Please note! This essay has been submitted by a student.
DynasTea is a new and innovative way the average person will enjoy a cup of tea. Our goal is to provide dissolvable cubes that will disappear after being dropped into a hot or cold beverage, leaving behind a flavorful cup of your favorite tea. These cubes are a substitute for tea bags and flavored water, but a combination of them both. The tea cube will dissolve into a flavorful beverage infused with all natural ingredients and flavors. Since water and tea are some of the most widely consumed beverages in the world, (Punch Wine, 2012) our team has a very wide market to work with. With that demand, our team wants to produce a product similar to sugar cubes, but with a disruptive twist. We are offering tea without bags, and providing a simpler, on the go, and environmentally friendly solution. DynasTea’s all natural tea is ground so fine that, when fully dissolved, the slim remnants will just sink to the bottom of the beverage. The cubes are modeled as cubes with a thin honey/sugar film that adds a slight sweetness and keeps the shape of the tea cube until it hits liquid. Once the drink is stirred or shaken, customers can finally get to enjoy the luxury of DynasTea.
The inspiration for our product is convenient tea that will be an environmentally friendly solution to the everyday cup of tea. The flavor is controlled, meaning instead of the tea being overpowering, our customers will get the desired amount of flavor by the amount of cubes they choose to drop. “Studies show that tea consists of antioxidants which means that the more concentrated the tea is, the more benefits you can obtain. Regardless of the color of the tea you’ll still get lots of health advantages” (Punch Wine, 2012). We plan to keep all aspects of a healthy cup of tea while making it convenient and environmentally friendly by getting rid of the tea bag. Drinking tea offers many health benefits. Black and green teas contain antioxidants, which are beneficial in fighting heart disease and cancer. Even though all varieties of tea have health benefits, green tea is the healthiest and contains less caffeine than black tea. (Share Care, 2013) Whether they prefer to drink it hot or cold, dropping a tea cube in a beverage will let customers enjoy some stress-busting effects. There is also an economic and social interest in drinking tea as a therapeutic aid for many illnesses. Numerous recent studies have been conducted to investigate the effects of green tea consumption on the occurrence of human cancers. These studies suggest significant protective effects of green tea against oral, pharyngeal, esophageal, prostate, digestive, urinary tract, pancreatic, bladder, skin, lung, colon, breast, and liver cancers, and lower risk for cancer metastasis and recurrence. (Naghama & Mukhtar, 2007)
Today, there are more than 1,500 types of teas to choose from because over 25 countries cultivate tea as a plantation crop. Currently there is an average of 51% of Americans (or roughly 158 million Americans) that drink tea every day (CalorieLab, 2013). China is one of the main producers of tea, and tea remains China’s (the world’s largest country) national drink (ShareCare, 2013). We plan to outsource from Chinese tea manufacturers resulting in low cost of production for DynasTea. According to Naghama & Mukhtar, about three billion kilograms of tea are produced and consumed yearly. Our vision is to change the process of making tea and make it convenient for the on the go tea drinker. Our DynasTea cubes are a new way to become more environmentally aware by removing the tea bag, going green, and living healthy.
The eco-friendly mission starts with the traditional tea bag that is not biodegradable, and has been criticized for being obsolete for its time. By removing it, we cut costs, our environmental footprint, and we remove certain issues such as tearing and over-flavoring. The traditional tea bags have been around since the early 1900’s and have only been slightly altered since. However, there is no need for the bag if the tea flavor is dissolved in the beverage.
Most teas in tea bags are mixtures of flavors that can come from all over the world. Tea may be blended with other teas from the same area of cultivation or with teas from several different areas for various results. The process of blending teas is to obtain a better taste, a higher price, or both; more expensive, better-tasting tea is sometimes used to cover the inferior taste of cheaper varieties of tea. We aim to utilize this blending process in the t-cube for many different flavors and types of teas. Since there are many different types of tea, this will provide a variety of options for consumers to choose from through our line extensions and product placement.
