Month: July 2011

Of tea and strategy

July 31, 2011 / / 4 Comments

The Republic of Tea by Mel & Patricia Ziegler and Bill Rosenzweig

And no, this is neither a post on whether or not Sun Tzu, Clausewitz or any other general or theorist ever drank tea nor a real review of The Republic of Tea book.

What I intent to do here is to see if the story in this book can fit into an existing model of strategy formation.

But first, what is in this book?

It contains the various letters and faxes between Mel Ziegler and Bill Rosenzweig in 1990 and 1991 when they worked on what would become in 1992 the Republic of Tea company.

In it, they cover everything from motivation, product ideas, marketing, packaging, relations with business angels. If you want to look how a business comes out of an idea, this is a good book.

You will even be able to find their complete business plan at the end of the book.

What is “funny” and irritating at the same time is the main difference between Mel Ziegler and Bill Rosenzweig.

The first one will focus on a philosophical approach to business while the second one tries to get the practical things first while not being really willing to fully commit itself into the business.

I looked at the Republic of Tea website before writing and although the original founders sold their company in 1994 what I found the business is still in line with their original plans (for example, the children teas or the products that were launched over the years) but is not what they originally devised or had in mind (and this changed along the book too).

My analysis is that this results from a non conscious effort between the both of them to bring together two different concepts for strategy (the deliberate and the emergent one) into something else, the realised strategy.

But first, let’s define what these concepts are and then see if I am pushing the model or if it really fits here.

For this work, I am going to use the model provided by Mintzberg and Waters in their 1985 Of Strategies,Deliberate and Emergent; Strategic Management Journal, 6, 257-272.

Realised strategy is the strategy that is actually implemented.

Intended strategy is when an organisation has decided on a consistent course of action and when all its energy is focused on realising it, it becomes a deliberate strategy.

Unrealised strategy is what I call a good idea that was not practical enough to be implemented or that was no longer adapted to the context.

Emergent strategy is the answer to unexpected opportunities or to the lack of intentions.

The way all these concepts work together is described in the picture below.

As far as the Republic of Tea is concerned, the realised strategy is pretty obvious, it is the one that has been implemented.

The other ones are probably less obvious but can be found through the whole book.

Here are some examples coming from the book.

Mel Ziegler: “The fact is that creation is a projection of what already exists. What I am saying is that The Idea existed but had not manifested.”

Bill Rosenzweig: “what is the philosophy behind the Republic of Tea?”

Mel Ziegler: “To show through the metaphor of tea, the lightness of taking life sip by sip rather than gulp by gulp.

What would you say is the business behind the philosophy?”

Bill: “The business of The Republic of Tea is to sell (which means first we have to find) the best tea on Earth.”

Bill Rosenzweig: “the game, as you have so cleverly identified it, encompasses creativity and the process of being creative.”

Bill Rosenzweig: “4. In the middle of the night last night I woke up with ideas about the structure of our organization. I roughed them out on the attached sheet. I hope you can read the writing. Feel free to build on this and let me know your thoughts. And just for the challenge of it I took a stab at the first ten-year plan. This is a good exercice, even if it has nothing to do with what we end up doing, because it forces me to think where we want to go.

5. As I roughed out that org chart last night I realized that we need to write a “product charter” that guide our product-development process.”

Bill Rosenzweig: “Here are some more down-to-earth replies:

1. You’re right about painting our world too small […] I also find the packaging and pricing very intriguing. […]

I am working on a new diagram for us to show categories and distribution.[…] Waiting to have some information to come in before I can complete it.

3. Industry research. […] It will be important for us to feel confident about our point of entry.”

Bill Rosenzweig: “Last night it struck me that maybe it’s time for me to get somebody who’s a little less emotional about tea to tale a look at the business, and so I’ve appointed the other half of my brain as The Minister of Research, and here for a start is what I want him to find out:”

This is followed by a complete description of what is a tea industry analysis.

Mel Ziegler: “The key will be to find the right-talented like-minded people to own the offshoot business, and to lure them into helping the Republic of Tea creates itself.”

As you can see, we have two different strategy processes going on at the same time.

One that is rather predetermined and consistent all along the way, this is the intended/deliberate strategy.

The other one is dependent upon the circumstances and evolves all along the creation of the Republic of Tea. It is the emergent strategy that shapes the intended/deliberate one into what become the realised strategy.

Following Mintzberg and Waters’ classification of the different types of strategy processes, we are here typically in what they call a process strategy where the leadership focuses on designing the system that forms the ground from which the different patterns of action comes out.

You will say that this is what all new businesses do.

Perhaps but it is the first time I see this written in a book as most of the time, you only hear about how the creators had a wonderful idea, made it and sold it.

This alone makes the book worth reading.

A lot of data but no definitive answers

July 25, 2011 / / 2 Comments

All the data used in this article were found in the 2010 Tea Barometer of the Tropical Commodity Coalition for sustainable Tea, Coffee, Cocoa and are stated as being 2008 data.

The most obvious information is that there is a split in the producing countries between those favouring home consumption and those favouring exportation: China and India are both countries that drink more than 70% of the tea they produce while Kenya and Sri Lanka export 95% of the produced tea.

The explanation behind it seems quite logical as China and India have a long tradition of drinking tea whereas in the other two countries, it was only introduced to sell to a foreign market.

 

For auction and direct selling, Chinese teas are all sold directly while most of those coming from Kenya and Sri Lanka are sold via the classical auctions (see what happened in Europe when tea drinking became a must). India is in a third category as its production is sold nearly equally through auctions and direct selling.

When I tried to understand why it works like that, 3 reasons came to my mind.

The first and most obvious one is that these differences could be explained by the introduction of tea in a country “only” in order to supply a colonial power with the use of the sales techniques and infrastructures that keep on being used even when the country becomes independent .

