owner was to appoint a fashion press agent to promote the brand. Developing communication in women magazines, he managed to reach the core target quite easily, following thoroughly its brand platform.

Product: A simplified offering 

A simplified product offering.

Figure 6 : Comparison of the online stores of mariage and kusmi

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The characteristics of luxury tea HEC Paris 2011 

No strong emphasis is put on the origin of the tea (Ceylan, Darjeeling, Yunnan) but on the flavoring and taste (chocolate, spices) or marketing of the properties (energizing, relaxing, slimming). Kusmi actually offers the origin teas as well but advertizes more on the concept teas (Energy boost, detox…) and mixes (Anastasia, Prince Vladimir…).



The Kusmi design is the same for all products, only the color changes. (Strong brand coherence through the strength of the label).

Figure 7 : Galleries Lafayette corner



The stores’ design with the bare, white walls put the emphasis on the products. It is close to the luxury, fashion retail stores in term of product enhancement. The feeling is the opposite of the austere Mariage Freres' boutique.

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Two styles for the products: one classic and premium for the traditional recipe, one trendier for the tea “bien-etre”

Figure 8 : The two "Kusmi" boxes designs

5.5 What evolutions for the brand? Do not try to fix something that is not broken. In other terms, if the brand platform is efficient, make every future decision in line with this brand platform. On the necessity to innovate

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The characteristics of luxury tea HEC Paris 2011 Let’s start with a bit of theory. If in the retail of consumer goods the product life cycle is a classic one (development, introduction, growth, maturity and decline), in the luxury business it is another story. The new launches are scarcer and a product lifespan is often unlimited. The new innovation do not come in replacement of the old one (≠ new collections at H&M) but they add up to the timeless collection. There are bags at Louis Vuitton store that are as old as the brand. To continue with the LV example, the brand creates a new bag every six months, this does not mean that they are not innovative. On the contrary, in order to launch that one bag, many more bags were created and destroyed and will in the end never be sold. It is a lot less than the premium business in term of releases but nearly more in terms of innovations launched in-house and not selected! As for innovation, the luxury brand has to be the first to launch the new trends. They have to be one step ahead in their respective business. In this sense, Kusmi is closer to a luxury strategy as its products “Prince Vladimir” “Anastasia” are hundreds of years old and only one new tea is released per year. However we must not forget that Kusmi is not a luxury brand in the clothes industry but a premium brand in the food industry. 

To be consistent with its position, since it is not a luxury brand and to avoid the natural decline in customer attractiveness, like any premium brand, Kusmi has to introduce innovation to keep the customer focus on its brand, especially since the tea market is going through a lot of innovation, meaning that customers have more and more choice and innovation has to be more present (an extreme example with a lot of competition, is the premium pastries world, innovations are introduced every month!)

On the necessity to strengthen the retail network A developed retail channel: Kusmi tea is strong thanks to its retail network. The retail store is the first medium of communication. It is so because of both its premium and specialty tea store positioning. Thus the retail store must be considered a priority in the development strategy. When in the retail business, location comes first. “Location! Location! Location!” Premium locations are a key point, and a good 70% of cash invested should be invested into developing the retail network. Develop strategic locations will not only drive sales and brand recognition, it will also assert the premium positonning in the countries where it is expanding. In Europe, at the moment, it is not strongly present and the retail network in underdevelopped. Coherent Store design: It is important to set rules to have the same “base” for each Kusmi store opened worldwide. Like any brand that expands worldwide in the retail business the retail store is the same everywhere. This coherence through the retail 71

The characteristics of luxury tea HEC Paris 2011 store will make the brand stronger. Like Sephora, Starbucks, L’Occitane, H&M, Nespresso, Laduree, Paul…Any retailer that succesfully expanded worldwide understood that. The furniture, the wall colors, the design is basically the same, as similar as it can possibly be depending on the architecture of the store. More important than the cash generated by this expansion, the positive outcome for the strength of the brand generally gained through its retail channel is priceless. It will ensure the brand coherence. Possible Product extension While considering brand stretching, a manager shall always keep in mind:  Is my position coherent with this extension?  Do I have any legitimacy or strength to move to this new sector?  With the trendy positioning, does Kusmi have the right image for this extension and the strength to do so through its retail business? This is a highly valuable advantage.  Will such an extension be costly?  Can Kusmi be competitive in the new market? An example through: Tea cookies and chocolates The chocolates and cookies extension have already been explored by Nespresso. With a very trendy and flashy design and interesting packages it would be good as an entry product for the brand and it will consolidate the fashion image and the positioning of the brand.

Limited Edition Launches Introduce collections to keep brand attractiveness. One release per year fits a Luxury Strategy, LV and Moet can do one release per year, because each release is a timeless luxury product. But, being in a more fashion/ premium sector, and being in the food and drink industry (consumed products with a very short lifespan), in order to maintain brand attractiveness, Kusmi shall release some limited editions of exotic flavors for example or make a partnership with designers and launch limited editions or signature creations twice a year. It will be a good way to test customer taste and maintain brand attractiveness. A limited edition could be proposed by a famous French cook or offer a product that is relatively far from the brand identity (Rose tea, Oolang tea…).

5.6 The International Development

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The characteristics of luxury tea HEC Paris 2011 If the objective of the brand is to bring good quality tea at a good price (Premium Strategy), Kusmi might want to revise its strategy for the country where it is going to develop. If Kusmi is to develop internationally, it is important to put a strong focus on the brand DNA: 1) The Russian Roots 2) The French Nationality 3) Its trendy and young personality Another key point is the concentration of the brand in its international development. It seems that the brand is present in more than 15 countries…but through one retail store only. It would be more efficient to slow down the international development but consolidate its positions in a country through a developed distribution channel. The brand awareness might be too weak in these countries. The development in Eastern Europe is strategically quite interesting, because of the geographic and cultural proximity and the market potential. On the long term scale, it is important for the brand to consider the Asian market where tea and French luxury holds a strong power. ASIAN DEVLOPMENT: turn a premium experience into a Luxury one through a pricing and localization strategy. JAPAN Japan is a high potential market; it accounts for more than 40% of Mariage Freres profits today. Highlight the Paris Origin When it comes to premium tea, Japan comes to mind as an obvious country. It has been noted by Kusmi competitors, Japanese people are willing to pay for their own tea at a higher price because it has been branded in Paris. Trading up Strategy Many brands, especially French brands have to adapt their strategies to this unique Japanese culture. For example Biotherm have seen their sales rise in Japan only after it increased in prices to justify a Luxury position. Some brands adopt a higher position in Japan and a low price can trigger the adverse effect. Japanese will not buy a low priced product if they think it is a “low quality product” as the association price/quality os quite strong.

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The characteristics of luxury tea HEC Paris 2011

Especially since Kusmi holds the brand name Paris, and especially since the success of Mariage Freres and many French brands in the food and drinks premium industries followed this strategy. The risk of a lowly priced product in Japan is to be seen as a cheap brand. In the same way, many French brands adapted their strategies in Japan, China, and Singapore as Luxury brands of a higher scale. Since they can enjoy the luxury image associated to French premium products. How to communicate the message to Asian people?  Increase the price to match Mariage Freres pricing in Japan  Highlight the brand's headquarter: Paris  Put the accent on story telling through the Russian roots via a beautiful website  Packaging design of a special Japanese edition with the Japanese pop art designer (ex: LV with Takashi MURAMI)  Premium localization of the first store (IT IS THE KEY POINT!)  Exclusive distribution (more exclusive than France)  Extend the offer in-store (all products are available in store) A luxury position will make it easier to enter the Japanese market. USA Development A market with a high potential in the high quality loose tea Tea is the most widely consumed beverage in the world, besides water, but it has yet to break into the New York market. The drink has been catching on slowly but steadily. Tea sales grew only 3% in the U.S. last year, to $7.3 billion, but have quadrupled since 1990, according to the Tea Association of the USA Inc. The strong growth potential of the US tea market has encouraged manufacturers to launch a large number of tea products over the last few years. Starbucks has been one of the companies to capitalize on this trend, forming a new agreement with PepsiCo to distribute its Tazo RTD tea brand. 

