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EXECUTIVE SUMMARYThe following plan outlines the suggested marketing strategy and tactics for David’s Tea, a high qualityloose-leaf tea provider that has aggressively expanded since its creation in 2008. David’s Tea has over ahundred stores located across Canada and the United States, and is continuing to expand the companyin terms of locations and diversities of tea. For potential and current customers, David’s Tea targets theyoung, hip urbanites, traditional and non-traditional tea drinkers, baby boomers and the healthconscious, offering a healthy and trendy drink. David’s Tea has several distinguishing features includinga strong brand, their unique blends, frequently released new flavors, the quality of the tea importedfrom around the world, high product customization for customers, and excellent customer service byknowledgeable and expert staff. The North American tea market is expanding steadily mainly due tohealth awareness and the benefits that tea provides, which creators of David’s Tea have capitalized on.Their expansion and growth has primarily been from strong customer relationship management andbrand loyalty, experienced management, strong financial backing, and a high demand for quality hotbeverages. Four years and over 100 stores after their start, David’s Tea is established and financiallystrong, and in need of a solid marketing plan to continue their explosive growth.COMPANY DESCRIPTIONA young and aspiring entrepreneur, David Segal, was only in his twenties when he became the ownerand creator of David’s Tea. He would visit tea shops and wonder why he could not find a quality cup oftea anywhere. He quoted, “I felt there was a void in which we could deliver a fun, fashionable andaccessible tea experience on the main streets and in high traffic malls,” Segal says (Bury, 2011). Davidand his cousin and business partner, Herschel Segal, who started the company Le Chateau, began thecompany in 2008 in Montreal, Quebec and opened their first store in Toronto. Together they wanted toestablish a new twist on tea and make it a fun and fashionable culture (Laird, 2012). Today David’s Teahas grown into a national retail chain and e-commerce company with over 100 stores across NorthAmerica (David’s Tea, 2012).David’s Tea is known for their unique and customary tea blends. The company went on a world search insource of quality loose leaf teas, and used them to create exclusive blends which are their primaryproducts. They offer over 120 types of loose leaf tea that make up their permanent collection as well asseasonal blends (David’s Tea, 2012). The company strives at introducing a new product or tea into thestore every two weeks, keeping them in the loop of the mature growth stage of the market. Thecompany is also an eco-friendly tea store providing organics, recyclable packaging and other sustainablepractices (David’s Tea, 2012).David’s Tea is a company that primarily concentrates on the relationship building between customersand their employees, offering a tailored experience and exceptional service. This plan describes howDavid’s Tea has positioned itself as a leading tea provider and how they plan to compete for marketshare for tea beverages in Canada. 3
STRATEGIC FOCUS AND PLANMissionGreat tea, friendly stores, and above-and-beyond customer service (David’s Tea, 2012).Overall Company Goals 1. To become the number one tea retail experience in North America. 2. To promote healthy living by drinking quality loose-leaf tea. 3. Continue expansion into the US market.Objectives 1. Have a David’s Tea in each of Canada’s 100 most affluent communities 2. Have the largest share of the North American loose-leaf tea market by end of 2013 3. Open a David’s Tea in each North American metropolitan area where consumers spend greater than $1,500 per year on coffee/tea per person 4. Expand into 20 new neighborhoods in the US & Canada by end of 2013 that have an ethnic majority focused on a tea-based culture 5. Have each location generating a profit within 1 year of its open 6. Sponsor and publish at least 3 peer-reviewed medical studies on the benefits of drinking tea per yearCOMPETENCIES AND SUSTAINABLE ADVANTAGESAdvantagesThe employees at David’s Tea demonstrate high expertise and customer service. Combined with theunique companys quality loose-leaf tea this differentiates them from their competition. One of thecompany’s growth strategies is customer relationship management, tailoring each service to theircustomers and providing a quality experience. Another advantage is Co-founder Hershel Segal has hadsuccess in entrepreneurship prior to the establishment of David’s Tea, creating the retail store LeChateau (Bury, 2011). This creates a heavy advantage for David’s Tea in terms of experience andfinancial backing.Sustainable AdvantagesDavid’s Tea consistently researches and releases new blends frequently, a strong sustainable advantagethat makes them leaders in the tea market. Strong branding is another sustainable advantage that iscontinuously progressing and will continue to do so.SITUATION ANALYSISDavid’s Tea has expanded since its opening in 2008. In 2010, the chain went from 8 to 40 locationsacross the country. In 2011, 25 more opened, and 2012 was a big year for David’s Tea with explosive 4
