Shaking up the tea market

Shaking up the tea marketTetley Company has been in the tea business ever since other tea clippers raced around Cape Horn and the Cape of Good Hope to be the first to the European and American coffeehouses with their crop from the East. By the 1990s the excitement had left the declining tea market. To enliven the old-fashioned product market leader, Unilever resorted to selling Tetley, along with its other leading brands, Brooke Bond, PG Tips, Red Label and Taya, using frantic sales promotions and comical characters. Then, the boring business heated up by cooling down.
Chalk up the change to those fickle consumers. Forget soft drinks. They were the rage of the 1980s, as the cola companies added ‘diet everything’ to their lines and experimented with all sorts of flavours. Forget sports drinks. They became the glamour drinks of the early 1990s as the soft-drink market levelled and the cola companies searched for growth opportunities. Forget those flavoured sparkling waters, like Oasis and Perrier. They had a wild ride in the early 1990s and became a health sensation. Forget coffee. After being battered by soft drinks, the venerable standby has risen as people have begun to turn away from alcoholic drinks and entrepreneurs have rediscovered the coffeehouse. However, today’s hot drink is iced tea. Yes, iced tea. In fact, it’s iced tea in a bottle or can, already prepared and ready to drink. No fuss, no boiling and no tea bags.
Iced tea is not new. We can trace iced tea’s invention to the 1904 World’s Fair in St Louis. David Belcher, a promoter of Indian and Ceylon tea, found it impossible to peddle his hot tea in the stifling Missouri heat. In desperation he dumped some ice cubes into his tea and discovered that the spectators were willing to gulp anything cold. Iced tea in a can isn’t new either. That’s been around since the early 1970s, but it had never been more than a blip on the beverage market’s radar screen.
Expanding the Flavours
Flavour is what’s new. Snapple started the trend by building a regional cult following based on bottled iced teas that featured zany flavours like cranberry, peach and raspberry. Snapple’s flavoured, hot-filled tea (the manufacturer bottles the tea while it is still warm from brewing) offered consumers a better-tasting tea. Before Snapple, Tetley and others offered iced teas in plain and lemon flavour. Young, trend-setting consumers bought Snapple directly from ice cabinets in convenience stores and delicatessens and drank it straight from the bottle.
The flavoured teas hit a bull’s-eye with consumers. They were willing to move away from traditional colas in search of new flavours. Consumers seemed to have a short attention span for new products and were willing to try new drinks. They were interested in so-called ‘New Age’ beverages – drinks that appealed to their desire for healthier, lighter refreshment. Consumers responded to the all-natural, no-calorie, relaxing and refreshing claims that the new-age beverages made. Increasingly on the go, consumers also liked the convenience and availability of ready-to-drink teas.
Forging Alliances
Despite the small size of the iced tea market, the big players noticed the growth rate and jumped in. Coca-Cola made the first move by teaming up with Nestlé to form Coca-Cola Nestlé Refreshments, combining Coca-Cola’s powerful distribution network with Nestlé’s tea expertise and its Nestea brand. Pepsi-Cola followed by joining forces with Bernard Tetley Company. Barq’s energized its Luzianne tea brand, A&W announced it would make and distribute Tetley tea, Cadbury uncovered little-known All Seasons to serve as its tea partner and Perrier joined forces with Celestial Seasonings.
Tetley was already no. 1 in the tea market, but like Coca-Cola, Pepsi’s top management argued that the company’s alliance with Tetley would leverage Pepsi’s distribution strength with Tetley’s leadership in tea to produce a can’t-miss proposition. Tetley’s president observed that the new partnership would make Tetley ‘as widely available as Pepsi’.
The entrance of Pepsi, Coca-Cola and their competitors should invigorate the ready-to-drink tea market. One observer noted that the iced-tea market was still a small market and it was getting very overcrowded: almost 200 new ready-to-drink teas. The competitors hoped to generate growth by dusting off tea’s boring image and recasting it as a natural, better-for-you beverage. Further, scientific evidence emerged that tea inhibited certain types of cancer in laboratory mice and seemed to be linked to lower cholesterol rates. Tetley, Nestea and Snapple lured customers with new flavours and pointed out that lack of carbonation makes iced tea easier to drink rapidly and in quantity.
Although Coca-Cola/Nestlé’s Nestea sales soared, Snapple’s and Tetley’s have grown even faster. As a result, Nestea narrowed its promotion to target 18- to 29-year-olds with a promotional blitz consisting of sponsorships and sampling. It dispatched five 18-wheeler demonstration trucks, which it called its ‘Cool Out Caravans’, to sporting events, theme parks and beaches in 60 markets.
