Tea Industry: Succeeding in the Global Market - Example

Firstname Lastname Instructor’s Name Course Number 21 August, 2009 Iced-Tea Iced-tea is growing increasingly becoming one of the most popular drinks in the world with its sales escalating all across the world. The drink is now gradually moving away from established markets such as Japan and United States towards potentially high consumption markets such as Europe and other parts of Asia. Global sales of ready to drink iced tea are estimated to be $23 billion. A recent study indicated that the annual consumption of iced tea by the French went up to 3.2 liters per person in 2002, while the percentage in Germany rose to 33 percent. However, this is no where near the per capita consumption of 60 liters per annum in Japan and United States (Food & Drink Europe, 2003). The iced tea markets continue to grow all over the world slowly giving it the status of one of the most desired and popular, readily available beverage. In order to segment the growing iced tea market to ensure better reach, companies need to first consider the demographic, psychographic and geographic aspects of the people. The demographic aspects include age, income status and lifestyle. The psychographic aspects include consumers’ attention span which required new beverages and willingness or openness to shift to new products. The geographic aspect is concerned with the climate or weather of the particular place. Cold weather may not be suitable for iced tea. Hence when segmenting the iced tea market, companies must consider the age, spending capacity, lifestyle and willingness of consumers to try new products. They must also consider the consumers who are constantly looking for different products and who are open and eager to try the new age beverages as they will constitute the key segment. The above demographic, psychographic and geographic aspects are important when segmenting the iced tea market in order to meet the demands of its growing size and ensure maximum reach of brands. Segmenting is one of the most important aspects of marketing. Potential market segments have to be identified in order to target the product and the resulting advertising and marketing strategies. Segmentation is the process of grouping people or organizations within a market according to similar needs, characteristics or behavious. (Bharadwaj, 2008). Recklies (2001) defines market segmentation as, “the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix.” Based on the demographic, psychographic and geographic mentioned in the previous section, the iced tea market can be segmented into the following. Youngsters aged between 18 to 30 years including from college goers and young professionals who wish to keep trying something new. People who have a slightly higher level of income at their disposal. The convenient drink seekers who are mostly on the go, have a fast paced lifestyle and prefer beverages in a convenient ready to drink forms, easily available in easy to locate places such as supermarkets, vending machines etc. Nutritionally concerned and health conscious individuals who believe that what one drinks affects how one feels with regards to health. These individuals make up about 46% of the population in developed countries (Ali, Choudhry and Lister, 1997). Tea which is a natural beverage has high nutritional values and has recently been proven to inhibit certain types of cancer will be an appealing factor to this segment. Lastly, fast and health conscious individuals, who although are concerned about their health, give equal importance to convenience. They prefer health packaged conveniently without much of an effort from their part in preparation. They prefer health drinks on the go. Forecasting demand is a vital part of the production and marketing process. The iced tea market has seen enormous growth over the past few years. With its increasing convenience, innumerable health benefits which have been proven scientifically, the novelty it has and the variety that it offers in terms of taste and flavour iced tea continues to expand its market and is fast moving to becoming one of the most popular beverages in the world, aside from regular tea. Within the last century it has attained enormous growth as well as popularity (DeCandia, 2007). Current demand for iced tea is so large in America that it forms almost 80% of the total tea consumed there. Likewise in the United Kingdom, while the overall market for tea has declined by 12%, the market for iced tea continues to see rapid growth. With reference to specific market segments the iced tea market continues to grow. Since the concept of iced tea is considerably recent, it is still a novelty among youngsters, namely college goers and young professionals. For them it is refreshing change from the usual beverages available and iced tea, the new age beverage is the current trend. Hence with the young segment aged between 18 and 30, the market will continue to grow. The increase in income levels and changes in lifestyles and socioeconomic status of people are also some factors which will increase demand for iced tea in the future. The increasing awareness among consumers regarding the health benefits of tea and an increase in the number of health conscious consumers will also keep up the demand for iced tea in the long run. Overall, the future demand for iced tea in any of the above given market segments seems very positive and is sure to see additional increase. Companies usually choose one out of the three market strategies available, namely undifferentiated strategy, differentiated strategy and concentrated strategy. From the following, it can be said that an undifferentiated marketing approach will be most suitable for Pepsi/Lipton. Undifferentiated marketing strategy either focuses on a common thread among consumers in the market or ignores segment variables and goes after the whole market with one brand and one offer. In this strategy the service provider presents the portfolio in the same manner to all segments in the market. This strategy is most suitable for Pepsi/Lipton because according to the given case study, the iced tea market is small in size when compared to other beverages although it has been having tremendous growth over the last few years. Furthermore, although there are different segments in the iced tea market, which have been classified in the previous sections, the common thread