growth (Budak, 2011). Growth in the company can be compared to the fact that tea has been one of thefastest growing menu items in Canada. A recent Agriculture Canada Food study predicted that by 2020tea consumption will grow to 40% (Budak, 2011). One contributing factor to this prediction is the agingbaby boomer generation. This generation is concerned with their health and will soon be retiring,staying at home drinking tea. The many health benefits of tea has helped to drive consumption amongbaby boomer and among younger generations. Furthermore the increasing population of Asian andMiddle Eastern immigrants into Canada has contributed greatly to the consumption of tea, because teais a cultural staple (Budak, 2011).SWOT AnalysisLocation Favourable Unfavourableof Factor Internal Strengths Weaknesses Experienced management in Investment in training with entrepreneurship new employees due to high Extensive hiring process of employees turnover of staff Tea experts Strictly tea- no coffee or hot Friendly and outgoing staff chocolate Offer quality loose leaf tea, diversified No seating blends from around the world Limited budget, high expense Offer direct marketing, customizations of each customer experience Online marketing via online purchasing of products and direct orders Brand name has connects with high quality tea External Opportunities Threats Expand more into the U.S. and Europe Competition with other hot Offer seating within stores beverage companies Increasing demand for tea with rising including Starbucks, who is health concerns now entering the market Limited amount of other specialty tea stores in North America Future downturn in economy, less interest in quality tea 5
Industry AnalysisThe tea industry is currently experiencing growth because consumers are becoming more aware of thehealth benefits of drinking tea. In 2008 the tea and coffee represented 1.1% of the total value of salesof food and beverage goods (The Canadian Tea, 2010). The tea industry has a number of competitors inthe non-alcoholic beverage sector including coffee, soft drinks, energy drinks, milk and dairy beverages,fruit juices, bottled water, sports drinks, vegetable juices, soya beverages, hot chocolate, and lowalcohol wine coolers and ciders. Below is a pie chart showing the percentage, measured by volume(hectolitres), of sales of all non-alcoholic beverages in 2008 (The Canadian Tea, 2010).David and Herschel Segal are tackling the tea industry because it brings people together, all over theworld, and it’s the second-most popular drink on the planet, second only to water. And, quite simply,because it makes many people happy.For the past six years, tea has been one of the fastest-growing menu items in Canada, with out-of-homeconsumption at 584 million servings over the past year, versus more than 500 million in 2007. Comparedwith coffee (more than 1 billion servings per year), tea is not as prevalent, but certainly growing. Arecent Agriculture Canada food-trends study predicted tea consumption will jump 40% by 2020, a riseattributable to many factors including an aging population (Budak, 2011).Potential and current customers include young, hip urbanites, traditional and non-traditional teadrinkers, baby boomers, and the health-conscious.Customer Analysis of David’s TeaHot beverages are a daily routine for the majority of Canadian adults according to the 2008 BeverageConsumption of Canadian Adults study. This research indicated that at least 64 percent of adults drinkcoffee or tea daily (Garriguet, 2008). The number of coffee drinkers is an important consideration to thismarketing plan, as coffee and tea share many of the same benefits (caffeinated, warm,convenience). This is confirmed in research in the 2005 study Canadian Food Trends for 2020, which 6
states that the high degree of correlation between tea and coffee consumption indicates that the twoare substitutes for each other (Serecon, 2005).Percentage who consumed selected beverages the previous day, by age, group, and gender, household population19 or older, Canada, excluding territories, 2004 (Garriguet, 2008, Table 2). 19 - 30 31-50 51-70 71+ Percentage Men Women Men Women Men Women Men Women who consumed beverage (%) Coffee 40 39 71 64 79 74 75 68 Tea 20 30 27 35 33 47 49 56The 2008 study revealed that coffee consumption stays relatively equal throughout adulthood for menand women; whereas tea consumption increases as both men and women age (Garriguet, 2008). Thismay be explained in the 2005 study, where it is suggested that this rise in consumer interest isassociated with the growth of consumer interest in health and wellness products (Serecon, 2005).The 2005 study also indicates that specialty teas do not appear to be price sensitive as they fit into aluxury good category where they "satisfy the need for small indulgences among a more sophisticated,and aging population (Serecon, 2005). According to Industry Statistics from the Tea Association ofCanada website, the specialty tea market ($92m )now outpaces the conventional tea market ($89m).Subsequently, the market