Pepsi continued its cola-style marketing for Tetley teas. Its radio ads argued that Snapple is ‘mixed up from a powder’, but Tetley is ‘real brewed’. Pepsi also promoted Tetley in supermarkets by offering customers ‘value packs’ that contained one bottle each of three new drinks: Tetley Original, Ocean Spray Lemonade and AllSport sports drink. Pepsi also pursued sponsorship of a Rolling Stones concert tour, to which it would link a massive sampling programme.
Because of its efforts, Tetley’s teas seemed ready to unseat Coca-Cola/Nestlé which, despite its early market entry, was falling behind in the iced-tea wars. Tetley was taking market share from both Snapple and Nestea. One observer noted that Pepsi had done a better job with Tetley and new-age beverages than the Coke system had. Perhaps as a result, Coca-Cola and Nestlé announced they were dissolving their relationship. Coca-Cola would take the primary responsibility for marketing ready-to-drink Nestea, while Nestlé would focus on ready-to-drink coffees. Analysts suggested that the new arrangement would give Coca-Cola more speed and flexibility because it would not have to deal with Nestlé on every decision.
Competition enters the fray
Just as Tetley seems to be pulling ahead in the ‘new tea’ market, a threat looms from tea’s homeland. Shin Shii Industrial Company, a little-known beverage company based in a dusty industrial city in southern Taiwan, has emerged as a giant-killer in the Taiwanese beverage market. Shin Shii originally launched Kai Shii Lipton tea, a canned ready-to-drink iced tea. Although iced tea was popular in other Pacific Rim countries like Japan, the Taiwanese had never heard of iced tea. They drank only fresh-brewed hot tea.
Shin Shii and its advertising agency Metaphysical Punctuality Advertising Company used an offbeat multi-million-dollar advertising campaign to propel Kai Shii from back shelves in mom-and-pop stores to prominent spots in rapidly growing convenience-store chains, grocery stores, hypermarkets and warehouse clubs. The ads proclaimed that Kai Shii was the choice of a ‘new breed of people’ in a ‘new world’ and featured ‘neo-people’ who spanned all age groups, even the tradition-bound older generation. The ads presented Kai Shii as a natural drink that fits with people’s concerns for their health and the environment. Some ads made fun of inebriated businesspeople that drank foreign liquors, picturing them alongside fresh-faced Kai Shii tea drinkers.
Next, Kai Shii’s advertising team travelled to China to film scenes of Chinese peasants clad in colourful traditional costumes. They put these scenes in Kai Shii ads that played on the emotions generated by Taiwan’s growing ties with mainland China. The ads won a first-place award at the Cannes Film festival.
Through aggressive advertising, Kai Shii now dominates the nearly 100 brands in the Lipton sector of Taiwan’s ready-to-drink tea market. Kai Shii doubled its share to 25 per cent of the overall market and 70 per cent of the Lipton tea segment.
Furthermore, consumer demand for ready-to-drink iced tea has cut sharply into sales of carbonated soft drinks. Soft-drink sales in Taiwan have plummeted by 16 per cent, while ready-to-drink sales have more than doubled. The sales trend hit Coke and Pepsi especially hard, and Pepsi said it would move to reduce costs.
Next, Kai Shii’s ads went global, featuring young Chinese living in New York City and Europeans living in London and Paris. These ads were just the opening salvos as Shin Shii turned its sights on foreign markets. Its managers plan to use the skills they have honed in Taiwan to enter the US market.
In entering western markets, Shin Shii will face the challenge of introducing consumers to the smooth-tasting, amber-coloured Lipton tea. Tetley and Pepsi will face the challenge of a new competitor that has already shown it can succeed in selling iced tea and in taking share from soft drinks. The local producers are not standing still. They now intend to use hot tea to displace colas and other soft drinks sold to people to consume ‘on the hoof’. Unilever are now adding to its Tetleyice with a radical new way of selling hot tea. Having spent £10 million ([US$16.6 million) developing hot cans to be sold in convenience stores and petrol stations, it was ready to test-market the product in Manchester, England. Brooke Bond’s PG Tips will be sold in ring-pull tins kept at 56 °C in a heated cabinet on shop counters. On sale alongside PG Tips, with or without sugar, will be Red Mountain coffee, sweetened or unsweetened, and Choky, the leading French hot chocolate brand. Watch out Lipton, Brooke Bond’s waiting!
______________________________________________________________________________________________________