Datamonitor reports that the US tea retail market was worth $2.5 billion in 2007 and recorded a compound annual growth rate (CAGR) of 2.0% between 2002 and 2007. In contrast, the $6.4 billion coffee retail market appears to have reached a peak, with growth falling at a CAGR of 0.6% over the same period.

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The characteristics of luxury tea HEC Paris 2011

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Companies are capitalizing on tea's growth potential with a rising number of US launches

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Kusmi's target age range is lower than the traditional tea drinker: Datamonitor 75

The characteristics of luxury tea HEC Paris 2011 records that the over 55 age group accounts for a higher percentage of the US tea market than any other age group—at 24.2% in 2006 (the next leading age group was the 35–44 year olds, accounting for 18.4%). Few companies target women between 35 to 44 years old as Kusmi does. A different approach to fine tea USA is a very different market where the luxury French Business is treated differently. There are countless tea brands in the USA, and many brands have a weakened presence in the East or the West depending on their strategies. It seems however that the position of Kusmi has not yet been taken and could offer new market opportunities. Respect of the Roots: The production has to be consistent with the brand ''Tea is an affordable luxury that brings out the best in people.'' Bruce Richardson "You either drink tea to have communion with your friends, neighbors or family, or you drink tea in a reflective, meditative environment for yourself," says George Jage, president of the World Tea Expo, an annual trade show that recorded a 68% attendance spike in June. "That's what Americans need the most-time for ourselves and to connect more with our neighbors." A continued interest in tea: tea brings serenity to people's life. The taking of tea can be almost a religious thing; people come to it seeking something for their stomachs, but leave with their souls refreshed. The modern meets the classic: LOHAS (Lifestyle of Health And Sustainability). An adapted strategy focusing on female consumers aged 30-40, highlighting the fashion and well-being aspects. Keeping the premium strategy in the USA would be wiser, applying the same strategy that worked in Europe to the USA and adapt it to the market. 

  

Highlight the well-being and travel aspects, in order to appeal to consumers, emphasize the drinks ‘health benefits'. The International Food and Information Council's (IFIC) 2007 Food & Health Survey, found that US consumers overwhelmingly believe that food and nutrition play the greatest role in maintaining or improving health (75%), more so than exercise (66%) or family history (43%) Strongly communicate the DETOX aspect of the product with its antioxidants and digestive benefits. Highlight the fashion and luxury aspects of the brand. Adapt the locations of the store to the core target: women in their thirties to forties, and thus open up stores in malls where customers expect to pay extra for premium goods, and hence attract a younger as well as richer and mainly female clientele. 76

The characteristics of luxury tea HEC Paris 2011  

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Keep the store design very similar from one store to another to create a strong brand visibility Enhance the shopping experience with lifestyle aspects, through the selling of books related to the Russian roots or tea, postcards, accessories. The store should become a place to go and browse and linger such as Virgin Megastore or Starbucks. It should not be just a tea store. Work on the taste to make it stronger (more tea in the bags, or more flavouring by bag) as the US market like stronger tastes. Conclusion to the international development of Kusmi

Mariage Freres makes nearly half of its revenue abroad. They discovered the potential of Japan, and some countries with a similar kind of high potential are still unexplored. 

The Mass Premium market is too competitive with brands such as Tetley, Twinings and even Lipton who are investing in this sector. Kusmi should focus its position where it is strong: in the premium fashion position. Kusmi is growing fast and its decisions today will decide whether or not it will be a strong brand tomorrow. Keep a selective distribution channel; develop a strong retail channel; focus its position to the countries of placement, adapt the position to the market, keep innovating to keep brand attractiveness, enhance brand communication through an enhanced website, and concentrate on the coherence of communication through coherent sales force communication, coherent store design, ads in line with the premium position, and then maybe…concentrate on the product extensions.

6. Special T, a trial extension of Nespresso’s business model to tea 6.1 Market context Division of market share of the coffee market in supermarkets Growth Roasted coffee

Sales in Million Euros -1.40%

881

Caps 16.10% Instant -0.70% Source: SymphonyIRI, October 2010

430 375

The success of the coffee caps market does not need to be proven anymore. The increasing sales in supermarkets in 2010 have increased the interest of Kraft food, Nescafe and Sara Lee who respectively introduced their Tassimo, Dolce Gusto and L’Or product. The main players in the tea markets are holding high hopes on the growth potential of the tea caps market. Nestle chose France as its testing market for its new tea caps machine, Special T, hoping to repeat the same success as Nespresso. They sell on the Internet only for the moment. Through an isolated and entrepreneurial organization within the group, Special T sets the objective to fill an 77

The characteristics of luxury tea HEC Paris 2011 empty market space out. The tea machine Special T’s success will determine whether or not to expend the concept abroad.

6.2 The Special T value proposition Launched in 2010, Nestle took up many elements of Nespresso’s strategy (the concept, the distribution online) hoping to reiterate the success of Nespresso. However, if Nestle was dominating the instant coffee market with Nescafe, it has no presence in the tea market dominated by global groups such as Unilever and Associated British Foods. How will Nestle manage to change the consumers‘ habits in term of tea preparation? The product Individually portioned aluminum capsules

average price per caps = 35 to 40 cents Patented Special T machine but might license their production to manufacturers in the future

Launching product price = 99 Euros Strategically, they decided to give the tea “Nespresso” another name. It is not the same business. Tea and coffee are two different businesses with two different aisles

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The characteristics of luxury tea HEC Paris 2011 and brands in supermarkets. Some explain it as a fear of Nestle to fail and tarnish Nespresso’s image. I think if this happens it may have some effect (even though a lot of people make the connection), but I do not think it is the main reason. I started my research on Special T going through the forums and taking notes of people’s reactions. To analyzes, customers’ satisfaction in general, seems quite high, and in general the high activity and emotional involvement of people on forums about Special T reminds me of the emotional attachment that started with Nespresso’s brand. “the tea is full of aroma and taste” “great choice” “easy to use and amazing tea” “I became addicted”. The Special T universe

Elements of Luxury       

They play on the travel dream around tea The selection of the teas The offer is divided between original teas and flavored teas “creations” The distribution is exclusive Creation of a club High level of services Communication exclusively on word of mouth

Elements of Mass Market 

The group chose to keep Nestle as an endorsing brand. However the two brands evolve in two opposite universes as shown on the graph below and it could threaten the luxury image they want to build : family, accessibility, dairies

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  

The packaging is not up to the brand’s ambitions* The offer is limited compared to the hyper choice present in the luxury market No feel of scarcity of the products like for Mariage that offers limited editions of special harvests

The pluses of Special T The arguments of Nestle are easily to understand: this machine doses the right amount of water at the right temperature and for the right time of infusion. It goes beyond the goal of Nespresso which was to make the coffee of the bar available at home, since the tea at the bar is usually a Lipton Yellow bag in hot water. As some bloggers pointed out, a lot of machine making tea existed before, Dolce Gusto, Tassimo did it. And you could even find tea caps that are compatible with your Nespresso machine on http://theoucafe.fr. But no machine claimed to master the “tea ceremony” the tea ritual through a calculated time of infusion and temperature per category of tea.

