Finding small bugs or even beetles in your tea is disgusting! Yet it might not be a big deal. Tea is a natural product. No matter what quality control a company has in place, there’s always a change that bugs get into the tea. At […]
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During the end of 2012, Starbucks announced its acquisition of Teavana, a high-end retailer of loose leaf tea. The coffee chain dreamed big and announced in 2014 that it was ready to conquer the 90 billion dollar tea market. In 2016 the company also decided to accelerate the brand in Asia.
Yet recently, Starbucks announced that it’s closing all its 379 Teavana stores. While most people who aren’t into tea might not find it strange, it came as a huge surprise for the tea community. See for example discussions on forums such as Reddit and Steepster.
So what happened? Why did Starbucks fail so badly in making Teavana a big success? See below our analysis:
1. Tea Isn’t Coffee.
Tea isn’t coffee. Yes, both beverages contain caffeine and are therefore often categorised together. Yet, it’s fair to say that a coffee person is completely different from a tea person, representing a different kind of lifestyle.
Starbucks expected that their coffee experience could help them, but in fact it worked against them. If it was a wine company who bought Teavana, it might have helped. Tea lovers really care about transparency, terroir, processing methods and natural flavours. These are values that premium wine companies also represent.
2. Starbucks Got The Market Size Wrong
The company stated that they’re after a 90 billion dollar market. First of all, the 90 billion estimated market size includes herbals. Without herbal tea, the market is about 40 billion USD in size according to Statistica.
Moreover, 80% of the USA markt is cheap iced tea. Not really the stuff that Teavana intended to target. So then there’s this 20% left of which a tiny part is ‘specialty tea’. Many person with some sense would know that going so aggressive with expansion for such a small market is overkill. Yes, the tea market is a growing industry, but you’ve to get the speed and timing of the expansion right.
2. Selling Tea In Dying Malls
The booming eCommerce industry in the US obviously resulted in a mall apocalypse. Malls are dying and this trend isn’t encouraging the continuation of Teavana stores. Here’s what Starbucks shared in the latest earnings call:
We conducted a strategic review of the Teavana mall-based store business and concluded that despite our efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue.
3. High Rent
Teavana stores are mainly located in premium malls. They’ve to sell a lot of tea to break even. Yet, the malls are having a hard time maintaining foot traffic as mentioned above. Yet, this doesn’t mean that Teavana can’t do well in less premium locations. The management, however, won’t give this idea a try.
4. Pushy Sales Tactics
Read discussions in forums online, and you can see that the sales tactics of Teavana staff isn’t really loved. Traditionally, tea is bought in a fairly friendly environment. In China, people freely visits lots of store to try out different teas, before they buy.
Teavana staff are trained for fast conversion and purchases. To avoid such an unpleasant environment, people rather order online.
5. Not Artisan Quality Tea
While the Teavana represents a premium brand, the tea sold isn’t that high quality. Experienced tea drinkers will know that they’re paying for the branding and packaging. It’s true that tea drinkers in the US haven’t developed a taste for quality tea yet. However, any brand has to convince this community of tea drinkers to built a reputation online.
Teavana is mainly in the tea blend business offering tea blended with other ingredients. However, it’s hard for them to diversify given that other competitors such as Davids Tea and local tea shops have a similar offering at a much lower price.
7. No Localisation
Starbucks have plans to push the Teavana brand into Asia. Most likely Teavana teas will be offered through Starbucks. Yet, in countries such as China, the locals haven’t developed a taste yet for tea blends.
If Teavana decides to sell local teas such as longjing and biluochun (which they’re currently offering in China under the Tazo brand) it’s not gonna work either. After all, how do you convince a Chinese to buy their own teas from a foreign coffee chain?
At last, they’ve also have strong competition from the bubble tea chains, offering highly tailoired and luxury iced teas. Starbucks managed to offer their coffee menu without too much changes, but will they also be able to do that with Teavana?
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“In June we launched a new jasmine soap. Now every day can sell 200-300 pieces.” says Chen Feng Jiao who’s a owner of a perfume factory. The demand is now picking up quickly in South Korea and the Middle East region.
Feng Jiao’s company is located outside the city Hengxiang, where she spend 20 years in traditional farming. The local keywords of success are ‘innovate’ and ‘return’. Innovation happens mainly in the supply chain space, by expanding into online sales channels such as eCommerce. At the same time, there’s this new demand for traditional jasmine products that used to be left behind in the past. People want to return to original small scale natural farming and jasmine products processed by hand.
“Our online sales of tea accounted for more than 30% of total sales and with higher profit margins than our offline stores.” as tea garden owner Huang Shanzhen. “While offline shops have regional advantages, an online store can instantly push our products throughout the country,” he adds.
Inspired by the success stories, many local young people enter the Internet Business forces. Effort is spend on the development of new jasmine products such as jasmine flower tea blends, oils, jasmine scented rice and even jasmine bonsai trees.
A jasmine old root carved into art bonsai can sell for more than 1,000 yuan(150 USD) a pot these days. A local flower garden director closed says that with the improvement of people’s living standards, the value of jasmine has been extended from a simple drinking to aesthetics.
A local jasmine grower says “In the past, we mainly jasmine tea wasn’t popular in China, we mainly focused on producing bulk teas for abroad. These were served for free in restaurants or used for processing in other products. This is different today. We find there’s now a high demand for premium Jasmine tea in China and we’re glad that we’re able to grow and process the best jasmine tea we can.”
At last, the industry’s success and focus on ‘return’ also comes with surprising benefits. The town is now also seeing an inflow of local tourists.
The past Jiu’an Township is a typical coal-producing township. When the coal economy was booming, the town had as many as 400 mines. More than 80% of rural revenue came from coal production and more than 3,000 people worked in the coal for a living […]
It’s the most popular tea in China and perhaps also abroad: the longjing tea (dragon well). It’s a green tea from the south of Hangzhou. Xinhua, China’s state news site reports today that severe drought this summer will result in a lower harvest next Spring, […]
Tea lovers who brew their tea in a traditional way, always ‘wake up’ the leaves by rinsing them in the first session. Tea resulting from this brew is always discarded. Because it’s a waste, tea drinkers generally pour them over these little tea pets on their tea table. It’s known that the more often you pour tea over them, the shinier they become! In the Tea Pets movie, these lucky charms come to life and embark on their own adventures.
Hawthorn tea has been used for many centuries as a heart tonic in Europe. While in China, hawthorn berries has always been used for indigestion and calming the nerves. Rose bud has been widely used worldwide for centuries for its therapeutic power – now we […]