Discussion Questions:
1. Based on your reading of the case, describe the bases that companies can use to segment the market for iced-tea? ( NB: This question is NOT asking you to write all that you know about segmentations, but to carefully read the case and state your responses based on the material presented in the case)
2. What potential market segments can you identify in the case for iced-tea? (Similarly, your answer to this question must be based on the material presented in the case)
My initial Post
Shaking up the tea market

Discussion Questions:
1. Based on your reading of the case, describe the bases that companies can use to segment the market for iced-tea? ( NB: This question is NOT asking you to write all that you know about segmentations, but to carefully read the case and state your responses based on the material presented in the case)

Behavioral:
Ø Customer attitudes towards the brand positive and enthusiastic (Consumers responded to the all-natural, no-calorie, relaxing and refreshing claims than the new-age beverages made.
Ø Quality taste, flavor and brands (benefit status) – Drinks that appealed to their desire for healthier, lighter refreshment.
Ø Loyalty status (Buyers can be divided on the basis of their loyalty status) –Significantly high
Demographic
Ø All age group
Ø Gender – ( Male, Female)
Ø Family Life Cycle – (Married and Unmarried)
After being battered by soft drinks, the venerable standby has risen as people have begun to turn away from alcoholic drinks and prefer healthier, less sugary drinks that even their families can enjoy.
Geographic
Ø Limited editions
Ø Hot and cold tea (depending on climate) according to information from the case David Belcher , a promoter of Indian and Ceylon tea, found it impossible to peddle his hot tea in the stifling Missouri heat. Because of the heat, he tried some ice. Therefore ice tea is suited for different regions, and consumers can enjoy it hot or chilled with ice.
Ø Available at various locations including: convenience stores, grocery stores, hypermarkets and warehouse clubs.
Price
Ø For instance competitors
Unilever are now adding to its Tetley ice with a radical new way of selling hot tea. Having spent £10 million ([US$16.6 million) developing hot cans to be sold in convenience stores and petrol stations, it was ready to test-market the product in Manchester, England.

2. What potential market segments can you identify in the case for iced-tea? (Similarly, your answer to this question must be based on the material presented in the case)
Demographical
Ø Young trend setting customers – Short attention span, new drinks, new flavors
Ø Middle age, working class – Therapeutic benefits healthier, lighter refreshments, convenience of canned tea
Ø Older generations – Health benefits, all natural ingredients, no calories

Geographical– Urban Centers (Ice tea as a convenient and quick refreshment for the working class in between snacks or lunch.
Someone replied to my discussion, I have to reply
Thank you for your discussion. I thought your presentation was thorough and easy to follow. I wish to highlight a couple areas that I was not quite clear on. For your geographic segment, you mentioned as the first base, Limited editions. I was unable to determine what that meant with respect to geographic segmentation, which is where the market is divided into different locations, i.e. countries, cities, etc. Also, your other points under geographic segmentation, from my interpretation of the case, did not exactly say what locations would be targeted to market the iced tea.