growth for specialty teas is huge. According to the 2005 study, the per capitagrowth in specialty teas is expected to grow 40% between 2001 and 2020 (Serecon, 2005). An agingbaby-boomer generation and an increased focus drive this growth on health and well-being will drivethe growth of this industry.The comparable price between coffee and tea indicate that the target market for David’s Tea is fairlybroad across adulthood.Competitor AnalysisDavid’s Tea’s competitors mainly includes coffee shops, chains, and other businesses that sell hotbeverages, and retailing businesses that sell accessories such as cups and teapots. As the main productsof David’s Tea are various blends of tea, the major competitors David’s Tea is facing are the fast drinkbusinesses. Among them, Starbucks and Tim Horton’s are two of the most established.Competitive analysis – StarbucksStarbucks has dominated the coffee market for years. It is not only known for creating quality coffee andservice, but also noted for its atmosphere and customer experience. Starbucks brands have obtainedrecognition worldwide and possess a strong influence. It blends company and community values by 7
providing quality coffee and building a common culture and environment in all store locations as well asheadquarters (Gibson, 2009). Moreover, Starbucks has strategic alliances and partnerships to obtain andsell the highest quality products.Starbucks has a revenue of $13.3billion and the trend is growing in the past five years. Its net incomehas risen dramatically from 315.5 million in 2008 to 1.38 billion in 2012 (Yahoo! Finance, 2012). In spiteof the high growth, the need for coffee is quite different as the month varies (winter is generally theirbusy season).Starbucks poses a significant threat to David’s Tea if it decides to focus on the tea market, which itapparently is starting to. Last month it acquired competitor Teavana for a whopping $620 million, whichshows its dedication to disrupting the industry (Lutz, 2012). It seems Starbucks is not going to let David’sTea expand further into the market without a fight.Competitive analysis – Tim Horton’sTim Horton’s offers a variety of products, most notably its coffee, fresh baked goods and homestylesoups and sandwiches have been famous in Canada for many years. Tim Horton’s focuses onenvironmental leadership as a main value, and markets itself heavily to working middle-class Canadians(Tim Horton’s, 2010-2012).Although Tim Horton’s is not making a dramatic rise in its income and revenues recently, its sales andincome maintain a steady growth over the last three years. However, Tim Hortons’ percentage grossmargin has dropped from 2010 to 2012 and the operating expenses have risen at a greater pace than itsrevenues (Yahoo! Finance, 2012).Overall, given their significant penetration in the Canadian market, strong brand, and successfulfinances, Tim Horton’s could be a strong contender to David’s Tea if it chose to enter the tea realm.OthersIt is worth noting that there are other competitors to David’s Tea springing up, such as Teaopia. It seemsothers who recognize the tea market’s potential and are entering themselves, hoping to experience thesame success David’s Tea has. In the next several years, competition will be fierce.MARKET-PRODUCT FOCUSMarketing and Product Objectives: 1. Provide premium tea for all 2. To be recognized as the friendliest and expert tea provider in North America. 3. To promote healthy living by drinking David’s Tea. 4. To make tea sexy and fashion forward. 8
Target Markets:Potential and current customers include young, hip urbanites, traditional and non-traditional teadrinkers, baby boomers, and the health-conscious.Points of Difference:David’s Tea has four unique characteristics: 1. Unique blends, new flavors released frequently. 2. Quality loose leaf tea imported from around the world. 3. High product customization that customers appreciate. 4. Excellent customer service by tea-knowledged and expert staff.Positioning:MARKETING PROGRAMProduct StrategyDavid’s Tea line of products include over a hundred different varieties of teas with varying flavours andhealth benefits. The wide variety allows the company to encourage customers to search for theirfavourite flavours, and or them to offer customers specific teas for specific situations: a refreshing teafor a hot day, a calming blend for someone who is stressed out, etc. Compared to coffee shopcompetitors who target the caffeine junky or the sweet tooth, this variety allows their stores to have amuch broader appeal to customers throughout the day.David’s Tea will educate its guests about its products by actively sampling them and by encouraging itsemployees to engage customers as they walk into or past the store. While many people enjoy tea, thereare hundreds of different varieties and many people are unaware of the different blends and what they 9
