Category: Industry

The grass is always greener on the other side of the fence

April 21, 2013 / / 6 Comments

Sometimes, you have to go back to another place you know well to find “new” and interesting things that you had previously missed.

I once spoke of loose leaf tea sold in a supermarket (see here) but I saw during this week an interesting concept in a hypermarket (http://en.wikipedia.org/wiki/Hypermarket): a true and dedicated teashop.

Not really dedicated since you can buy roasted coffee, spice and other specific sweets.

However, you can also buy almost 50 loose leaf teas (flavoured and not flavoured ; green, white or black) from a brand I could identify after making some research on Internet as being Compagnie Coloniale (http://www.compagnie-coloniale.com/).

This would be interesting per se but when looking at more information on this concept, I found an old article (from 2009) with an interview of the owner of this store with some pictures.

He was not asked why he had decided to do this but he said he wanted to make life easier for his customers.

Let’s look at it from a broader perspective.

Clermont-Ferrand is not from my point of view a really huge tea town and this hypermarket (since they are franchises, I cannot and won’t generalise) seems to focus on good quality yet affordable food products.

I think this is the key to this surprising marketing move: trying to broaden their market with this offering of tea but in a specialised and somehow different settings.

It is here that some of you might kill me for looking at this but I must say that they are still offering the usual bagged tea boxes but also a lot of loose leaf boxes of “classical” brands (you know those in the supermarkets near you).

What does this mean?

That with more space and a focus on the customers, even big stores (that are supposed to be non personal and so on and so on) can decide to upgrade the quality of their products, to increase the space available for their sales and to offer a complete range of products, increasing their attraction power and therefore their potential sales and profitability.

Can all the big stores go that way? I guess it depends on their strategy and how they perceive their market.

Can it work? If the market is not saturated by high quality teashops and if there is a demand (even if it is a small one) for such goods, I would say yes.

Does it work in making you buy more? It didn’t for me but only because they hadn’t what I was looking for and also because I know where to buy my teas (even if I am always ready for new things as long as they appeal to me). However for people discovering tea or without an access to good stores, the concept seems quite good and for me everything that allows more people to get access to quality teas is something worth noticing.

 

Tea retail business and the Great Captains: an intro

February 24, 2013 / / 13 Comments

L’Heure Gourmande by Adrian Scottow

Small tea business are like every other small business in the world. They face different challenges be it competitors, taxes, difficulties to find good suppliers… but they also have unique advantages in terms of their capacity to evolve, a peculiar relationship with their customers, the services they can provide.

This can be summarized in one sentence: small is beautiful but big is powerful.

One of the first decisions to make before launching a retail business (and tea is one of these) is what should be the focus or should I say the market for the future new company: should it try to provide everything (or nearly everything) or focus on a peculiar market (Japanese teas, home blended teas…)?

Some of you would object that this approach is quite academic and that usually people when starting a business don’t really know where they are heading or I would rather say, they don’t have a clear vision of what I just wrote about. They might have an unique expertise, some specific suppliers, a peculiar idea but for most of them (and I did write most of them), the idea is launching a business for different reasons.

This is exactly why I decided to write on this topic.

As usual, I won’t go too deeply in the topic as it is a mere introduction to something that I am sure has already been studied many times in different industries/fields.

What I want to do is provide a first look at these two alternatives and their pros and cons.

The “provide everything” approach as its name implies is a generalist approach which intents to give a little of something to everyone or to have every single need covered.

Pros

Covers every potential need

Focuses on a larger target market

Is more resilient to changes in trends

Cons

Higher competition from other companies

Differentiation from others is more difficult to achieve

Unable to answer the most precise needs of some customers

Table 1: Some pros and cons of a “provide everything” approach

The “focus, focus, focus” (the third focus being there to avoid any confusion with Hocus Pocus) approach is completely the opposite as it aims at being the best/only/… seller of a specific thing and be recognised for it.

Pros

Avoid direct competition with most people on the market

Recognised more easily for its expertise and unique approach

Higher value of the products sold or higher willingness of the customers to be more

Cons

Smaller market

More fragile when dealing with change in market trends

Linked with fewer suppliers

Table 2: Some pros and cons of a “focus, focus, focus” approach

I think most of the pros and cons can be understood quite easily so I will only comment a little more on two of them.

The first one is the trend parts.

If a company is surfing on the wave of the health benefit of green teas and selling only these teas ; it will have troubles to use what was its main selling argument when this trend “dies”.

And if it has nothing else to promote its products, it might be in dire straits.

On the other side, if it sells several products, it will have no problems surviving the different trends that rise and fall.

Obviously this simplification doesn’t work if you are talking about a trend that has been around for so long that it is something normal to most people in an area or in the world.

The second one is the higher value of the products sold or the willingness of the customers to pay more.

When a company is focusing on a product or a line of products, people recognise its expertise (I made the hypothesis that this company is knowledgeable about what it is doing) and are eager to pay more (probably a little more) for its products.