Despite its dominance in the market, maintaining and enhancing tea’s competitiveness is crucial. Currently, the market is flooded with numerous companies that have been producing tea for decades. Presently teas are being sold in regular tea bags, instant tea (in powdered form), and loose tea leaves that can be placed inside biodegradable bags or tea balls. DynasTea will be a new experience for tea lovers everywhere. There will be no bags, strings or tags on our tea. Instead, it will incorporate the natural taste of tealeaves infused with other natural ingredients; all conveniently packed into dissolvable cubes. The ingredients used in our product will not only consist of tealeaves but also flowers and roots known to have health benefits. DynasTea will revolutionize the tea market for years to come.
DynasTea has developed a way to process the essence of the tealeaves that will give the buyer a bolder taste when consumed. The process is inspired by the similar methods used to press grapes and/or olives. This procedure starts by using a cold press ridding the tea leaves of any stems, grinding the leaves finely. Manufacturers that choose to use heat for this process run the risk of losing the natural properties of the leaves. (Cold Pressed Olive Oil, 2013) It would then be compressed into a cube shape and infused with a sweet vitamin or sugar coating. The result is a sugar cube size tea that can be placed in either hot or cold water, leaving only a small amount of tea remnants behind. Using the traditional way of pressing the leaves will maximize the overall flavor of our tea.
Staples in the tea industry such as Twining and Lipton use regular bags that expose the tealeaves to more air after they have been dehydrated. This process leaves room for tea bags to contain stems, which can also affect the taste and experience of the tea when prepared. Most tea bags are reinforced with an artificial coating of paper containing carcinogens. This coating would create an overall negative experience of the tea. “The small size of the bag does not allow leaves to diffuse and steep properly, and the fact that most tea bags are squeezed against the side of the cup – often brews a more bitter cup. Not to mention, the paper used for the bag can also be tasted by many, which can detract from the tea’s flavor” (Wellness Articles, 2013). Other tea manufactures such as Celestial Seasonings is more cautious on the partial’s that is used on for their tea; which is why they are DynasTea’s biggest competition. Similar to our tea, Celestial tea’s ingredients will be gathered from all around the world. The blends that the company creates will explore the remedies of herbal tea resulting in a healthful taste sensation. The amount of waste generated as a result of the bags and its accessories (i.e. String, tag, etc.) is astounding.
DynasTea wants to create a better experience for its consumers and limit our carbon footprint. “Bio plastics and biodegradable packaging are gaining traction in an industry keen to become more sustainable. Although varieties made from recycled materials continue to dominate the global sustainable packaging market, much of the recent industry focus has been on the development of packaging made from renewable materials. This trend has been most evident in the paper/board and plastic sectors, and frequently forms part of a wider sustainability strategy by food and drinks companies (Just – Food Global News; 2011)” By eliminating the paper, and staples for tags DynasTea will flourish in the market; due to the fact that we have no waste associated with our product. Our herbal tea will create a convenient way for tea drinkers to experience tea.
Twining, although a key player within the tea industry, has currently reached an area with little variation. Their business is unable to reach a wider demographic due to their reluctance to add new flavors to their product lines. In 2008 the company, was forced to reassess and do a complete overhaul of current products. They realized that in order to accomplish their vision of being the number one choice of tea for the working class they had to follow the trend. “Twining undertook a brand overhaul in 2008 to emphasize health and make the range less confusing (Twining’s Case Study: Encouraging More Diverse Tastes in Hot Beverages Available Now for Analysis, 2008)” By implementing health and the all natural aspects, DynasTea will be able to thrive in a congested market.
Our brand is the answer for the growing demand of consumers needs to be healthy. Presently people have become more conscious of how much is wasted on an average day. With DynasTea consumers would not have to worry. As previously stated most tea bags that advertise that they’re made with natural ingredients, which is not the case; company’s use synonyms in order to enchant the buyer. Tea companies work hard to portray the all-natural aspects of their product or brand. What these companies fail to do is inform the buyer of all the unnatural processes added to their “natural product”; good examples are tea bags. Most tea bags (if not biodegradable) are laced with plastic or other synthetic materials. Although they have a high melting point, they can still affect the tea experience. “The idea of a plastic tea bag might be unpalatable for folks for a number of reasons, the most clear-cut being the contribution to landfill waste, but additionally because heating plastic can rouse alarm in consumers. That’s probably why tea companies like to describe theirsilken satchels as a compromise (Orci, 2013)” DynasTea solves this potential problem, by getting rid of bags (biodegradable or not). As a result, DynasTea will not face competition from any counterfeits or any private label product that most business do.