taste like or what their health benefits may be. David’s Tea recognizes that by putting their product insomeone’s mouth that they are able to tell new customers the story behind their product, and introducereturning customers to new flavours. This helps grow the customer base and diminish the effect ofbrand fatigue.David’s Tea is boldly branded teal with an all-caps Logo. This branding is carried through to their take-away beverage containers. The design is meant to stand out from rival hot beverage companies(Starbucks – white cup, Tim Horton’s – red cup) and compete against their brand awareness.David’s Tea has a bright, open, and smart design to each of their stores. The stores want to be easy tonavigate for people who would like to take their tea to go, and comfortable enough for people to sitdown and relax. The company is emphasizing the lightness of tea in the décor and design of its stores.Price StrategyThe price strategy of David’s Tea can be separated into two different parts: to-go drinks, and bulk tea totake home. To-go drinks – The price point of their to-go drinks is equivalent to medium-to-high range coffeeshops at around $2.50 per beverage. In this sense, David’s tea avoids competing on price against rivalbeverage companies like Starbucks. Bulk tea – The pricing of their bulk tea is where David’s tea has a competitive advantage versusrival hot beverage retailers like Starbucks. At David’s Tea you can get a 50g container of loose tea ofyour choice for approximately $6.00 dollars that will make about 25 servings. Whereas a bag of coffeefrom Starbucks may cost twice as much for the same number of servings.Promotion StrategyDavid’s Tea uses a variety of different promotional elements to raise awareness of their brand: Personal Selling – David’s Tea utilizes personal interaction to sample products and to educate itscustomers about the teas that it sells. The employees of the company are passionate and educatedabout their products and can make recommendations to someone looking for a new flavour. Thisemployee experience separates David’s Tea from rival hot beverage competitors like Starbucks or TimHortons. Public Relations – David’s Tea has several articles written about their company and its relativelyquick expansion across Canada and now into the United States. Articles are used to demonstrate thatthe company is innovative and experts in the tea business. This is used to build brand credibility and todistance itself from rival tea shops. Internet – David’s Tea has an integrated online shop on their website that serves as a tool topromote their teas, seasonal mixes, and their associated housewares. The company also has a Facebook,Twitter, and Pinterest page which are used to promote new store locations, new blends, and informcustomers what their ‘Tea of the day”. 10
Sales Promotion – The website for David’s Tea is promoting a Holiday Gift Guide to promotetheir winter seasonal selections. Their bundles of tea offer a significant savings over ordering theincluded flavours individually. Additionally, David’s Tea will include three free sample teas for any onlineorder placed. The online store also has an expanded selection of discontinued and seasonal teas notavailable to the retail stores. Gift Cards – David’s Tea puts a lot of emphasis on gift cards as a gift-giving solution for theircustomers. The company knows that they have loyal and passionate customers, and recognize that theycan use this to bring new people into their store to purchase gift cards and also introduce them to theexperience. Advertising – David’s Tea does essentially no print or media advertising, and instead relies onword of mouth to promote their products. Subsequently, the interactions and knowledge that theiremployees are able to pass on to customers are critical to encouraging word of mouth promotionPlace/Distribution StrategyDavid’s Tea stores are primarily located in central shopping areas. In Vancouver they are currentlylocated in areas such as: Vancouver on West 4th Street and in the Oakridge Center Mall, in Burnaby atthe Brentwood Mall, in West Vancouver at the Park Royal Mall, and in Surrey at Guildford Center. Byselecting these locations they are choosing to be in high traffic areas where they can be convenientlyshopped.By choosing shopping districts, David’s Tea hopes to encourage customers to buy tea while they areshopping. The stores are located at these locations are each in areas with heavy foot traffic. Theselocations allow the company to actively sample their teas to people passing by and therefore raise theawareness of their brand.FINANCIAL DATA AND PROJECTIONSPast Sales RevenuesDavid’s Tea is a private company that does not divulge its financial data. However, it does not take anopen ledger to recognize that opening more than 100 stores in the last 4 years is a sure sign of greatsuccess. It is safe to say, given their rapid expansion, that their past sales revenues are quite impressive.Five- Year ProjectionsDavid’s Tea is getting close to saturating the Canadian market, and while they may have room to expandin 2013, may soon become cramped in 3 or 4 years. In order to continue their rapid growth and revenuegeneration, they will need to continue expanding in the US and consider other countries as well. Giventhat they are near this tipping point, they may need to evaluate other strategies to continue their solidprofits, such as a more efficient supply chain to lower costs. 11