Why? Because deep inside us, we know that expertise has a price and that this price is worth it when expertise and quality go together. How do we know if they do? The first answer is by trying but we are also willing to believe more in the product quality when it is sold by someone knowledgeable in a topic.

Don’t tell me that it is the same as a salesman selling vacuum cleaners or encyclopedias as it is not. These people are sales experts not real vacuum cleaners experts. The good ones could sell you anything.

This is how this post ends but I am sure I missed something. So don’t hesitate to comment/discuss/correct me…

Napoléon on Saint Helena

What? I forgot something? The Great Captains?

No they didn’t all drink tea but they give a lot of thoughts to this being everywhere vs. focus problem and as always in military things, there was never a clear answer as it depended on a lot of things.

 

Any damn fool

January 24, 2013 / / 9 Comments

«Any damn fool can put on a deal, but it takes genius, faith and perseverance to create a brand.»

David Ogilvy (1911-1999)

With such a quote to begin with, it is obvious that I can only speak of two things: deals or brands.

I hope your bets were on the second one as I will be talking about brand and the tea world.

According to the American Marketing Association Dictionary, brand is the “name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.”

But this is not all, a brand is also something else, it is a promise made to the buyer that he/she buys something special or solid or good or… and this is what we will be dealing with here.

A brand has :

  1. some unique attributes (a brand is known for being expensive, cheap, long lasting…) ,

  2. some unique advantages (this is the message behind each attribute),

  3. some values (a brand is the mirror of the company that created it),

  4. a culture (a Japanese brand is not at all like an American one),

  5. a personality (what would you associate this brand with?),

  6. some specific buyers (a brand is linked to a specific set of people that are expected to be suited for it).

As you might have guessed, this list comes from a marketing book I had as a student (Marketing Management by Kotler & Dubois, 9th Edition) but I just wrote it down there as a reminder of what a brand is.

Now you might ask me how does this relate to tea because we all drink teas and you don’t drink brands (although some of us only drink tea from one or several specific companies because they are who they are (isn’t this a brand thing?))

You can see it that way but I don’t think it is simple like that, otherwise why would some people only drink Darjeeling (you can write here Chinese, Taiwanese or any other tea producing country)? or teas from a specific estate? or only one kind of tea?

Let’s spend a little time on this example and don’t forget that all the things I write are my ideas not the truth.

What is a Darjeeling tea? According to the Tea Board of India and its Geographical Indication for this type of tea:

“the definition of Darjeeling Tea has been formulated to mean tea that:

  • is cultivated, grown or produced in the 87 tea gardens in the defined geographic areas and which have been registered with the Tea Board;

  • has been cultivated, grown or produced in one of the said 87 tea gardens;

  • has been processed and manufactured in a factory located in the defined geographic area; and

  • when tested by expert tea tasters, is determined to have the distinctive and naturally occurring organoleptic characteristics of taste, aroma and mouth feel, typical of tea cultivated, grown and produced in the region of Darjeeling, India.”

Source : Tea Board of India, http://teaboard.gov.in/inner1.asp?param_link_id=610&mem_link_name=About%20Darjeeling%20Tea

This definition is good but not enough to tell us if Darjeeling is a brand or not.

If we read it, we can summarize it into an unique set of attributes (quality, distinctive taste and aroma, grown in a specific place), advantages (you get a good deal for your money, you have a good tea, you can trace it to where it was grown) and values (the Champagne of tea).

To find the three other items, we have to think a little about the background of this tea.

Looking at its history and even its current organisation, it is easy to see that Darjeeling is a product of the British Empire. We now have the culture (a British Empire/British India one)

Based on all the previous lines, we can guess a personality (traditional, high quality, British), which helps us to define or to imagine what a specific customer for this tea might be (someone a little bit snobbish but still wanting a high quality product).

With this we managed to go through all the 6 items that makes something a brand and we can now say that Darjeeling is indeed a brand.

So next time you drink a tea, stop for a minute and see if your favourite tea country, type of tea or even estate would qualify as a brand.

And guess what? the answer could be yes.

Hamburg or Free is the name of the game

November 25, 2012 / / 15 Comments

Hamburg holds a special place in my heart not because it is a major hub for the world tea trade but today we will only focus on this aspect (sorry for those too curious about me).

I will first call everyone knowledgeable about this topic to tell me when I am wrong as it is a complex matter and information is few and people are not really ready to answer questions (or perhaps I didn’t ask the right persons or the right questions. Who knows?).

 

English tea box by Hannes Grobe (published under Creative Commons Attribution-Share Alike 2.5 Generic licence)


First, here is an extract of the website of the Port of Hamburg.

The Port of Hamburg has been the leading European trade centre for tea for many years. The major exporters are India, China, Sri Lanka and Indonesia.

Hamburg’s docks handle about 50 to 60 percent of the worldwide trade. Around 70 percent of the tea sold in Germany passes through Hamburg.