Establishing a substantive value proposition is critical for our product. The cost associated with DynasTea is very minimal. Assuming the company has access to capital in order to purchase equipment, and deal with any overhead; the running cost should be low. The energy used to produce this type of tea requires minimal effort. Other than the raw ingredients used, and the packaging of the product, waste is not a word that would be associated with our company.
The tea industry may have been unsuitably advertised a few years ago, but today no other commodity is better poised to capitalize on a union of societal trends. DynasTea will be known for its multifaceted health aid and as a way to comfort those who wish to bring balance back into their lives. In another, it is pitched as worldly, gourmet, and, when it is organic and fair trade, even virtuous.
While doing research we had to address potentially the biggest issue with the new product development process. We had to make sure that no one had invented this kind of tea before. We executed a Google patent search with many different key words, phrases, and names. Luckily, we did not find any product that had a patent for something like DynasTea. We then determined that DynasTea would be an acceptable idea to move forward with.
It would be beneficial if DynasTea purchased the Tea from an outside vendor at least during the first year. The time and the amount of money it would take to purchase from foreign destination would be very cost effective. Purchasing from a reputable vendor gives out company the ability to focus on other aspects of the business. The cost of tea purchased wholesale can range from $8.50 – $243. (Sfherb.com, 2013) The cost of a heavy-duty cold press for wholesale production can range from $2,800 – $8,000. (Machine.alibaba.com, 2013) Our competition sells their product for an average of $15 with about 100 tea bags in each box. In order to stay competitive DynasTea will price product at $10 with a box that has 100 cubes.
According to the Tea Association of the USA, as of last year tea could be found in almost 80% of households in America. This year, Los Angeles Times reported domestic tea sales in restaurants, grocery stores and shops reached $15.7b in 2012, which increased 32% from 2007. Due to these high numbers and increase, we realize the size of our market is increasing daily. The Tea Association of the USA also recorded the increase in tea purchases for 20 consecutive years.
Although coffee is still in the lead as preferred beverage, the Tea Association suspects tea sales to surpass coffee in the next four years. By 2015, the market is projected to reach $18b. (Los Angeles Times, 2013). Because of this opportunity, it is a great time to invest and expand DynasTea to please the demanding market, which seems to be on the run daily due to hectic lifestyles.
Although the popularity of tea has increased, the demand for tea bags has minimized throughout the years. This change in mind is not something new. In 1992 49.8% of tea purchased was in tea bags, the following year there was a decrease to 48.5% and in 1994 46.7% of tea purchased was in the form of tea bags (teausa.org, 2012). Teabags have become less popular which to DynasTea, is an advantage due to our convenient substitute. Because of the lack of demand of tea bags, one of DynasTea’s benefits is its space-saving packaging. Luckily, cubes stack up easily and fit into smaller packaging compared to tea bags. This will help save costs, which in return benefits the company.
According to the Tea Association of the US, the highest national average of tea consumption is in the Western portion of the country. Tea consumption is higher in this section of the country because most people are much more laid back and “enjoy life sip by sip”. The mountainous region of the West, which include Arizona, Colorado, Idaho, Montana, Nevada, Utah and Wyoming, are the most likely to purchase tea (+64%) (Teausa.org, 2012). These demographic statistics will help us when choosing where to distribute our tea cubes first.
A lot of money is involved in establishing a permanent retail location. To avoid such steep costs, we are looking to start off our retail locations by placing kiosks through shopping centers and malls in the West. According to Patricia Norins, publisher of Specialty Retail Report, kiosk investments range from $2,000 to $10,000. Kiosks are currently a $10b industry. Although the kiosk rental rates can be about $2,300 a month or 15% of monthly sales, these fees are minuscule compared to the rental fees of an actual retail store location (entrepreneur.com, 2013). These kiosks would offer the same customer service and products as any of the participating retailers that will be mentioned next. Another benefit of kiosks is the traffic that walks by will automatically take a look and be attracted by the uniqueness.