or necessity in all these segments is a new age healthy beverage. Since Pepsi/Lipton iced tea as a product and as a brand satisfies all of the needs of the segments, ranging from convenience, health and nutrition to young and trendy, an undifferentiated strategy that targets the entire iced tea market would be most appropriate. Lastly, an undifferentiated strategy, makes use of the large fixed asset base effectively, leveraging costs with the large base and keeping prices low (Strouse, 2004). Since, in general iced tea is preferred by the young and trendy with an open lifestyle and enough disposable income, Lipton iced tea must be positioned as a young and trendy drink with numerous health benefits, targeted towards youngsters aged between 18 and 30. Brooke Bond canned teas on the contrary are hot teas sold in cans sold over shop counters. Hot teas are generally preferred by older and more serious consumers. Hence it should be positioned as a serious drink with many health benefits, targeted towards middle aged professionals and older people ranging between 35 and 60 years. Baker (2008) defines marketing strategy as, “a process that allows an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve sustainable competitive advantage.” A marketing strategy serves as a foundation for a marketing plan which contains a list of actions to be taken to ensure increase in sales or successful entry into a new market. A good marketing strategy must amalgamate an organization’s marketing goals, policies and action sequences into a consistent whole. Shin Shii would require careful planning and effective strategy decisions to ensure that it gains a considerable amount of attention and subsequently market share when and after it enters into the Unite States iced tea market. The United States iced tea market has seen enormous growth in the last decade and continues to grow with iced tea becoming 80% of the total tea consumed. Shin Shii has to develop marketing strategies that gain instant attention of the consumers and convince them to try the smooth, amber coloured Oolong iced tea. Furthermore, Shin Shii will have to face the competition from the current market leaders Lipton and Pepsi. Shin Shii must focus on television and print advertising and heavy promotional activities. Heavy investment is required for television commercials. In addition to advertisements that portray young Chinese in New York, it must also run commercials that target the local consumers in America. Print advertisements must also be sent out to all leading newspapers to create awareness among the American consumers about the new entrant in the iced tea market. Promotional activities however, are the key to gaining market share. It must make use of demonstration trucks in theme parks, beaches and various other public places to create awareness about the brand and give consumers a chance to try the new beverage. Shin Shii must sponsor sporting events and tie-up with leading sports personalities and other health professionals to increase awareness on the health benefits of the beverage. Promotional activities provide an opportunity to interact with the consumers and gain insight into their requirements and obtain feedback. Hence television commercials and promotional activities are the key aspects that will aid in entering the American iced tea market and gaining considerable market share. Product positioning is concerned with the creation of a unique, consistent and recognized customer perception about a company’s product offering and image. A product or service may be positioned based on attitude, benefit, application, users, class, price, quality etc. Positioning targets a particular product or service towards specific market segments and product needs at explicit prices (Berry, 2008). A product may be positioned based on certain factors, namely, for whom it is designed, what kind of product it is, what single most vital benefit it offers, who are the competitors, what is the product differentiation and what significant benefit the consumer receives from that differentiation. In Japan Kai Shii was positioned as the choice of a new breed of people, in a new world targeting all ages. The same positioning can be used in the United States also, as statistics show us that iced tea constitutes almost 80% of the total tea consumed. However, an added positioning of a healthy drink with numerous health benefits will also suit the American market. More and more Westerners are getting health conscious and switching towards healthier lifestyles. Hence positioning Kai Shii as a new age drink which is not only tasty but also healthy will be most effective in the American iced tea market. Furthermore, positioning also has to be competitive as Lipton and Pepsi, being the primary competitors market their products in a similar way. With the increasing income status, lifestyle trends and mindset regarding health and nutrition, the best form of positioning for Kai Shii would be as a new age, trendy and tasty drink with numerous health benefits. References Ali R, Choudhry Yand Lister D W(1997). Sri Lanka's Tea Industry: Succeeding in the Global Market. World Bank Publications, 1997. p 124 Baker, Michael (2008). The Strategic Marketing Plan Audit 2008. Cambridge Strategy Publications. p.3 Berry, T (2008). The Power of Product Positioning. Marketing Articles: Brand & Positioning. Mplans Website. Retrieved August 21, 2009. http://articles.mplans.com/the-power-of-product-positioning/ Bharadwaj, S (2008). Module 1: Segmentation, Targeting and Positioning. Management Science II. Indian Institute of Technology Madras. Retrieved August 21, 2009. http://nptel.iitm.ac.in/courses/IIT-MADRAS/Management_Science_II/Pdf/1_3.pdf DeCandia, D (2007). A Primer on premium Iced Tea. Tea International. Vol 179, Issue 2. Retrieved August 21, 2009. http://www.teaandcoffee.net/0207/tea.htm Food & Drink Europe (2003). Unilever, Pepsico Join Forces to Meet Iced Tea Challenge. Products and Headlines. Food & Drink Europe Website. Retrieved August 21, 2009. http://www.foodanddrinkeurope.com/Products-Marketing/Unilever-PepsiCo-join-forces-to-meet-ice-tea-challenge Recklies, D (2001). Segmentation and Positioning. Recklies Management Project GmbH. Retrieved August 21, 2009. http://www.themanager.org/pdf/Segmentation.PDF Strouse, K G (2004). Customer-centered Telecommunications Services Marketing. 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