I also was not clear on your point regarding price segmentation. This is a strategy used when you have a narrow product range and can identify groups of prospects who would buy if the price was lower or who would be prepared to pay a higher price in return for a factor that they felt added value to the product. Your point about competitors therefore was ambiguous and including the cost Unilever incurred to promote their hot tea, to my mind, is not price segmentation.

Kind regards

contribution that I must respond too

Good evening everyone, please see my contribution to the discussion below:
Based on your reading of the case, describe the bases that companies can use to segment the market for iced-tea?
The bases that companies can use to segment the market for iced tea are:
Geographic – which is where the market is divided into different locations. The marketers could divide the iced tea market according to:
Regions i.e. North America, Eastern and Western Europe, East and Southeast Asia
Countries i.e. United States of America, Canada, Taiwan, China
States i.e. New York, California, Florida
Cities i.e. New York, Beijing, Taipei
Neighbourhoods i.e. urban or rural

Demographic – where the market is subdivided into various parts to help target customers more accurately. It is based of variables like:
Age – what age groups the product will be marketed to i.e. 18 – 29 year olds
Life Cycle Stage – trend setting youth, middle aged calorie watcher / health enthusiast
Sex – whether male or female
Family size – the size of the family i.e. no of family members
Income – annual earnings of the individual or family i.e. $80K+
Occupation – profession of the targeted individual i.e. Insurance broker
Education – level of education reached i.e. high school or university level
Family life cycle – whether married, with children or single
Religion – Buddhist, Christian, Muslim
Nationality – American, Chinese, Taiwanese

Behavioural – is a marketing strategy based on actual consumer buying behaviour. It divides the market into groups of customers according to:
Knowledge of the product, i.e. whether the quality and taste is good
Attitude towards the product, i.e. how they view the product
Loyalty to the product, i.e. whether they will continue to purchase
Usage rate, i.e. how often is the product used, daily, weekly, etc.
Awareness of the product, i.e. are the benefits known, i.e. low calorie, all natural
Benefits sought – i.e. customer expectations of the product, i.e. refreshing great taste

Psychographic – where marketers divide the buyers into several groups which will allow them to be more focused in their product design. This is done on the basis of
Social class, i.e. the buying power of the customer, i.e. middle or working class
Activities, i.e. hobbies the customer likes, i.e. sports, beach going or rock concerts
Values, i.e. what is important in life to the customer, i.e. quality, being healthy
Lifestyle, i.e. is the customer a rock music fan, a health buff or a sporting enthusiast
Personality traits, i.e. what influences the way they think and feel, i.e. love of family

What potential market segments can you identify in the case for iced-tea?
Geographic
• The United States
• London
• Paris
• Geographic segmentation also takes into consideration climate i.e. tropical regions like the Caribbean and South America
Demographic
• A ‘new breed of people’ / ‘neo-people’ of all age groups
• the tradition-bound older generation
• People concerned with their health

• Inebriated businesspeople

2017-03-09 09:33
discussion another post I must reply to
1.Based on your reading of the case, describe the bases that companies can use to segment the market for iced-tea?
Market segmentation is a marketing term referring to the aggregating of prospective buyers into groups, or segments, that have common needs and respond similarly to a marketing action. Market segmentation enables companies to target different categories of consumers who perceive the full value of certain products and services differently from one another.
From the case provided there are various bases the company could use to segment the market.
Geographic
(i)Tetley can be segmented using climate. Looking back to the case study David Belcher saw that his new invention was very popular in the hot climate of Missouri at the time. Iced tea has great impact in hot climates around the world.
(ii)Countries can be another base for segmenting the marketing. “Although iced tea was popular in other Pacific Rim countries like Japan, the Taiwanese had never heard of iced tea. They drank only fresh-brewed hot tea.” America is clearly another area as this is where David belcher started to gain market share. England as well as this was a test market of Tetley
Demographic
(i)All age groups
(iiMale,female(gender)
(iii)Married and unmarried
Based on the flavors and benefits and convenience of ice tea this would appeal to all types of customers. “Pepsi also promoted Tetley in supermarkets by offering customers ‘value packs’ that contained one bottle each of three new drinks: Tetley Original, Ocean Spray Lemonade and AllSport sports drink. Pepsi also pursued sponsorship of a Rolling Stones concert tour, to which it would link a massive sampling programme.” This shows that Pepsi has been helping Tetley attract various types of customers of various age groups as well.
Behavioral
(i)Quality and taste of the product. The flavors being offering as well along with the benefits which can be derived.
(ii)Loyalty status significantly high. “The flavoured teas hit a bull’s-eye with consumers. They were willing to move away from traditional colas in search of new flavours. Consumers seemed to have a short attention span for new products and were willing to try new drinks. They were interested in so-called ‘New Age’ beverages – drinks that appealed to their desire for healthier, lighter refreshment”
(iii)Attitude towards brand positive and enthusiastic. Consumers have been all for the idea of iced tea.