Another plausible explanation was that the higher the quality, the higher the percentage of direct sales or the lower the production, the more the auction system is being used. However, this is not consistent with the facts as Sri Lanka has the lowest direct sales percentage but probably not the lowest quality and the difference in raw production with Kenya is not enough to explain this loss of direct bargaining power.

A third idea was that the countries with more tonnage sold were also the ones most heavily involved in auctions but again China with its “low” level of exportations goes against this rule.

Of these 3 explanations, only the first one is coherent with the 4 countries but the question would then be: why did the situation remain the same?


The smallholders/estates production split would seem to be linked to the timeframe and men behind the introduction of the tea culture (cf. the introduction of tea in Sri Lanka and how smallholders were crushed) but the facts don’t support this theory since only India has a really high percentage of its tea production coming from estates (more than 70%).

Another explanation could be that the countries producing tea in estates do sell teas strongly linked to the places they are in (a bit like terroir in wine) but the Chinese example with its 80% of its tea production coming from smallholders is an example that doesn’t support this theory.

 

Perhaps the reason lies in the workforce but even if in India, you need less men to produce one ton of tea than in the three other countries, the difference between Kenya and Sri Lanka shows that this explanation is not the good one either.

So in the end, what can we learn from this set of data? Several things but more importantly that nothing is as easy as it seems and that more work is needed to understand the tea industry.

If you have information or insights on how it works, please feel free to comment.

An interview with Kusmi

July 2, 2011 / / 12 Comments

[I rewrote this interview on a French radio of Sylvain Orebi, owner of Kusmi Tea and Løv organic as if it was made for a newspaper.

Here are the original transcriptions: Kusmi Tea – BFM Radio – French and Kusmi Tea – BFM Radio – English – ed.]

_____________________

» Could you present yourself in a few words for our readers that might not know you?

I am Sylvain Orebi, president of Orientis, owner of Kusmi Tea and Løv Organic.

» Sylvain Orebi, how did you decide to get into the tea business?

I followed the family tradition of coffee and cocoa trading before founding in 1985 with my father and my brother a new company specialising in coffee and cocoa trading.

Our business flourished until the early 2000s when challenged by the large global trading companies and by the food manufacturers, we decided to go downstream and we bought a coffee importer in Le Havre., Olivier Langlois.

It had a small department importing bulk teas since the 30s and it was right after this purchase that I began to look at tea from a business point of view and after finding out that there were good margins in it, I decided to go there.

» How did you do that?

For 2 years, I recreated the tea activity with a B2B approach but then I found out that there was a business opportunity in the niche market of B2C premium tea but in order to deal with my competitors, people like Mariage Frères, I needed a name.

This is when I was lucky since a friend of mine bought all the premium teas available in the Bon Marché [one of the most famous department stores in Paris, Francehttp://en.wikipedia.org/wiki/Le_Bon_March%C3%A9 – ed.] and among them were several Kusmi teas and I felt in love with the packaging before falling in love with the product and decided that I wanted to buy it and luckily enough, they were on the market but I didn’t know it at that time.

Kusmi Tea Can

» Could you tell us more about this brand?

Yes. Kusmi was founded in 1867 in St. Petersburg by the Kousmichoff family but exiled itself in Paris, Avenue Niel in 1917.

PavelThe original blends that are still used today have been created in the 1870s-1900s by Pavel Kousmichoff, a real creator , and his recipes were further elaborated by his son.

However, the brand belonged to a couple who had it for over 30 years after having bought it to the Kousmichoff family and that were not doing much to develop it or to make something out of it.

» The brand seems to have been barely alive when you bought it. How did you change this?

It was a lot of work. I had to completely rebuild it from the ground; we started from scratch, to be honest, we broke everything, we worked on the quality of the teas, on the packaging, on the distribution concept in France and abroad, quite a lot on communication too.

Luckily enough the company still had the blending expertise and know-how in its workshops but I modernised everything, including the packaging, which was at that time done by hand.

As far as the communication is concerned, it was my first management decision and I hired a part-time press secretary specialised in beauty who thought that Kusmi was a wellness, a beauty product and it allowed me to be in the “nice” media, such as Elle, Vogue… These magazines were obvious media for our brand as 80% of our customers are women that are attracted by our baroque packaging and that keep on buying our products because they are really good.

» How do you sell your products?

It took us two years to completely rework the products and the strategy and then in 2005, we were ready to sell again.

The distribution was and is still made only in selected places and corners in the whole world, in towns like Paris, Kyoto, Tokyo… We also have five stores in Paris, one in New York, another in Montreal. Right now, I am looking to open stores in Milan, London, Hamburg and Munich.

» You also created a new brand called Løv Organic. Could you tell us a bit more about it?

I created new blends for Kusmi and one day, I decided to listen to the people who keep on asking me for organic teas, not so much in France but rather in Scandinavia, Germany and the United States.

We went for a new brand because a brand is organic or not but it can’t be both.

For the same reason, even if both brands are distributed via mostly the same channels, there is now a Løv Organic shop in Paris.

» How do you see the future of the tea market? When a company like Nestlé launches a new product, it means something, no?

There is something going on but I am not sure it is a hype because tea is a product that has been drunk for a long time in China, India or the UK. Even if in France, people didn’t drink and might do so now, I wouldn’t call this a hype.

People have a taste that is changing, they want to be good and tea is a wellness, a health product.

The market has also changed thanks to companies like Mariage Frères that opened the market, allowing people to find premium teas at a price that was not necessarily low.

» And the future of your company?

In 2011, Kusmi Tea should have a turnover of 20 million Euros and I think that in 2015, the whole business should reach the 100 million Euros mark.