*

Will be developed more thoroughly further down

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The characteristics of luxury tea HEC Paris 2011 All tea specialists know that a good tea depends on the way it is infused. It is also true that nowadays even with the latest innovations; it remains rather complicated to make luxury tea if one wants to respect the exact time and temperature of infusion. The tea offer in vending machines is thus very limited. Basically if you want a good tea, you’d better go to a tea specialty store, where they will have the knowledge and patience to brew it for you in exchange of a fair contribution of a 12 to 100 Euros. Yes, good tea is like good wine, it can be highly priced.

6.3 Comparison with Nespresso Brief reminder of the pluses of Nespresso:

Source: presentation HEC Marketing 2011 Yuanhang Shen, Flora Goguey

If we compare Nespresso and Special T’s pluses, we can find similarities in both the marketing speech and in the product definition. However the question would be to know if the Nespresso strategy can be used in the luxury tea market and how to adapt the strategy to reach the same customer’s perception of luxury? Why Special T could do better in its promises to the customer? In term of Design On the machine: the technology at the service of luxury On a customer perspective, the opinions are diverse. It is often commented that the Special T’s machine design is poor.

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The characteristics of luxury tea HEC Paris 2011

Compared to some of the Nespresso machine, it takes a lot more space in the kitchen and the design is less refined than the Nespresso one. Licensing the machine to the manufacturers as soon as possible would be a good way to meet customer expectations is term of choice in the machine design. The premium strategy of Nespresso for the machines is to conquer the home market faster and thus establishing a loyal client base for the luxury strategy applied on the caps. By keeping the exclusivity in the manufacturing of the machine, Special T will have to internally acquire the technology and design competencies of the manufacturing group to maintain its legitimacy as a luxury brand. Because “there is no prestige without respect […] each new model must reinforce this credibility: due to technological obsolescence and lack of reliability, and despite its patents of nobility, Jaguar went bankrupt” (The Luxury Strategy) On the packaging: can it be used as a gift? Another downside and probably the first that would be corrected by me is the packaging of the tea caps. The carton package makes it impossible to present the caps to one's guests.

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The characteristics of luxury tea HEC Paris 2011 If one looks at what has been done in the tea mass market, Lipton, Twinings and Tetley offer comparable packaging in term of design and quality perception.

Due to the recent trends in the mass market offering higher quality product, Special T has to enhance its packaging to fit its luxury positioning. The luxury positioning is the only positioning that could make Special T successful in its market. Some examples of what is done in the premium tea market:

Figure 9 Nespresso caps

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The characteristics of luxury tea HEC Paris 2011

Figure 10 Damman freres tea bags

Nespresso managed to adapt the luxury codes in the coffee market, through a refined black and golden packaging. If we were to look at Special tea packaging out of context, it would be difficult to position it as luxury tea rather than premium:

Especially since the mass market brands are doing so well at enhancing their packaging. In term of perceived functionality As some bloggers pointed out, a lot of making tea machines existed before, Dolce Gusto, Tassimo. One could even find tea caps that are compatible with the Nespresso machine on http://theoucafe.fr. But no machine claimed to master the “tea ceremony” the tea ritual through a calculated time of infusion and temperature by category of tea. All tea specialists know that a good tea depends on the way it is infused. It is also true that nowadays even with the latest innovations; it remains rather complicated to respect the tea preparation process perfectly. However if Nespresso takes the hassle out of going through the coffee brewing, Special T only replaces a simple operation: putting tea in hot water. Would people 84

The characteristics of luxury tea HEC Paris 2011 buy a machine to replace something as simple as boiling water in a kettle and adding a bag? The tea equipment is itself easy. Compared to the coffee making process, there is no legitimacy for Special T to exist. That is if Special T claim to replace this tea making phase. The challenge will thus be for Special T to prove that it is not simply replacing the hot water poured over a teabag, or the infusion of Mariage Freres, it has to claim a higher technological added value to make people understand that the technical improvement of tea making is higher with Special T than the technical improvement of Nespresso for coffee. Simply because the technical improvement is obvious for Nespresso, it is the same process as in a café restaurant and that it is far easier than the traditional coffee pot. However for tea, it is a pure innovation and the customer still does not understand the added value. It is thus highly important to advertise the technical advancement of this machine. Having a luxury positioning makes it all the more necessary. Plus here lies an opportunity to use storytelling and efficient advertising to support this luxury positioning. “There is no prestige without respect: modern luxury therefore does not turn its back on technology” (The luxury strategy) This is why, aiming at a Luxury strategy is more important for Special T than it is for Nespresso. They have to make the customer realize that when a Special T cup is poured, it is not the same as the cup you will get in a Parisian Bistro, which most of the time is just a yellow label bag in hot water, but something more. This machine will have to prove its high technical legitimacy as a tea making machine. This is far more complex than adding a bag to hot water and far more elaborate. The dream around tea provides a good communication ground. The story telling around tea ceremonies can be used, as in many countries, tea is a ceremony more than an ingredient, and the ceremony often holds a deeper meaning and takes years to be mastered as it does in Japan for example. As stated in the Luxury Strategy the technology shall always maintain the dream “there is a potential of imaginary and sublimation of the world running through the technology”.

6.4 The challenges around the product The environmental impact The issue around the “environmental impact” is similar to Nespresso and some solutions could be put in place by Nestle to fight that and contribute to the environment. For example offering a good price incentive if you bring back your old caps, introducing the deposit of returnable caps in the services part of the company. The multiplication of the machines One of the main challenges lies in the multiplication of machines in the kitchen and it is driving the consumer crazy. After the coffee machine, the ice cream machine, the bread machine, the mixer, the French fries machine, the ice cube machine, the 85

The characteristics of luxury tea HEC Paris 2011 blender, the cappuccino machine comes ….the tea machine. It is all the more difficult to make the customer buy it since, tea making is a lot easier than coffee, ice cream, toasted bread etc…It would be so much easier to have a combo machine between Nespresso and Special T, even if it has two systems and two entries for caps. Pricing it at a higher price for example and making it a very nice design.

6.5 How to reach the success of Nespresso?

Strategy enhancement

The coffee bean and tea leaf example The coffee bean and tea leaf is a coffee chain with a premium position on the coffee and tea restaurants market. They have developed a machine to sell at home the tea and coffee.

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The characteristics of luxury tea HEC Paris 2011

Their marketing message is very simple and very efficient: “CBTL™ is an easy to use, single serve beverage system that combines the handcrafted taste and quality that is the hallmark of The Coffee Bean & Tea Leaf® with the finest Italian technology and design perfected by CAFFITALY SYSTEM. One capsule is all you need to create a single serving to savor. One touch is all it takes to brew fresh espresso, brewed coffee or tea.” They combined the premium skills of an Italian manufacturer for the machine with the premium skills in tea and coffee making of their boutiques. It is important for Nestle to convey the dream and universe through both products, in other terms through both the machine and the tea caps. It is important to communicate on the uniqueness of the experience, the excellence and the high technical advancement of the machine. There is not yet any Special T universe that has been created apart from the travel dream that is explored as it is explored by Mariage Freres, Le Palais des Thés, or even Lipton. Special T should go further in the development of a brand universe. They already have a very good product according to customer feedback and they should maintain this high involvement in the quality of the products, but it will not be enough if they want to conquer a larger market.