Imported teas are also blended and flavoured in Hamburg, before being exported worldwide. Great Britain and France are among the traditional destinations. About half the tea is shipped to the USA after being processed in Hamburg. The Russian market has also been gaining in importance recently.

Source: http://www.portofhamburg.com/en/content/tea

If you read the first paragraph, you might not understand why this happens since Germany is not known for its tea consumption (0.23 kg per capita and per year in 2009 according to the Food and Agriculture Organisation, which is even lower than the USA and far beyond the average yearly tea consumption per capita in the European Union (0.48 kg)).

However reading the second and third ones, you might begin to understand there is something as:

  1. the Port of Hamburg is not only the major European tea port but also the biggest one at the world level

  2. there seems to be a lot of further shipping (I won’t comment on the half of the tea shipped to the USA since I don’t have enough data for it).

Obviously, tea like other commodities is a trade where economies of scale is the name of the game for most companies (some won’t follow this strategy but most will).

Why? Because when you are big enough, you have more bargain power (look at articles on the Glencore-Xstrata merger) during the whole buying, transportation and processing chain.

This explains why once these companies have selected a hub, they are more than likely to put all their eggs in the same basket.

However this really quick analysis doesn’t help us to understand why Hamburg and why not Antwerpen or Rotterdam or Southampton.

Obviously, if a lot of companies involved in the tea business are there, it helps but it is not the only reason as companies move around, markets evolve…

So the explanation for the concentration lies not in the sole existence of what we could call a tea industry cluster (even if I think I might be exaggerating with the cluster thing).

In order to get a major tea port is adding to a tea industry cluster some historical background enough?

“Northern Germany as far as the Bavarian and Austrian Frontiers; Handbook for Travellers” by Karl Baedeker. Fifteenth Revised Edition. Leipzig, Karl Baedeker; New York, Charles Scribner’s Sons 1910. “Courtesy of the University of Texas Libraries, The University of Texas at Austin.”

 

The development of Hamburg in the colonial goods trade (coffee, tea, spice, cocoa, tobacco…) has its roots in the immigration of Protestant and Jews traders fleeing the religious conflicts of the 16th and 17th centuries.

These people came from different areas but also from the Netherlands and they brought with them their knowledge of these markets, their relations and their money.

Such was their success that in 1747, you could find in this town 246 coffee and tea traders and 267 in 1777.

The opening of the Chinese ports following the Opium War in 1842 and the end of England’s Navigation Acts in 1857 gave new opportunities to the tea business in Hamburg (If you want a more in depth analysis on Hamburg, its history and globalisation, you should read Capitalising on change in a globalising world by Wolfgang Michalski).

We now know that the tea industry has been concentrated in Hamburg for a long time.

But this is not enough as the following two examples will show.

Hamburg was the centre of Europe’s beer industry between the 14th and somewhere between the end of the 16th century and the middle of the 17th century. It was also the centre of Europe’s sugar industry between the end of the 17th century and the beginning of the 19th century.

Conditions and competitions changed and this two industries went away.

There is one final advantage provided to the tea industry that might explain it all. It is something that companies are always looking after, i.e. a financial incentive.

By financial incentive, I don’t mean subsidies but something more “subtle”, customs rights.

Yes you read it right, one of the main reasons behind Hamburg position is simple: part of it is a free port and it has been so since 1888 when the Free and Hanseatic City of Hamburg became part of the German Empire.

view from Poggenmühlenbrücke at Speicherstadt in Hamburg, Germany by Thomas Wolf, www.foto-tw.de.(published under Creative Commons-Lizenz Namensnennung-Weitergabe unter gleichen Bedingungen 3.0 Unportedc license)


This is a legal thing and the European Commission has approved it and published a list (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2002:050:0016:0018:EN:PDF).

The idea is simple: when you import goods in a free zone, you only pay import taxes when the goods leave this area.

When you apply this to a yearly stock, you understand why it is really interesting in financial terms.

To say it with other words, you imported 1,200 tons of tea at once, since you had a good price thanks to your bargaining power. You sell each month for 100 tons in the European Union. Thanks to the free zone status, you will only pay each month the import taxes for your monthly consumption.

You might then say that it explains the importance of the Port of Hamburg for the European Union but not for the rest of the world since everyone can do it in its own country and you would be right.

What I must add to this explanation is that when you re export our of the EU goods from a free zone after some allowed transformations (e.g. improving the live span of your product or putting it in a new packaging…), you don’t pay taxes at all.

Let’s use another example. You have bought 1,000 tons of tea and you imported them in the free zone part of the Port of Hamburg. You change their packaging to meet your customers needs and re export to the USA for 1,000 tons worth of tea in teabags. At the end of the year, you won’t pay any import or export taxes for the EU (not even on the raw teabags).

When you add all this, you can understand why Hamburg has such a dominant position in the tea world as the industry is there and the customs “easiness” too.