To help us in deciding which western states would be introduced to tea cubes first, we based our choice on overall household income. The Tea Association states households with income from $50,000 to $74,000 are the top tea consumers. Based on those numbers, we have decided to first spread out our tea kiosks in malls Colorado (60,180), Utah ($58,235) and Wyoming (56,044) (US Census Bureau, 2103). These states were also chosen in part due to race. The Tea Association states 78.6% of tea consumers are “white”. Colorado’s population is 88.1% white, while Utah has a white population of 91.8% and Wyoming 93.1%. We are introducing our tea to consumers that are more apt to purchase and invest.
Another deciding factor in location to distribute our tea cubes first is age. The Tea Association states baby boomers (age 45-54) are the best consumers of tea, 20% more likely than the average consumer to purchase. These customers might be concerned with consuming too much caffeine and are looking for substitute such as tea. US News reported the top 20 cities baby boomers would most likely retire to. The list also included Colorado Springs, Colorado with a 22.6% growth rate of baby boomers, Salt Lake City and Ogden-Clearfield, Utah with 19% and 18% growth rates respectively. By placing tea in these states, we will target the age demographic that is most likely to purchase DynasTea.
In hopes to generate as most revenue as possible, DynasTea will partner with current known retailers. Starbucks, which in 2010 had revenues of $10.7 billion, (Lepore, 2011) offers a promising opportunity for a partnership. Starbucks customers are extremely loyal. “The average Starbucks customer visits the store 6 times per month while a loyal 20% of customers go to the stores 16 times per month” (Lepore, 2011). To introduce these loyal customers to our cubes, we believe we should offer complimentary samples with minimum purchase. Immediately after that, Starbucks should be start featuring our cubes on their shelves. “Specialty coffee drinks account for around 75 percent of Starbucks’ sales, but an increasing amount of its business is centered on selling whole bean coffees and merchandise” (O’Farrell). The more interest customers place on the merchandise being sold at Starbucks, while waiting in line perhaps, the more success DynasTea will have.
Another projected partnership is with Teavana, which was purchased by Starbucks November of last year, will help introduce the products. Currently Teavana has 330 stores, which are usually located in upscale shopping malls. Teavana’s experience can be described as a “part tea bar, part emporium” (Teavana.com). Teavana also offers mall goers with samples at the front of their door and throughout the store. We believe that this will be our biggest opportunity to market our product. By offering samples of our tea cubes, potential customers will get familiarized with the tea cubes and understand the convenience, which is our main competitive advantage. We would also like to introduce the cubes to Teavana customers by giving complementary samples with a minimum purchase such as at Starbucks. The cubes will also be available for purchase at Teavana and this partnership will benefit both parties involved by boosting sales.
A third partnership DynasTea would pursue would be with a health and nutrition retailer such as GNC and Whole Foods. Both chains target health conscious consumers of all ages. At GNC, most of these customers may have a range of interests such as weight loss, nutrition, or simply maintaining a healthy immune system. GNC’s revenue has increased 6.6% to $665 million from $624 million according to Trib Business, after spending $3 million on marketing.
Whole Foods is not only number 232 on the Fortune 500 list, but is currently the eighth largest food and drug store in the country. It has 368 stores throughout 12 regions of the country. (WholeFoodsMarket.com). Whole Food’s target market is looking for either natural, organic or “green” alternatives to many products they like. DynasTea fits into this store’s demographic due to its lack of teabag, which minimizes waste.
According to Tim Forrest, a marketing consultant to the grocery industry, there is a specific market, which stops at Whole Foods. People who shops at Whole Foods:
Most of these demographics match up with tea consumers. As mentioned previously, baby boomers are more inclined to purchase tea. Also, like Whole Food’s market, The Tea Association states the tea audience is mostly made up of females (53.2%). They also report that 25.8% of tea consumers have some sort of college education, while 20.9% have college degrees. These consumers are more educated on maintaining a healthy lifestyle (teausa.org).
Our partnership with both mentioned chains would also be essential for a possible line extension of DynasTea, which could contain vitamin-infused tea cubes. GNC’s target market would benefit from this product due to its benefits such as burning calories, boosting immune systems, regulating cholesterol and fighting cancer as well as heart diseases and viruses. Consumers are interested in purchasing products that are natural and beneficial to their health as well. In the 2012 Market Overview Report in the magazine Natural Foods Merchandiser, it is reported that the industry of natural and organic products is growing. “With nearly $91 billion in total revenue last year, the industry grew 10 percent over 2010, showing that consumers are filling their carts with natural products and that the industry is healthy and growing” (Celentano, 2012).