7. Le Palais des Thés, the passion of the “oenology of tea” Le Palais des Thés was created with very little money and inspired by a man passionate about tea. This brand went through a lot but managed to become a big hit thanks to its innovative direct supply chain in the tea market. It had at the time two main objectives: bring high quality tea through direct import, make it an affordable luxury. The brand finds its roots in this oxymoron. However, if in the nineties, Le Palais des Thés was considered an innovative concept, the apparition of new players and the recent shifts in strategies brought new challenges for a brand in desperate need of a stronger identity. What are the steps that lead to the brand construction? What are the challenges that Le Palais des Thés will be facing in the years to come?

7.1 The Brand history At the beginning of Le Palais des Thés there is a man passionate about tea. It is in 1987 that he formed the idea of bringing to the French market a better quality/ price tea and decides to launch with the help of 45 people, a company that will select and import the best teas directly from the plantations. Each one of them put a 2000 francs capital (around 300 Euros). The first two years were difficult, the decision process was slowed down by the division of the capital. Francois Xavier Delmas thus decided to buy 80% of the share capital. Today 90% of the capital is owned by Francois Xavier Delmas and Mathias Minet.

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The characteristics of luxury tea HEC Paris 2011 The goal of the brand is at the roots of its identity: make the finest teas an affordable commodity. He introduced a very innovative concept: putting the loose teas on display and accessible to the customer. The shopping experience was done around the tea exploration and discovery. The brand also opened its first tea school. What was at the time a very innovative concept expanded among the different players of the industry: Mariage, Hediard, Fauchon and Le Palais des thes’ differentiation became blurry. Francois Xavier Delmas spent more than 20 years on the field, selecting the best “grands crus”, making sure that the working conditions of the tea pickers and the agricultural methods were ethical and sustainable. Year after year he remains animated by the same enthusiasm and passion while talking about his travels.

7.2 Le Palais des Thés’ universe A selective distribution model, a wide range of “tea selections” The distribution is made through its retail network, on the online store and through luxury food outlets, restaurants and hotels With 17 stores in France, among which 5 are in Paris, the brand also expanded abroad. Le Palais des Thés opened 3 stores in Belgium, 1 store in Ireland, 1 in Israel, 1 in Japan, 2 in Norway and 1 in Slovenia. An unperceived differentiation through the value proposition The Palais des thes as Mariage’ value proposition is to select the best teas of the world for its customers. The product range is thus large and the shopping experience thus very similar in many traits to Mariage Freres. The services part is developed and the discovery approach of the customers through the shopping experience is close to the one characteristic of specialty tea stores. It seems from a customer point of view, that the value proposition is the same as in Mariage, or Damman, but without the historical myth (since 1854), the tea trade dream (store design), the luxury feeling etc… However, the universes in which each brand evolves are very different if not opposed. It is for Le Palais des Thés an opportunity to highlight its brand identity through a stronger marketing mix. An unusual selection process: the expression of a passion As any brand created by passionate men, Le Palais des Thés has a very complex and authentic personality. The tea selection reflects the passion of the teams, and the heart of the people selecting them. The product holds a unique character, changing with the seasons, the discoveries of the owner through its travels, the harvests. 88

The characteristics of luxury tea HEC Paris 2011

An unconventional supply chain model Le Palais des Thés has got a dual supply chain model. Like most tea brands in France, a part of its offering comes from tea houses in Germany. However, a selection of rare harvests, coming directly from the plantations makes the originality of the brand. Some teas can thus come from very small plantations. The disappearance of intermediaries gives to Le Palais des Thés a better control over the quality of the tea selected. We can say that a part of the offering of Le Palais des Thés follows a luxury model. A Strong corporate culture Le Palais des Thés has got a strong corporate culture through both its strong ethical values and its high engagement toward sustainable development. The visits to the plantations serves not only the exploratory approach characteristic of Le Palais des Thes but also enables the company to check on the working conditions, the plantations’ agricultural methods and the life of the pickers and planters, as an objective investigator. The visits are often made outside of the selling seasons, and planters are approached outside of the supplier/buyer relationship. The brand developed through the numerous travels undergone, a privileged relationship with the tea plantation owners, and a very unconventional relationship with the suppliers. Among the criteria taken into account: there is no use of child labor, a decent remuneration of the tea pickers, the respect of health and safety norms, the respect of the environment, no use of pesticides… They work with certified organic crops and go beyond getting supplied by certified sustainable plantations as done by Lipton, and thus give the opportunity to smaller scale plantations that cannot afford any certifications a chance to be selected and sold at the stores. Each employee of the company shares this corporate culture and each one of them goes through an initiation to the world of tea by going to “L’ecole du thé” (the inhouse school of tea of the company) or by visiting tea plantations abroad. It is very difficult to draw the brand platform of Le Palais des Thés, or its position in the triangle. Indeed, the brand is stuck between a luxury and a mass market strategy and the choices in the future will determine the identity of the brand thats has conflicting roots.

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7.4 The high luxury potential in contrast with the brand identity: The Palais des Thés dilemma The elements of luxury positioning Anti-law number 6: The brand dominates the client “The luxury brand should be ready to play this role of advisor, educator and sociological guide. On this account it simply has to dominate” (The Luxury Strategy) Le Palais des Thés started with the mission to make high quality tea accessible in all senses. Through a direct supply chain, a more affordable price but more than anything through its educator role. The tea school was opened shortly after the start up of the firm and the shopping tea experience provided at Mariage freres or any tea specialty store nowadays was first introduced by the brand. One goes to a tea store to get knowledge, insight, to explore the flavors and the tea world. Through its tea school, its blog and publications Le Palais des Thés asserts its strong will to play a major role in the initiation to the world of tea. A tea school

A tea school proposes tea tasting sessions and initiations to the tea and its culture (the rituals, the ceremonies, the know-how, the products’ tastings). A blog

"Discovering Tea, A Tea Traveler’s Blog" is the blog handled by Francois Xavier Delmas. It opens the door to a journey through the tea world, its secrets, its production, the countries it comes from and the life on the plantations. It gives interesting insights about the exploratory approach of the brand. A book

Le Guide de Dégustation de l'Amateur de Thé was co-authored by the owners of Le Palais des Thés Francois Xavier Dalmas and Mathias Minet. They share, through this book the experience gained after 20 years of traveling in the plantations, from tea tasting lessons, to preparation advice.

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The characteristics of luxury tea HEC Paris 2011

Anti-law number 17: Cultivate closeness to the arts for the initiates “The luxury brand is a promoter of taste, like art.” “Luxury is not a follower: it is creative it is bold” (The Luxury Strategy) 



Mariage Freres took these elements of luxury strategy further. They didn’t stop at a book and a school, they opened a tea museum, widened the specialized book offer in the product range and thus as a teacher earned more respect and more recognition as the tea specialist of the capital. Le Palais des Thés thus, feels like a watered down version of Mariage freres in term of shopping experience. However, le palais des thes through its very unique selection process holds a strenght as a tea expert and tea selectioner that his competitors doesn’t have. Wisely marketed this can become a strong differentiating asset. The first fruits of the creation of a club through the theophile card:

The magazine “Bruits de Palais” Launched in 1994, Bruits de Palais is a magazine released quarterly by Le Palais des Thés for the fidelity card holders. It proposes articles about the history of tea, its culture, the recipes around tea, and the discovery of new teas. SWOT of a luxury strategy (based on the characteristics of a luxury strategy as developed on the luxury strategy) Strengths Weaknesses The control of suppliers No strong label or visual identity The tea school No star products The wide product range and the “coup de coeur” The prices policy (must remain selections affordable) The social and ethical engagements The lack of coherence through packaging, communication… The network of stores No strong partnership The French identity No strong WOM The sincerity and authenticity of the brand Opportunities Threats A brand that can become emotionally involving The lack of historical story The travel dream “A taste of adventure” The development of luxury social and ethical tea brands The reputation of the school on a worldwide level Intensification of competition A privileged club The story telling around the travels Develop brand visibility through strong labeling