For any company with a focus on the economy of scale approach (remember I said most companies in the tea business are following this model whether they are in the bag tea business or in the loose leaves one), this is a winning situation.

Will this ever change?

YES because the status of part of Hamburg as a free zone will end in 2013.

Because of this, we might see some changes in the manufacturing, transportation and pricing strategies of the whole tea industry.

I told you in the title “free is the name of the game” but soon, it might become “we are living interesting times”.

Bremen or going into an arena to look for a string

September 19, 2012 / / 8 Comments

Bremen holds a special place in my heart, both for personal reasons (the most important ones) and for tea ones.

This is why I was delighted to learn that the first German Tea Festival was being held in this town.

But first things first.

Bremen is a Hanseatic (yes me and the Hansa…) town in Northwest Germany, alongside the river Wesser and together with its “advanced” port Bremerhaven, they form the city-state of Bremen.

To be honest, Bremen is a nice “old” town with several typical things (Bremen Roland, the Town Musicians, Böttcherstraße, the Schnoor), but Bremerhaven is a bit too modern when compared to its sister town (that was my personal point of view on this matter).

After this few tourist lines, let’s go back to what really matters to you (or you wouldn’t read this blog): the German Tea Festival and tea.

The Festival was hold in the Bremen-Arena as a part of the Hanselife fair, a huge yearly fair with lots of different things to see (cars, hobby, food…).

I was there for the “opening” of the Tea Festival and a presentation by a German Tea Master.

He gave a lot of explanations on Japanese tea and on the Japanese tea ceremony, some of them I knew but some I didn’t (you can always learn something).

What I found quite interesting was his way to give me some foods for thoughts by linking the different tea ceremonies (including the Frisian one) together as a way of taking time to be with each other, to interact with these people and somehow to respect.

He was unable to perform the tea ceremony for the Bremen Mayor as this one was late and he had also a problem with his hand. However his son performed a tea ceremony that you will see below.

Filming this ceremony also helped me find out that my camera only makes films under 8 minutes: tea teaches you a lot of things 😉

After that, I climbed the stairs to the first floor and went to the Tea Festival per se.

The first steps led me to the tepiano stand where they were demonstrating and selling a tea Thermos made of glass but not a normal one, one where you could steep your tea either directly or through a filter.

Interesting stuff to see

Next to them was the stand of midori t, a German company specialising in Japanese teas and teawares.

I even saw some teas from the Palais des Thés.

A few steps later, two stands were selling their teas (Darjeeling for one and various teas for the other) but they were shadowed by a Samurai passing by and speaking in German.

The next two stands belonged to the German tea master from before and I spoke a bit with him about the different Japanese teas (this is one of these moments when you really want to speak a little more of a foreign language) before he offered a Matcha that had a slight spinach and nuts taste.

A small stand was standing here and this is where I found a book on tea but one in German.

It is from an editor called Umschau that specialise in books on food.

I read a few pages and found it was quite complete (they even mentioned the tea produced in Switzerland).

I am sure you have probably guessed it but I will still tell you: I bought it.

The last stand was from another company that sells a lot of fruit teas with real fruits.

I tried one of their teas but as usual, I had an headache after drinking it.

The last look before leaving the German Tea Festival was for the collection of tea related pictures.

My impression? The name of tea festival seems a bit over-rated as it was rather small and focused a lot of Japanese teas.

Was it an enjoyable experience? Yes.

Was it a memorable one? No.

The next step was a trip back to my favourite tea salon in Bremen, the one located in the Schnoor.

This tea house is located in a small street and is in a small two floors shop with nice little tables with candles.

Their teas are from Ronnefeldt and they have a “small” tea (and wine) card but with enough choice.

I took a Badamtam 1st Flush and a Superior Fancy Oolong together with a nice typical German pastry.

And they were quite good.

 

The (Tea)World is a village

May 13, 2012 / / 8 Comments

TeaWorld Rendez-vous ©
I had read this name on the Internet but that was all as I had thought “this is probably another American thing, where I will never be able to go.”
But I saw something on several tea blogs that got me interested as I figured out it was in Brussels not too far away from where I live.

So here I was on Saturday, May 5th at Tours & Taxis, a former marshalling yard and import/export hall
The event was hosted in several big white tents and I managed to park nearly in front of the entrance (probably because I was there early in spite of my GPS having troubles to find its way in the tunnels).

After paying my ticket, I received a nice small cup as ticket and to taste what the different companies had to offer.

First halt for Hennessy/Theodor but the tea wasn’t ready yet (remember I was there early) and I am not into cognac, even when it is mixed with tea.

The next stop was for an unknown to me Swiss brand of kettles and such, Solis. I probably would not have stopped by them if I hadn’t seen my “magical” kettle there and heard the sellers saying it was new in Belgium.
I spoke with them and found out that they had just received it and I told them about tea, this product, how I was satisfied, how it worked…
I even tasted their first test (not the best tea made by this kettle) and gave them the name of the brands in France and in the USA that sell this product.