Whole Foods recorded $10.2b in sales while GNC reported $1.4b (Celentano, 2012). Consumers have built customer loyalty with these retailers and trust their products, which in return give DynasTea the credibility. The retail segment of natural products is currently bringing in $37b (Celentano, 2012). Customers are going to these retailers in hopes of finding healthier alternatives and that’s exactly what DynasTea is providing while keeping it convenient.
The largest social network, Facebook, has 500 million users as of October of this year, with 250 million users logging on daily (Visual.Ly, 2013). We believe using Facebook as a social media outlet to reach out current customers and potential customers. Through Facebook, we will mention any kiosk openings at shopping centers, new partnerships, new line extensions, more variety in teas, and promotions. To encourage customers to purchase our tea cubes, we will occasionally post coupons to redeem at any participating retailer, mall kiosk or website.
To market to a vast audience, DynasTea will launch its own website. Visitors may learn more about how the tea is produced, more regarding our line extensions, and they will also be able to contact us for further information. This website will also offer a “kiosk locator” which will allow customers to find the closest available kiosk. Customers may also purchase their tea cubes through our website.
‘Tis the season of giving! During the holiday season, Starbucks, as well as the rest of our participating retailers and kiosk, will feature our limited time promotional product. This product will be a small tube with four cubes to make great stocking stuffers.
The Integer Group, a retail branding firm, conducted a survey and reported 9 out of 10 shoppers make impulse purchases, buying items that weren’t on their shopping lists, according to a recent survey (Neporent, 2012). To encourage these impulsive last-minute pickups while waiting to check out, these tubes will be positioned next to the register. Starbucks’ lines tend to be long, especially during peak hours such as the morning. “The drudgery of unoccupied time also accounts in large measure for the popularity of impulse-buy items, which earn supermarkets about $5.5 billion annually” (Stone, 2012). By spreading the word about DynasTea through gifts, we are hoping to acquire new customers.
Due to the high tea consumption in females, another marketing tool to introduce this demographic to our product would be through magazine ads. Shape, Self, and Women’s Health are all great avenues to attract consumers. According to the Alliance for Audited Media, Shape is the top female health magazine with 1,614,641 subscriptions. Women’s Health magazine has 1,574,269 active subscribers, while Self lands in third place with 1,520,570 subscribers. By reaching all these subscribers, we can great awareness on the benefits of tea and how to enjoy it in an eco-friendly, convenient manner.
In 2010, Affinity Research stated 53% of readers plan to take action after seeing a magazine ad. This action can range from purchasing the product, recommending the product, or simply visiting the ad’s webpage/store. A lot of these readers fit the demographic of the average tea consumer mentioned previously. “Between 2005 and 2009, magazine readership increased in every demographic except those aged 35 to 49” (Huebsch).
There are various benefits of advertising through these specific magazine ads. Primarily, the main benefit is we will reach our intended audience since we are advertising within our specific industry. This will save money and time. Also, a lot of these magazines are featured in waiting rooms throughout doctor’s offices. This will benefit DynasTea by reaching out to individuals who aren’t subscribed but still remain interested in healthy living. Lastly, “Magazines are typically kept for a longer period of time than newspapers because of their higher printing quality” (Huebsch). The longer a magazine is kept, which could be months, the more audience it will reach.
If a company does not know itself, how can its customers truly have an understanding of what is being offered? We have compiled a list of our product’s strengths and weaknesses to go along with potential opportunities and threats. This will give our future investors, as well as our team, a clearer look into just what we have to offer.
The first strength that DynasTea has is that it has done away with the traditional tea bags that one sees in the tea market today. This represents strength for multiple reasons. The first reason, as stated earlier, is the reduced environmental footprint. According to Teausa.com, Americans consumed about 80 billion servings of tea in 2012. In addition, over half of the American population drinks tea on a daily basis. The most important stat though is that, “in 2012, over 65% of the tea brewed in the United States was prepared using tea bags.” (Teausa.com, 2013) That comes out to roughly 52 billion tea bags each year alone. While tea bags may seem small, those numbers add up in terms of the waste factors. Traditional tea bags are not reusable and thus get thrown in the trash. DynasTea will help reduce the amount of waste generated by tea drinkers.