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The characteristics of luxury tea HEC Paris 2011 “A luxury brand is a brand first and luxury second”* : The challenge of Le Palais des Thés. The weakness of Le Palais des Thes lies in its padded out and blurry brand identity. The creation of a strong brand is a priority rather than the creation of a luxury brand. As seen above, the brand has got a lot of valuable ingredients to the implementation of a luxury brand, but it has to assert a strong brand identity through a simplified marketing message, a unique message, spoken through all the dimensions of the brand. The reason of Kusmi’s strength nowadays is through its strong coherence and the respect of its brand platform through each of the elements present in its marketing. The problem of le Palais des Thés today is to draw its brand platform and to see that each element of its marketing are coherent with the latter. It has to find its differentiating element. Its tea expertise “Oenologue of tea” could provide a good starting ground. Le palais des thes is a good example of a brand that holds a lot of inner strenghts but is in the market place weak compared to Mariage or Kusmi. The fact is simply because a brand has to keep its message simple and unique. I have already pointed this out but I will never say it enough. For example: if you create an environmentally friendly brand, it has to offer organic product, the design has to be related to nature, the logo, the colors, the star product everything shall mirror this strong and unique message it wants to convey…. If you take a look at the picture below, even without knowing the brand you can say a lot of things about it.

*

From The Luxury Strategy, Developing brand equity chapter

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The characteristics of luxury tea HEC Paris 2011

PART 2 in a nutshell

•

• • •

•

•

•

Lipton opted for an aggressive trading up strategy using the classical mass market methods through unhenced packaging and increased choice. They explored the travel dream but fail to create a “universe”, a “dream” as defined by luxury brands to comptete with Kusmi, or Fauchon Luxury tea comes lose, but many “premium” bags option exist. Mariage freres created the French luxury work on tea selection and mixes meant for an elite, exploring the tea trade posts of the past century dream. The concept sells well abroad especially in Japan. As it was done in the luxury fashion industry, an Asian copy cat of mariage freres was launched in Singapore by the name of TWG. Holding the same brand platform and DNA at the exception of the French signature and history. It gives Mariage freres a challenge and an opprtnuity to strenghten its brand around its core dimensions and aspects in order to compete with TWG if it comes after. (Add asterix : Ralph Lauren faced the same predicament with Bean Pole in South Korea and still has difficulties to gain brand awarness against its copy cat) Kusmi introduced the fashion dimension in the old fashioned and traditional luxury tea business. Giving a renewal to the industry and appealing to a younger, urban and feminine market. However, it holds some weaknesses in term of brand coherance through its communciation, store design and the lack of inovation in the product offering might threaten the inevitable stagnation in the life cycle of a brand. Nestle launched its tea machine. Aiming at a luxury positionning through a developped tea selection, a designed machine, a club and an exclusive distribution, there are still some mass markets dimensions such as the appearance of the supporting brand “Nestle”, the packaging, the lack of added value from being in the club. But the main issue and rela challenge will be for the brand to prove the technological enhancement of a machine that does more than replace the infusion of a tea bag in hot water. Le palais des thes is a brand born from a passion for tea but lacking a strong brand personnality. Stuck between elements of luxury strategy and a will to make tea accessible, it will have to decide in the year to come the dimension that makes Le palais des thes, Le palais des thes, wether it is the passion for tea, the personnality of its creator, the expertise

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III RECENT EVOLUTIONS AND GENERAL CONCLUSION All in all through this journey in the French Luxury tea, we got a better understanding of today’s market. We may now answer in this last part of my report this question: If I were tomorrow to create a luxury tea brand, what would I have to put in place? What distinguishes a luxury tea from a mass market tea or a premium tea? As we have seen there is no Luxury tea brand but rather premium tea brands adopting luxury strategies at a more or less developed degree. The graph bellows pretty much sums up our findings in term of luxury codes to be followed by tea brands to create a luxury tea brand as set by the main players in the industry:

Graph 1 The characteristics of a traditional luxury tea brand

The culture of luxury tea The French specialty tea stores created a “culture” of tea. The salesman does not speak about the product as a salesman but as a handcraft man, as a connaisseur for the person selecting the teas for consumers. They thus, managed to convey the passion of the product. The consumer is not just buying tea, they are not in the classical buying situation, and they ask questions and are in an exploratory situation. The whole concept of the store leads to such an experience. The structure of the offer allows the customers to take more time with the salespersons and thus spend more time with the brand with this teacher/apprentice relationship. The role of the brand is that of an educator, their goal is to introduce the customer to the tea world, its classifications,

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The characteristics of luxury tea HEC Paris 2011 its categorization, its benefits and characteristics. “Our goal is to educate them about the pleasures of drinking tea” declared Andrew T Mack, founder and CEO of Teavana Atlanta in an interview for Chain Store Age. To ensure their status as the house selecting the best teas, they used:  Tea grading classifications (from dust to golden tips), they more often than not avoid to sell the lowest grades  Story telling around history of the brand and tradition  Pricing strategies (very high margins)  Highlighting of the place of production  Traditional methods of production  Commitments to quality

Mariage freres’ succes In France, we can say so far that only Mariage freres managed to create a luxury brand of some sort, as you may have people staying at the four seasons and asking specifically for a Mariage Freres tea like they would ask for a glass of Moet. For purists, such as le Palais des Thés or La Maison des Trois Thes the situation is similar to wine cellars, they sell luxury tea but did not manage to create a brand people will specifically ask for while at a restaurant. People will go there to buy a rare vintage, but the label comes second. And yet there is no luxury without branding. Showing off the logo is part of it. As stated in the Luxury Strategy “Luxury objects are objects of luxury brands. Only diamonds are luxury objects appreciated without brand. What counts is their size and purity. For everything else there is no luxury without brands” Following this principle, Mariage managed to build a reputation around the tea selection and build a dream around the French tea work on taste, and a label with a social meaning easily decoded. Where Le Palais des Thés and Damman stopped at the Functional value of their products and to some extent the experiential value, Mariage developed a symbolic value of tea as an elite drink for people with refined taste.

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Maraige managed to create a unique value proposition: Ensure a constant quality, the mariage freres quality through a changing product. The harvests might change but the mariage signature is intemporal. Through blends and mixes, Mariages created trademark timeless products and fought the inherent changing taste of tea by ensuring the constant taste of a mix od teas and spices, and fruits. The challenges in the luxury tea were to ensure the volumes, the constant taste with the overwhelming choices. Mariage freres divided thus its offering between mass market teas blended that became signature recipes and the selection of changing harvests.