A nice lady then stopped me and said that they were offering a special discount on mint green tea.
I said “Thank you but I don’t like mint.”
She offered me to come back 15 minutes later to see a tea master preparing a “state of the art” tea.
Unfortunately, I didn’t make it back in time (too many things to see and too many people to talk to).

I then went to the tea bags corner (I know @thedevotea but I had to go through it) and found pyramidal and square tea bags, with more room than in a normal one.
I had read about both of them but I wasn’t really convinced.
What was more interesting in Lu Lin Teas was their boxes (and trials sessions) of Chinese teas and even more their small 9 loose leaf tea samples boxes

I then discovered African teas from Rwanda and Burundi.
Both ladies were quite informative on the tea, how it was produced and processed.
I tasted teas from both countries and I prefer the ones from Rwanda as they were not as harsh as the one from Burundi but perhaps they were better prepared.

I then stumbled upon a Korean company proposing herbal teas with medicine virtues (not my cup of tea) and a Japanese stand where I tasted two Japanese green teas made in the traditional way.
Speaking of the Japanese, I also witnessed a Japanese tea ceremony and then tasted a Chinese Jasmine tea.
Unfortunately, the Vietnamese were not there but I picked some papers they had left.

At that time, I was glad to have learned Spanish as I was in the Argentinian part of the salon and I talked with a nice lady selling tea bagging machines (now I know how it works), people from the Ministry of the Mission Regions (the former Jesuit Missions where they grow all kind of food stuffs including tea), someone from an Argentinian tea estate.
I tasted their green tea and I think they are probably still too much tea bags oriented but let’s give them some time and I am sure we might be surprised by what they do.

I then got back to the entrance and Theodor where a really nice and distinguished gentleman talked to me about Theodor.
He was quite knowledgeable about his company, where I could find their teas and he even listened to me speaking about how I select the teas I buy (me and my strange “tea-ories”).
I was even more pleased when I found myself speaking 5-10 minutes with Guillaume Leleu about teas.

After that I had to pay a visit to some relatives so I left the TeaWorld Rendez-vous©.
I didn’t buy anything but I was happy to have met people and  to have discovered new things.
In the end, this is what tea is all about.

You will get lost but one day you will thank me

April 2, 2012 / / 14 Comments

What a strange title, no? But I do think that you will understand what I meant before the end of this post.

Call me a magician but I know what your deepest dream is: you all dream of owning and operating a tea plantation.

Can you imagine the joy of drinking your own production?

However I am no magician but someone interested in tea, figures and facts. Therefore you can imagine how happy I was when I found online a paper called “Rapid estimation of the minimum size of a tea project” (Guinard André. Evaluation rapide de la dimension minimum d’un projet de production de thé. In: Économie rurale. N°87, 1971. pp. 67-71. http://www.persee.fr/web/revues/home/prescript/article/ecoru_0013-0559_1971_num_87_1_2137).

Unfortunately, it is in French and it was written 40 years ago.

But I am here to help you and I am not sure but I thought that perhaps what was true 40 years ago is still true today.

My only fear is that it might become too complex but we will see.

The first thing to understand is that this estimation is based on the profitability criteria, which for the author means finding out what is the minimal size which minimises fixed costs per unit of production.

Why does he want to do that?

Easy. Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business (source: http://en.wikipedia.org/wiki/Fixed_cost); so the lower they are per unit produced, the higher the profit is for each sale.

Why did he use them and not other direct production factors (capital, work force, land…)?

Simple, because it takes so much time to “create” a plantation that the optimal use of these direct factors is too far away to be of any interest here.

The author decided to focus on the factory as even if it is not the most costly part of the process (20 to 30% of the investments and total price of the project), it is one where the fixed costs are the most important (50% of the fabrication costs).

 

Here comes the tricky part.

The total daily capacity of the factory is equal to the number of production lines available multiplied by their hourly production capacity and the maximum operational hours per day.

But how do you find what is the needed daily capacity? It is quite simple; the factory needs to be able to deal with the maximal daily production of the plantation, which is function of the maximum production by hectare multiplied by the number of hectares.

This means that the size of the plantation must be equal to the total capacity of the factory divided by the maximum production by hectare.

Let me guess. You are lost, aren’t you.

The only important thing to know is that if you ever get your hands on the perfect piece of land to create your own tea plantation, you will have everything you need to decide how to optimize it.

The other side of the coin, or double speak of the tea pseudo-worldy ?

March 2, 2012 / / 8 Comments

This is not something I wrote but the translation in English (thanks to @jackie and @lahikmajoe for proof reading it) of a post made by Guillaume Leleu, the owner and founder of the French tea company Theodor (www.theodor.fr), on Monblogdethé (www.monblogdethe.fr).