Another strength that DynasTea holds also has to do with the elimination of tea bags. Tea bags cost money to manufacture. According to dhgate.com, packages of empty tea bags cost anywhere from $.01 – .11 wholesale. That may not seem like a lot but once again, when added up, the costs can be tremendous; especially for a tea company, like DynasTea, that is trying to get off its feet. Eliminating tea bags can save millions of dollars.
Another strength boasted by DynasTea is our potential partnerships with Starbucks and Teavana. These are two well-established beverage companies that will help catapult DynasTea off the shelves. People will notice our product and associate it with these great companies.
One glaring weakness that DynasTea has is that there is no way to fully dissolve the tea into the water without compromising the product. If customers want something that completely dissolves in their drink, our product is not right for them. We grind the tea up very fine so that most of it will disappear but the remnants will settle on the bottom of the cup. Some people do not enjoy having these remnants in their drinks but if we were to switch to a fully dissolvable powder we would be sacrificing taste by a great deal. Also, at that point our product would be way too similar to powdered drinks such as Crystal Light.
Another weakness that DynasTea has involves the partnerships. It would be great to gain exposure and notoriety through Starbucks and Teavana but they are definitely not going to let us sell our product in their stores for free. We will have to deal with a percentage of our revenue being reduced in order to pay the stores to use their shelves. They want to make a profit as well. There is nothing we can do about it but we feel it is a necessary investment.
There are many opportunities that present themselves with DynasTea. According to teausa.com, the use of instant tea (traditional tea bags) is declining while the use of loose-leaf tea is gaining in popularity. The popularity that loose-leaf tea is gaining is noticeably high in specialty tea and coffee shops. Luckily many of the tea drinkers we are targeting, buy their tea from specialty shops like Teavana. We have the opportunity to step in and take control of a growing market.
Another opportunity that DynasTea has is the growth of tea drinkers compared to coffee drinkers. As stated earlier in this paper, tea sales have increased by 32% over the last five years and are projected to continue growing through 2018. Coffee sales on the other hand are only projected to grow about 1% through 2018. Again, we can take advantage of this growing market with our new and improved way of drinking tea. (Teausa.com, 2013)
When talking about threats, the most important thing to take into consideration is the competition. There are hundreds of different tea companies in existence in America today. Our product could very easily slip through the cracks if we do not market it correctly. Also, it is easy to assume that many people stick to a certain brand that they like the most. Almost all of us have some sort of loyalty to a particular brand of product whether it is tea, toothpaste, clothing, etc. It might be hard to get people to switch from the brand of tea they have been drinking for their whole life.
Another threat that DynasTea must be aware of has to do with the partnerships. As much as we want to get DynasTea’s name out there we do not want to be crippled by royalty payments. At some point our partnerships with Starbucks and Teavana must come to an end if we want this company to truly take off.
All products go through the different stages of the life cycle. There are four stages including the introduction stage, growth stage, maturity stage, and decline stage. Our product, DynasTea is definitely working through the introduction stage at this point in time. Our product has not yet hit the open market, as research and development are still ongoing while we look for investors to help our product reach the shelves. Unfortunately, this stage of the life cycle is an expensive one. We must spend a lot of money developing, manufacturing, shipping, and marketing our product without much to show for it. These costs will have to be paid for out of our own pockets in addition to any money that investors provide. Of those four things, the most underestimated cost is marketing. In order to fully get our name out there, a lot of money must be spent.
Usually with a new product in the introduction stage, the market does not exist or it is very small. Luckily for DynasTea, the tea market has been established for many years, but just because the market exists does not mean people will just buy our products. We must separate ourselves from the pack and start moving into the growth stage where we can start really generating revenue.
Every new company must have goals in mind for the future. Without goals and things to aspire to, a company can become content with what it is doing and never grow. This is not to say that ridiculous and unrealistic goals must be set. Actually we are saying the exact opposite. We want to establish SMART goals. SMART stands for specific, measurable, attainable, realistic, and time-sensitive.
One goal that we as a company have is to partner with Starbucks and/or Teavana within the first year of our existence. We know that these partnerships will go a long way to ensuring that the DynasTea brand will become a household name. This goal is specific in that it states exactly whom we want to partner with and that it states how long we are giving ourselves to