The image of tea: The major changes undergone by the brands such as Kusmi through a complete modernization of the image of premium tea gives a new breath to the imaginery of luxury tea. Indeed, the market is defined by the players and the image that they give to tea is that of a thousands of year old product which way of selling hasn’t changed. Tea has a submerging variety which explains while many base the luxury positionning on the richness of their “collections”. Marketing creations (concept teas) such as the Detox concept tea of Kusmi was an audacious introduction in a premium tea offering that a traditional luxury brand like Mariage cannot take and thus it takes Kusmi outside of the competing field of Damman and Mariages. Kusmi thus doesn’t have to propose the hyper choice of these tea houses nor does it need to work on the origin of the harvest to assert its quality. Introducing a fashion dimension was a very bold move and that is why the market expanded outisde of the traditional over fifty years old consumer. The outstanding financial results of the brand are partly due to this very differentiating choice that calls customers’ attention out in an environment filled with redundancy of the same marketing messages. As developped in The Luxury Strategy, the fact that luxury is linked with history

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The characteristics of luxury tea HEC Paris 2011 doesn’t mean that it has to be old fashioned on the contrary. The fact that Hermes was the French house that has been supplying noblemen since the nineteenth century with the finest leather product is linked to the fact that it is the first place we expect to explore the latest technological advancement in term of shopping experience, the latest innovations in term of work on leather. The challenge will be for them to manage to keep the history feeling and remain a brand that lives with its time.

And the sustainable Development? The sustainable development is a subject that I hold close at heart and regret not having the opportunity to debate about it more thouroughly in this report althought I tried to dig a little deeper in the issue. Luxury and Sustainability are not oxymoric, even if luxury is often defined as the culture of excess, of waste and hyper consumption, it is the token of luxury brand to go ahead of everyone in term of techological advancement, new trends and innovations, to be “avant-gardiste”. In a sense, being sustainable should be the duty of luxury brand that can pass higher costs on the price to a market that is not price sensitive and that often holds sustainable development as a preocupation. We arrived at a stage in time when this preocupation became more than a trend, but a necessity. Lipton set the objective to get all his production certified Forest Alliance by 2015. While Le palais des thes has got an organic products selection and we have seen together that sustainability is at the core of the corporate culture. Kusmi on the other hand prefered to separate the offering and create a separate brand for organic products. It is likely that brands will keep on the developping in the segment and many things are yet to be done there! Especially since tea holds all the ingredients to be 100% planet friendly. Let’s hope for a better future together!

Some examples of TEA BRANDS IN THE USA: A very innovative market (if you are interrested)

Rishi: “Gifts for any tea lover” Website: http://www.rishi-tea.com/ Logo:

Home page:

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The characteristics of luxury tea HEC Paris 2011

Teavana “Opening the doors to Health, Wisdom and Happiness” Website: http://www.teavana.com/ Store:

Logo:

Home page “Teavana

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The characteristics of luxury tea HEC Paris 2011 Tea Journey”

Packaging

Adagio Teas Website: www.adagio.com

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The characteristics of luxury tea HEC Paris 2011

Harney & Sons “Fine Teas” “Master tea blenders” Website: http://www.harney.com/ Home page: Very exquisite and precious design, use of classical, known codes of luxurious tea industry Logo:

Packaging:

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The characteristics of luxury tea HEC Paris 2011 Tea Forte Pyramidal shaped teas Website: http://www.teaforte.com/

Other tea brands I like: Serendipitea in New York Tealosophy in Buenos Aires Steaz ice tea

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THANK YOU I hope you enjoyed your reading with a hot cup of tea!

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The characteristics of luxury tea HEC Paris 2011

Bibliography Studies, academic papers, reports  Les strategies de croissance des outsiders du luxe, Une Etude Eurostaf, sous la direction de Pascal Reybard, 2006  The early history of the great atlantic and pacific tea company, by Bullock, Roy J. Harvard Business Review, Apr33, Vol. 11 Issue 3, p289, 10p  Asthetics and Ephemerality: observing and preserving the luxury brand by Berthon Pierre; Pitt Leyland, California Management Review, Fall 2009  Preserve The Luxury Or Extend The Brand? Harvard Business Review, Jan/Feb2011, Vol. 89  LVMH: King of the Luxury Jungle. Black Book - LVMH: King of the Luxury Jungle, 2009  Crafting Brand Authenticity: The Case of Luxury Wines. By: Beverland, Michael B. Journal of Management Studies, Jul2005. Interviews  C. Barnes & Co. Coffee and Tea Manufacturing Industry in the USA in 2010, Market reports, industry trends and demographic data  The 2006-2011 World Outlook for Instant- Soluble and Other Tea in Consumer Packages Excluding Tea Bagsby by Professor Philip M. Parker, Ph.D. Eli Lilly Chaired Professor of Business, Innovation and Society INSEAD (Singapore and Fontainebleau, France)  Tea Industry of India The Cup That Cheers has Tears by V.N. Asopa, July 2007, Research Paper, Indian Institute of Management of Ahmedabad  What’s in a Drink that You Call a Chai?: Quality Attributes and Hedonic Price Analysis of Tea by Satish Y. Deodhar and Vijay Intodia, May 2002, Research Paper, Indian Institute of Management of Ahmedabad  COFFEE, TEA AND COCOA Market prospects and development lending, Book reviews, World Bank market survey , by Shamsher Singh, Jos de Vries, John C.L. Hulley and Patrick Yeung  RTD Tea and Coffee in France, Industry profile, 2010, DATAMONITOR  France food and drinks report 2008, Business Monitor International Ltd Press, magazines  Les secrets des produits stars (Jean-François ARNAUD), Le Figaro, 07 février 2005.  Lipton cherche l'affection des buveurs français de thé, Les Echos, 29 avril 2003.  BIEN ETRE Esprit zen et invitation au voyage accompagnent la boisson tendance;  Thé attitude. Le Figaro, 03 novembre 2001. 103

The characteristics of luxury tea HEC Paris 2011  Lipton : le thé, comme une invitation au voyage, BAZAN Catherine (2009).  Lipton, l'art de faire aimer le thé au monde entier, MICHEL Caroline (2010).  Lipton Ice Tea adopte la "positive attitude", BAUCOMONT Virginie (2009).  Move over, double skim, double latte, Pasquarelli, Adrianne. Crain's New York Business, 10/18/2010, Vol. 26 Issue 42, p1-25  Reading the Tea Leaves. By: Wilson, Marianne. Chain Store Age, Sep2003, Vol. 79  Trends in Tea. By Everage Laura. Gourmet Retailer, Nov2004, Vol. 25 Issue 11  Tea culture, by Roberti, Roberta. Link-Up, Jul/Aug2001  Blooming concepts by Misonzhnik, Elaine. Retail Traffic, Jul/Aug2010  Making tea a luxury, by Tan, Jessica. Forbes Asia, 12/14/2009, Vol. 5 Issue 19, p80-82  Le Palais des Thés dévoile ses dernières innovations au Sial PME (QC), 2004  Stratégies Magazine n°1573 Books  The Cult of Luxury: Asia’s Love Affair with Luxury, Chadha and Husband, 2006  Route du thé. Le Triangle d'or par Kitti Cha Sanmanee. Ed. Hazan  Guide de l'amateur de thé, par Jean Montseren. Ed. Solar Interviews      

Mohamed Barouadi, PDG SITI, Societe Imperiale des thes, Marrakesh Sylvain Orebi founder and CEO of Kusmi tea and Lov Organic tea Francois Xavier Delmas, founder and CEO of Le Palais des thes Bessiere Cyrille , manager of Le Palais des thes USA Sophie Villemain, brand manager Lipton, Unilever Stephen A Graph, Marketing Director Special T, Nestle

Databases EUROMONITOR XERFI EBSCO CCI Websites  www.twgtea.com/, The TWG TEA Company  www.mariagefreres.com, Mariage Frères - Maison de Thé à Paris depuis 1854. Thés raffinés et de qualités exclusives  www.palaisdesthes.com, Online store from the French luxury tea brand Le Palais des Thés. An exclusive selection of the world's finest tea harvests 104