The original post was in French and in it, Guillaume Leleu speaks about flavoured teas.

But I will let the stage to the maestro himself.

This is about tea. Tea? Yes, so much talk about what one claims to know. Success? Reputation? Respect? Dare I believe that all of this is only pure jealousy?

Why do I find it hard to believe that this is a subject where people speak frankly, objectively and without ulterior motives, or nasty intentions? Because if I were wrong, at least, we would open up a debate. Public or not, it would allow the exchange of ideas.

But this cannot happen, as long as the narrow-mindedness of some, the meanness of their comments, their lack of arguments are not publicly exposed.

To have the courage to voice their opinions, and to speak out against those of others, are acts of chivalry, something of another time, nothing more than a dream today.

So be it, but let’s use the same weapons of treachery and hypocrisy that our friends use. Let’s say things out loud without naming anyone, the evil of what is left unsaid.

I have rarely seen as many articles, posts, memos as I do today, lamenting all the wrongs of flavoured tea, how it infringes on on the “holy drink”, the only tea worth our attention; unflavoured and single origin tea. A term used by pseudo experts, not marketing driven at all, of course, not what were you thinking?

So, flavoured teas are just a way of “marketing teas of unbearable taste… that stink… without body .. of mediocre quality… with “cheap” flavours”… only worth “cooking with”… “… to make things easy and profitable for tea merchants.”… “pulling the wool over your eyes” … and one should never “stoop so low as to consume such improper drinks.” As to those “poor fools” who consume, purchase and enjoy them I shall not repeat the comments made – one more glorious than the other – about these likely uneducated, uncultured, and ill-mannered people.

These opinions would not be problematic if they were well, just simply opinions, points of views open to contradictory response, leaving room for doubt, or recognizing difference. Rather they are verdicts in a rigged trial where guilt is proclaimed before the proceedings even begin.

Instead the remarks reek of intolerance beyond what education and good breeding allow. They are abusive, petty, mean, proof of a total lack of courage, and audacity. It is my duty not to remain silent, and I must restore a little bit of respect to this much maligned flavoured tea.

Of course this problem isn’t new. Wanting to create a scale of values in this righteous world, to establish a noble lineage – more noble than others, to boast about privilege has always been the joy of the pseudo intellectual bourgeoisie. Better value yourself, rather than wait for others to do so, especially if you know how little you are worth. It is easier to pretend to be, than simply be.

So is flavoured tea a “second league” tea?

You will have understood that according to some: YES, or even a third or fourth league one.
In my humble opinion as small creator of such blends, but also as a mere consumer: NO and far from it.

Flavoured tea is one of the many facets of tea and always has been. It is one aspect, alongside the gardens, varieties, and methods that make up tea to the most noble degree. It is an integral part of the drink and merits the same recognition as a Dan Cong, a Darjeeling or an Oolong from Taiwan.

Lu Yu would turn in his grave if he knew of this stance that perpetually questions the value of flavoured tea. Because it goes against the whole philosophy behind tea. Tea is the drink of hospitality, of welcome, it is the drink of the poor and also the rich. It is the drink with more than a thousand and one faces.

Tea is the ambassador of tolerance, of respect, of cultural encounters and exchange.

There isn’t, and there never was a degree of nobility in a cup of tea. It is a drink, and the harmful Western way of assigning degrees of value to man should not be applied to tea.

Personally, I drink more pure tea than flavoured teas because I enjoy the widely variable characteristics of the former. Does this give me the right to judge or shun my neighbour? Does this give me authority to pretentiously dismiss those who do not share my tastes?

After all, this is nothing but a matter of taste, not of finesse, elegance, nor even the spirit of taste but one of egotistical self appreciation, of loving what one loves.

Flavoured tea, not only the teas I create are nothing but nature meeting nature, one plant “Camelia” mixed with other plants, be they fruits, flowers, spices. How is this less noble than a single origin tea? I don’t know.

Do these critics ever cook? Do they only eat their tomatoes plain, without vinegar, salt, pepper? Don’t they cook their meat or their fish? Do they eat everything raw?

Is creating a flavoured tea a diabolical act where you alter what is most noble? Does this make me guilty of sorcery? Am I committing the unforgivable in wanting to create a cookie flavored tea – to the point where comments, one more flattering than the next such as “”marketing tea… that stinks… without body…” are applied?

IF this is the case, I am lucky that I was not the first. Poor Chinese, Arabs, Indians and other devils who showed me the way! Oh no, I forgot, a Chinese flavoured tea is as noble as a tea flavoured in France yes, yes I assure you. Probably the lineage

When Hennessy requests my expertise to match its “fine de Cognac” with tea, to create a new drink, is that wrong?

But my God, Chanel dyes the cotton and the linen it uses to make its most beautiful dresses! Hermès mixes leather and zamak, that it uses as clasps for its handbags. I ask myself what is the world is coming to?