2.What potential market segments can you identify in the case for iced-tea?
Two market segments which could be identified are demographical segments and psychographic segments. Let’s look at this in more detail
Demographical Segments
this could be further broken down in three groups of consumers:
(i) Young consumers
Young consumers can be seen as variety seekers which are consumers that have limited product loyalty and tend to consume a broader selection of beverages, primarily depending upon their taste and situation at the time. Consumers being interested in new beverages links to the overall goal which is to try and increase share-of-stomach by offering a broader product range with different flavors and varieties. These consumers can be seen to have a short attention span for new products therefore are willing to try new drinks. Young consumers would also be interested in new flavors being introduced.
(ii)Middle aged working class.
This segment can be the “on the go” type of consumers. They are a busy group of consumers who tend to eat and drink while they are traveling. Because of this approach to their lifestyle, these consumers often look to a beverage which can be taken with them. These consumers are on the go and don’t have the time to set tea bags in hot water and stir etc. Having the convenience and availability of ready to go drink teas are what they want. Being able to have light refreshments other than Coca cola serves as a healthy step for these consumers. This working class may look at their calories a lot therefore the drink will thrive in the environment. The drink also provides health benefits.
(iii)Elder Generation.
The older generation will tend to make choices which are healthy and promotes eating well. All-natural, no- calories, relaxing and refreshing claims can place iced tea in the market for elderly consumers. The promise of all natural ingredients along with no calories and health benefits places this Ice tea in a position for success in this market

Psychographic
(i)Activities. “As a result, Nestea narrowed its promotion to target 18- to 29-year-olds with a promotional blitz consisting of sponsorships and sampling. It dispatched five 18-wheeler demonstration trucks, which it called its ‘Cool Out Caravans’, to sporting events, theme parks and beaches in 60 markets.” The fact that Ice tea companies are promoting product in these areas shows that active consumers are interested in the product as with the benefits derived and the form which this is in
(ii)Lifestyle. As discussed above consumers are more concerned with healthy living and working on calories. This is seen as consumers are more responsive to the new age beverages providing all natural ingredients, no calories etc.
Graded Discussion
A maximum of15 marks will be given for the Graded Discussion using the following grading rubric:
Category Poor Fair Good
Contribution to the Discussion Does not share any information which relates to the topic being discussed. Shares very little information – some relate to topic. Shares a great deal of information all of which relate to the topic.
(1 marks) (2-3 mark) (4-5 marks)
Engages/Shares Views with Others Relies on others to bring ideas to the forum or merely copies/repeats the comments of others. Rarely provides feedback/input in discussion. Actively engages in discussion providing feedback/seeking clarification/taking the discussion a step further.
(1 marks) (2-3 marks) (4-5 marks)
Quality of Analysis and Application of concepts Absence of analysis, unable to assess situation/problem and propose recommendations. Some analysis is evident, problem(s) identified but unable to structure recommendations grounded on concepts. Evidence of thorough analysis, situation assessed and recommendations/
decisions supported using marketing management tools.
(0 marks) (1-3 marks) (3-5 marks)

find the cost of your paper