The characteristics of luxury tea HEC Paris 2011  www.kusmitea.com, La maison Kousmichoff, fournisseur de la cour des tsars de l'ancienne Russie, présente sa gamme de thés. Distributeurs, histoire et présentation du groupe  www.en.lov-organic.com, Lov Organic is a luxury organic tea brand with a selection of green teas, black teas and red teas. A range of teas in recyclable and eco-friendly packaging  www.specialt.net, Special-T provides the table industry with innovative and high-quality tables, steel table bases and table base systems  nespresso.com, Des machines à café exclusives, offrant les meilleurs grands crus  www.adagio.com, Fresh tea, cool accessories and plethora of useful information. Adagio Teas is the most popular tea store online, with stellar customer service marks.  www.starbucks.com, www.tazo.com  Steaz.com  Lipton.com  Teaforte.com  Stachtea.com  Teavana.com  Republicoftea.com  Twinings.com  Tetley.com  Dilmahtea.com  www.hersheyteaparty.com  Samovarlife.com  Amazon.com  coffeebean.com  www.teauction.com  www.youtube.com, Japanese tea ceremony, tea at koken with sound http://www.youtube.com/watch?v=7tt7NBIVeMY  Food Stuff - A Honey Store in Grand Central - NYTimes.com  wikipedia

ANNEXES TEA IMPORTERS Germany SPECIALTY TEA IMPORTER Halssen & Lyon GmbH Teeladle SPECIALTY TEA PACKER Hochland Kaffee Hunzelmann GmbH & Co KG GebrOder Wollenhaupt GmbH S0LUBLE TEA MANUFACTURER Halssen & Lyon GmbH Plantextrakt GmbH & Co KG Dr Otto Suwelack TEA ASSOCIATION/ORGANIZATION Deutscher Teeverband e V FairTrade Labelling Organizations International (FLO) German Tea Council TEA AGENT/BROKER 105

The characteristics of luxury tea HEC Paris 2011 Cha Dd Teehandelsgesellschaft mbH Ludwig H O Schroeder & Rudolph Hamann TEA EXPORTER Halssen & Lyon GmbH TEA IMPORTER Cha Do Teehandelsgesellschaft mbH Club English Tea GmbH Der Teeladen Gebr Gschwendner Dethlefsen & Balk GmbH Tee Import Christoph Gotz GmbH Halssen & Lyon GmbH HTH Hamburger Teehandel GmbH Import & Export Intertee Handels GmbH Kloth & Kohnken Teehandel GmbH J.T.Ronnefeldt ProjektWerkstatt Teekampagne Raoul Rousso GmbH J. Fr Scheibler GmbH & Co Paul Schrader & Co Sunry Import & Export GmbH TE E Tee Einkaufs& Handelskontor Hamburg GmbH Theodor Maass GmbH G W A Westphal Sohn & Co Gebruder Wollenhaupt GmbH TEA PACKER Alois Dallmayr Kaffee OH Feinkost-Bohm J Bunting Teehandefshaus GmbH & Co Carl Moll Landkaffee GmbH Cha Do Teehandelsgesellschaft mbH. Der Teeladen Gebr GschwendnerDethlefsen & Balk GmbH H & S Teegesellschaft GmbH & Co KG Krauterhaus Wild GMBH & Co Minges Kaffee und Tee Inh Rolf Minges Onno Behrends GmbH & Co Ostfriesische Tee-Union GmbH & Co KG OTG International GmbH Pukala Teehamdelsgesellschafi Mbh Paul Schrader & Co Ludwig Schwarz & Co GmbH Teekanne GmbH Theodor Maass GmbH Thiele & Fresse Wolfgang Schott Brillant GmbH TEA DECAF PROCESSORS Halssen & Lyon Gmbh Plantextrakt GmbH & Co KG SKW Trostberg AG ::2:: Alois Dallmayr Kaffee OHG, Dienerstrasse 14/15, D-80331 Munchen, (Postfach 10 04 61, D-80078 Munchen) Tei: (49)(89) 21350 Fax: (49)(89) 2135167 Telex: 5-23-615 dalim d. Personnel: Dieter Vogel, green coffee purchasing; Rudolf Krapf, green coffee purchasing Feinkost - Bohm, Kesselstr 13, D-70327 Stuttgart, (Postfach 60 01 42, D-70301 Stuttgart). Tel: (49)(711) 4010-0 Fax: (49)(711) 4010- 280 Personnel: Mr. Schulz, general manager. Germany J. Bunting Teehandelshaus GmbH L Co., Brunnenstr. 37, (Postfach 26787, D-26762 Leer), D-26789 Leer Tel: (49)(491) 8080 Fax: (49)(491) 808-188, Carl Moll Landkaffee GmbH, Holzbachstr 2, D-86152 Augs- burg, (Postfach 10 22 27, D-86012 Augsburg) Tel: (49)(821) 50 103-0 Fax: (49)(821) 50 103 20. Telex: 533 415 Cha Do Teehandelsgesellschaft mbH., Hermannstr.106-109, D-28201 Bremen. Tel: (49)(421) 536 6766 Fax: (49)(421) 536 6777 Emai: [email protected]. Personnel: Lutz E Tonnis, managing di- rector Club English Tea GmbH, Am Eggenkamp 8-10, D-48288 Greven Tel: (49)(2571) 5070. Fax: (49)(2571) 50751 Personnel: Dieter Groneweg, general manager; Sonja Groneweg, product manager; Birgit Wickermann, customer service German Tea Council Deutsches Teeburo Katharinenstr 33 D-20457 Hamburg. Tel 49 40 3751 8441 Fax 49 40 3751 8443 Der Teeladen Gebr. Gschwendner Heidestrasse 26, D-53340 Meckenheim Tel: (49)(2225) 92 14 0. Fax: (49)(2225) 92 14 20 Dethlefsen & Balk GmbH, Moorfleeter Str 40 D-22113 Ham