I had hoped that 2012 would allow us to focus on the most important values in life: sharing, respect, self-sacrifice. It is a waste and I am truly saddened when I see myself having to write this letter to respond to poor comments.

What reassures me, however, is that in our modern world, most tea consumers don’t listen to such rhetoric. They don’t impose their tastes on others by presenting them as the only way, thus claiming the monopoly on wisdom. . How many tea lovers have I known who discovered the flavour of Puer thanks to flavoured teas? And let’s dare ask, would we find pure tea today if flavoured tea wasn’t sold? I can assure you the answer is NO.

My morning tea is a Souchon, my daily tea is quite often an Oolong, or a wonderful Japanese green tea. I must confess that I like the multiple and complex notes of a plain tea… but those aside, I am always eager to taste the elegance, the surprise and the pleasure of the floral, spicy or greedy notes of a cup of flavoured tea. There is one thing that is true: I do not prepare it following the Gong Fu Cha and I suggest those who prepare a flavoured tea in such a manner, should refer back to their pseudo expert – as for their information – this ceremony is reserved for Wulongs.

To conclude, these are the same people who, with their double speak of flattery and hypocrisy, call the company I have the honour to have founded “the best company” for flavoured tea, “renowned for its blends.” This permits them to infer politely that at Theodor you’ll only find third rate teas.”

So, Ladies and Gentlemen, you the self-righteous of the tea world, worldly in another world, it is with pride and unconcealed joy I inform you that I serve my creations and blends to thousands of tea lovers every day.

Understand that our blends are highly respected and accompany the meals in the best restaurants of the world, as well as those in simple establishments. It is with dignity that I strive to maintain the glorious title you have bestowed upon us. And if you permit me to give you one last piece of advice – because unlike you the company I represent does not practice discrimination: You will also find some of the finest selections of teas that the world and nature offer us, through the gardens, the plantations and the people. It is up to you to find merit in this aspect of tea. However, in order to do so you will need to become a little more open-minded.

Long live the mixed, the melting pot, and diversity. Here’s to a long and peaceful life to pure tea, flavoured tea, smoked tea, and all the other wonderful plants, flowers, and fruit infusions that bring sensory pleasure and smiles into our cups and glasses every day.

Guillaume Leleu

“Café du Commerce” and tea

February 6, 2012 / / 2 Comments

Let’s start with what is called in French a “Café du Commerce” analysis (mostly a popular wisdom analysis that you can hear in most cafés): tea prices are too high.

You do agree, right? How many times did you hear that? Or perhaps even say it?

I once explained why the same teas sold by two different companies could be sold at different prices(Whats in a name?…Price) but this is not really the point made by popular wisdom here.

The point is more that the price of the commodity itself is high.

Since I begin to write this blog, this question of prices has been fascinating me. Why?

Because tea is for now still sold through auctions and is one of the last (if not the only one) commodities to be sold that way.

This means no futures (to be simple and unfair to what was supposed to be an insurance product about bad crops, let’s say that it is a way for the financial markets to speculate on the prices of commodities but if you want a more impartial definition, just follow the link Futures Contract) and therefore no speculations, only the good old supply and demand meeting each other and deciding for a price.

The perfect dream of any economist, no?

Don’t be afraid, I won’t try to find out if there is speculation on the prices of tea but I will try to find out if it is true that prices are high.

To do this, I needed data (yes, economists can live on a diet made mostly of statistics, data and figures but not without a drink, which for me is obviously tea) and I was lucky to find two online sources: one with the monthly prices (in US cents per kg) of the last 360 months (starting for me in November 1981) at the London and then at the Mombasa auctions (Monthly Commodity tea price from IndexMundi) and the other with the weekly average prices of tea at the weekly auctions of Sri Lanka, Indonesia, Kenya and Malawi from December 1999 to June 2002 (Dharmasena, Kalu Arachchillage Senarath Dhananjaya Bandara (2004). International black tea market integration and price discovery. Master’s thesis, Texas A&M University. Texas A&M University. Available electronically from International black tea market integration and price discovery)

Then I had to cross check the data to see if it was usable for me and the answer was that the first set of data was usable while the second wasn’t.

Why? Because according to the methodology from the author, he had to make some guesses and assumptions (that might be right but I wanted fully reliable data) and second because I had no easy way to know when these auctions were hold, making the second step of my analysis a lot harder to do.

So what does these sets of data look like?

To be as complete as possible, you will find below both of them (for the second one, I put everything at 100 in the first week so as to compare the evolutions of different prices labelled in different moneys) but I will only use and comment the first one.


Click to view


Click to view

You will all see that after a kind of bubble in 1983-1985 and another in 1997-1998, the price was moving around a central value of more or less 200 cents per kg and this until 2005 when it began to rise to reach a little over 350 cents per kg in November 2011, meaning a rise of 175% between 1981 and 2011.

Not bad?

So now, you will begin to wonder why did it rise like that? That is a good question but one I will not answer here as there are several plausible explanations and one set of data even over 30 years might not be enough to find the good one (or good ones).

The next thing you will begin to say is that the good old popular wisdom was right and that we are all sheep waiting to be sheared.

Since you know me a little by now, you can easily understand that the answer might not be as easy as it seems.

Why? I hear them (you know them, the guys sitting at “Le Café du Commerce”) say, “the data is here, you must recognise that we are right.”

I am sorry guys but there is still a little something I need to check before telling you that you are right or wrong.

What do I have in mind exactly? A simple thing : nominal vs. real values.

You are probably thinking this is another strange concept but it isn’t.

You all know that the value of money changes overtime or put it in another way, for 1$ today, you don’t buy the same amount of a given product than 20 years earlier.

You might argue it is just a trick to make things more complex but it has more to do with inflation than with tricks, ie prices go up and down each year following inflation or from time to time deflation, so 1$ of 1991 would be more or less worth 1.6$ of 2011 (I said more or less because I didn’t bother what should be written after the point).


Click to view

So, what do these new figures tell us?

We see that the same bubbles over the years but what is more important is that tea prices have decreased.

Yes, you read me right. In the last 30 years, the price of the auctioned tea has become cheaper in constant money.

You should feel lucky to live nowadays, shouldn’t you?

Is bigger better?

December 19, 2011 / / 15 Comments

If you ask this about blogging, the answer is obviously no.

You want an example? I have several files, articles and so on about Teavana IPO, finances and such (this is the nice part when a company goes public) but I have tried to analyse all of it in depth and I have been stuck in nowhere, unable to go anywhere but unwilling to let it go.

How does this connect to tea?

When I asked myself what I should do and found the question I asked myself at the beginning, the answer came to me: What is the growth strategy of Teavana? Where do they do make their money? Where do they make their profits?

I don’t know if I will be answer to answer all these questions but I will focus on them (this means I won’t cover everything but perhaps I might come back to it later).

“Teavana is a rapidly growing specialty retailer of premium loose-leaf teas, authentic artisanal teawares and other tea-related merchandise.”

I will come back to the growing part later on, so let’s focus on the sales mix.

Here is Teavana’s sales mix over the last years.


 2008 2009 2010
Tea 51,00% 54,00% 56,00%
Merchandise 44,00% 42,00% 40,00%
Beverage 5,00% 4,00% 4,00%

Tea is the biggest part of it but not by much (only between 1 and 6% more than the two other categories put together) but its importance is growing while Teavana is experimenting a rise in their sales (from 63, 86 millions $ in 2008 to 124,70 in 2010), so when you mix the two of them, you see that tea is really important for Teavana.


 2008 2009 2010
Tea 32,57 48,74 69,83
Merchandise 28,10 37,91 49,88
Beverage 3,19 3,61 4,99

So important, that their tea sales were in 2 years multiplied by more than 2.

This is coherent with Teavana’s strategy as “A primary driver of our expected margin expansion will come from the continuation of our sales mix shift away from tea-related merchandise towards higher margin loose-leaf teas that our stores generally experience as they mature. In general, this trend is consistent with the evolution in our customers’ buying patterns as they graduate from purchases with a greater focus on merchandise with which to prepare and enjoy tea towards transactions centered more on replenishing their favorite teas and experimenting with new blends.”

To sum it up, they aim at opening more and more new stores but they also aim at bringing the consumers to the world of loose-leaf teas where their margins are higher.

Does it work or is their future growth the result of a growing number of stores?

Here is a first hint to see if it works.

The graphics provides us with a first analysis: the growth in the number of stores is obviously linked to the growth in revenues and also to the growth in profits (even if it takes time to get a return on investment, even if Teavana claims to do it rather quickly with a payback period of 1.5 year) but it is only one of their main components (I checked also using statistical formulas but I don’t want to bother you here with them).

So it seems that Teavana figures are in line with their strategy :

expand the number of stores,

  • increase the same-store sales,

  • expand the online presence.

 

Will this strategy work? Perhaps and since I don’t read the future in tea leaves, I won’t answer that question. However, what I know for sure is that perpetual growth is an unknown phenomena.

If we get back to Teavana, from all the weaknesses they have identified in their strategy, I think the most important one is the potential problems with the new stores (suitable locations, lease terms, cash to invest) and the personal (train and retain it).

Why?

Simply because quality is not enough, you need to have the right people able to create a specific relationship with the buyers, allowing them to come back and to “upgrade” their experience.

You also need to be visible, meaning being in the right place, which comes at a cost.

So is bigger better? Only up to a certain point.

What point? It all depends on how a company is able to evolve and make the best of its size but sometimes, it just becomes too big to fail, which usually leads to a failure.

But one thing I know is that for now, Teavana is not going the Starbucks way and comparing the two is like comparing broccolis and carrots, they are both vegetables but that’s all. Teavana and Starbucks are both beverage companies but that’s all.