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The characteristics of luxury tea HEC Paris 2011 burg. Tel: (49)(40) 731-0730 Fax: (49)(40) 7310 7320. Cable: PEC- CO HAMBURG Email: [email protected]. Personnel:Thomas Schultze, senior executive manager, tea; Jens Meier, managing di- director; Marcus Clausen, managing director; Michaela Bendinger, senior executive manager Deutscher Teeverband e.V., Gotenstrasse 21, D-20097 Ham- burg. Tel: (49)(40) 2360160 Fax: (49)(40) 23601610 Personnel: Monika Beutgen, managing director FairTrade Labelling Organizations International (FLO} Poppelsdorfer Alee 17, 1353115 Bonn. Tel: (49)(228) 949-230 Fax: (49)(228) 242-1713 Emai: [email protected] Personnel Olaf PaSsen, coordinator tea producer register. Tee Import Christoph Gotz GmbH, Kabelkamp 11, D-30179,Hannover Tel 49 511 966 130 Fax 49 511 966 1330 Email [email protected] H & S TeegesellschaH GmbH 8. Co. KG, Industriegebeit Haidach, D-88079 Kressbronn Tel: (49)(7543) 6030 Fax: (49)(7543) 60310 Personne/: Gerhard Klar, President: Edwin Teufel, sales manager HTH Hamburger Teehandel GmbH Import 8. Export Am Sandtorkai 4/5 II. OG. 20457 Hamburg. TeL: (49)(40) 363-771 Fax: (49)(40) 367-827 Telex: 215463 hthd. EmaiL: hamburg-tea@t-on line.de. Personnel: Marcus Wulf, managing director InterteeHandels GmbH Sasler Bogen 4a PO Box 652110,D- 22372 Hamburg Tel (49)(40 ) 6017961 Fax (49)(40) 6010883 Telex: 2144 668 INTE D. Personnel:Axel Gesing, shareholder Kloth & Kohnken Teehandel GmbH, Wachmahnstrasse 39, D- 28209 Bremen. Tel: (49)(421) 347-7931. Fax: (49)(421) 347-7720 Personnel: Mathias Kloth, managing director; Axel Kohnken, man agrng director. Krauterhaus Wild GMBH & Co. Productions und Vertiebs- gesellschatt. Am Bauhof 13-15,D-21218 Seevetal.Tel: (49)(4105) 504-0 Fax (49) (4105) 624-0 Ludwig H.O. Schroeder & Rudolph Hamann Pickhuben 5 D-20457 Hamburg Tel ( 49)(40)37 48 400 Fax (49) (40) 37 48 40 40 Personnel Peter Flagel, owner and manager, Reiner Eberle owner and manager Mingus Kaffee und Tee Inh. Rolf Minges, Gruner Markt 31, 96047Bamberg Tel ; 49(951)22 319 Fax (49)(951) 27780 Personel Rolf Mingus Onno Behrends GmbH & Co., Postfach 140, 26491 Norden Tel (49)(4931) 1895-0 Fax (49)(4931) 1895-13 Teiex 27 213 OBEH D Ostfriesische Tee-Union GmbH & Co. KG, Hinterm Siel- hof 25, D-28277 Bremen Tel (49)(421) 87140-0, Fax (49)(421) 87140-45 OTG International GmbH, Am Bauhof 13-15, 21218 Seevetal Tel (49)(4105) 504-0 Fax (49)(4105) 624-0 0ffices: Pages S A, Route des Estreys, 43001 Le Puy en Velay, France Tel (33) 71056811 Fax (33)71029404 Keith Spicer Ltd,Ferndown Indus- trial Estate, Wimborne, Dorset BH21 7PN, England Tel (44)(1202) 861321 Fax (44)(1202) 861761 OTG Scandinavia, Hammarby Fabriksvag 25, 12033 Stocklholm, Sweden Tel (46)(8) 6409475 Fax (49) 8 6409479 Infusiones Milford S L, c Teatinos 52, 28820 Coslade, Madrid, Spain Teh (34)(1) 669 5046 Fax (34)(3) 669 5501 Andean Mountain Coffe SA Route de Chandoline,1951 Sion, Switzerland Tel (41)27316881 Fax (41 )27316885 Plantextrakt GmbH & Co. KG, Dutendorfer Strasse 5-7, D- 91487 Vestenbergsgreuth Tel 49 9163 88460 Fax (49)(9163) 88464 Telex 624002 Personnel Werner M. Baer ceo

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The characteristics of luxury tea HEC Paris 2011 ProjektWerkstatt Teekampagne, Pasteurstr 6-7, D-14482 Potsdam Tel (49)(331) 74 74 74 Fax (49)(331) 74 74 717 Email: projectwerkstatt@projectw Personnel Thomas Rauchle director, Pukala Teehamdelsgesellschafi Mbh, Bei Dem Neuen Krahn 2, 20457 Hamburg Tel (49)(40) 374 1230 Fax (49)(40) 374 12321 Telex 2165718 api d. Personnel: Patrick Richard, director J.T. Ronnefeldt, Kurfuerstenplatz 38, Postfach 90 07 60, D-60447 Frankfurt/Main Tel (49)(69) 7930050 Fax (49)(69) 793005-38 Raoul Rousso GmbH, Am Eggenkamp 8-10, D-48268 Greven Tel (49)(2571)5070 Fax (49)(2571)50751 Personnel: Dieter Groneweg, general manager; Erich Graber, sales manager; Hubert Riegas,generalmanager;Hans-Ulrich Schipke,purchasing J. Fr. Scheibler GmbH & Co., Trostbrucke 4, D-20457 Ham burg Tel (49)(40) 3785890 Fax (49)(40) 36 28 86 Telex 2 14 379 JFS D Schluter a Maack GmbH & Co., Ost-West-Strasse 49, D-20457 Hamburg Tel (49)(40) 32 81 10 48 Fax (49)(40) 32 81 10 44 Telex 211 105 sumkd Email [email protected]. Person nel: Vincent Schluter, managing partner; Bernd Frahm, manager, coffee department Paul Schrader & Co., Postfach 10 78 29, D- 28182 Bremen Tel (49)(4203) 43 220 Fax 49 4203 43 232 Telex 2 45 645 PSUCO D Ludwig Schwarz & Co. GmbH Meilsener Strasse 4, D-21244 Buchholz Tel (49)(4181)213-0 Fax (49)(4181)21333 Personnel H Mevs sales manager, J Henk, production manager, P Aldag, technical manager Sievers & Sohn GmbH Pickbuben 6 D-20457 Hamburg Tel (49)( 40) 36 71 51 Fax 49 40 36 53 14 Sunry Import & Export GmbH, Heimfelder Strasse 118 21075 Hamburg Tel (49)(40) 790 0080 Fax (49)(40) 792 6257 Email [email protected]. Personnel: Sun Yue Hua managing director Dr. Otto Suwelack, Josef-Suwelack-Strasse, D-48727 Billerbeck Tel (49)(2543) 72-0 Fax (49)(2543) 72-200 Personnel: Nikolaus Uleer, managing director; Reinhard Morgenstern, export manager Dieter Kater, coffee sales manager Teekanne GmbH, Kevelaerer Strasse 21 -23, D-40549 Dussel dorf Tel (49)(211)50850 Fax (49)(211)5048139 Telex 8584 504 tee d. Cable Teekanne dusseldorf Personnel: W Rausch, purchasing director T.E.E. Tee Einkaufs- & Handelskontor Hamburg GmbH Bei den Muhren 70, D-20457 Hamburg Tel (49)(40) 374929-0 Fax (49)(40) 37492929 Telex 2163098 RSTE D Theodor Maass GmbH, Siemensstrasse 51, 25462 Relingen Tel (49)(4101) 3905-0 Fax (49)(4101) 3905-39 Thiele & Fresse. Hinter der Halle 7-8, Postfach 2341 D-26703 Emden Tel (49)(4921) 25184, Fax: (49)(4921) 32490 Personnel F. Thiele, president G. W. A. Westphal Sohn & Co. Neuer Wandrahm 5, D-20457 Hamburg Tel: (49)(40) 324 077 Fax: (49)(40) 327 182 Telex: 2 165 029 GWAW D Personnel Hans-Fedo Busch, director Wolfgang Schott Brillant GmbH, Birkeneck 45, D-25479 Ellerau Tel (49)(4106) 78045 Fax: (49)(4106) 75454 Gebruder Wollenhaupt GmbH GutenbergstraBe33-35 D- 21465 Reinbek Tel (49)(40) 72 8300 Fax: (49)(40) 72 8301 3. Email: [email protected] Personnel: Peter Kuhn, director, Dirk Wollenhaupt, generalmanager

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The characteristics of luxury tea HEC Paris 2011 1.) Mr Karl-HeinzJohwedt intertee Handelsgesellschaft mbH Gesing & Co. Gutenbergring 65-67 22848 Norderstedt Germany Tel: +49 406017961-64 2.) Tee-Handelsgesellschaft Wordtmann mbH Wandsbeker Chaussee 123 22089 Hamburg Germany 3.) Kirchner, Fischer & Co. GmbH Daimlerstrasse 13 25337 Elmshorn Germany

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