ORGANIZATIONDavid’s Tea is concentrating on making tea fun and fashionable by creating a specific brand andculture. They have fashioned tea as a healthy and tasty alternative in the hot beverage market,attracting young customers who are concerned with their future healthy lifestyle and old customerswho are concerned with their current health. Their culture also centers on making the tea experiencegreat, focusing on more than just unique blends by providing quality service and expertise about theirloose-leaf tea blends from around the world. Overall, their strong brand is best represented by acheerful, healthy, and wholesome lifestyle that is relevant to today’s trends and fashions.IMPLEMENTATIONProduct Strategy Continue to offer a variety of teas, and have at least 30 regular blends and 5 seasonal blends in stock for each store Hold monthly store meetings to educate each employee on the products and ensure they are properly trained Keep a strong brand throughout the store and make sure every product is placed in a branded David’s Tea container Offer products in a modern retail atmospherePrice StrategyDavid’s Tea is separated into two categories: to-go drinks, and bulk tea for home. Their to-go drinks arepriced equivalent to medium- to high-range coffee shops around $2 to $3 per beverage. Their bulk teathey are able to price cheaper versus their competitors while still offering a high quality product.Promotion StrategyDavid’s Tea uses a variety of different promotional elements to raise awareness of their brand: Personal Selling: the company has a fairly thorough recruitment process, as well as ongoing staffeducation and training that ensures their employees are excellent personal sellers and representativesof their brand. Public Relations: already under the public eye for their rapid growth, David’s Tea will continue toimplement PR campaigns to attract further media attention. Their angles can combine their strongbrand with the rapid expansion of their business to create compelling articles. Internet & Social Media: David’s Tea already focuses significantly on their online sales, doing alot of business and transactions online. They combine this with their social media (Facebook, Twitter,Pinterest) to listen to customer feedback and constantly improve their product offering. To capitalize onthis, the company should do contests and giveaways for each social network, as well as work withpopular food/drink/tea blogs to improve Internet attention and retention.. 12
Sales Promotion: David’s Tea capitalizes on the seasonal market well, creating blends for spring,summer, fall, and winter. They do this through a holiday gift guide as well as online. Continuing to offeronline promotions and advertising through their website will help drive revenue and repeat purchases.Moreover, partnering with other like-minded companies that advertise seasonally (for instance, selectclothing lines) could help increase their sales. Gift Cards: David’s Tea uses gift cards to encourage their faithful customers to spread the love oftea and create new ones, bringing fresh faces into the store. This is a great strategy, and this plansuggests improving it by creating a rewards program for its top customers. Advertising: David’s Tea uses direct marketing by strongly branding themselves and theirofferings (from cups to tea cans to at-home accessories) with their familiar teal colors. Pairing this withlocal/neighborhood advertising, such as posters and print advertisements within 100 meters of theirstores, will create additional sales. Events: The company holds a significant number of events, mainly tastings of their familiar andnew products. They also supply tea for fundraisers and charity events occasionally. Continuing to dothese on a regular basis is a good start, and supplementing the program with appearing at local events(such as community festivals) will be a great way to spread awareness of their tea.Place/Distribution StrategyPosition David’s Tea in main shopping areas and central avenues with heavy foot traffic. Be the only tea-specific venue within the mall (or street, as it applies). Also be in close vicinity to large corporateskyscrapers, given that their occupants favor a coffee-break lifestyle and appreciate a higher-qualitybeverage that augments their personal image.EVALUATION AND CONTROL Marketing managers of David’s Tea are encouraged to re-examine their goals and objectives ona bi-weekly basis and assess successes and shortcomings. Based on their evaluation results, they areencouraged to make appropriate changes to drive the company forward. Each Objective in this plan isSMART, and should be evaluated monthly to see if the company and marketing program is on track toachieve it. 13
BIBLIOGRAPHYAgricultural and Agri-Food Canada, (2010). The Canadian Tea Industry. Retrieved from website: http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1298047470064Budak, J. (2011, June 08). Steeped in success.Canadian Business. Retrieved from http://www.canadianbusiness.com/article/29371--steeped-in-succsssDavid’s Tea - Buy Loose Leaf Tea Online." DAVIDsTEA - Buy Loose Leaf Tea Online. N.p., n.d. Web. 22 Nov. 2012. http://www.davidstea.com/.David’s Tea, Points of difference VS Teaopia (Online) Available at: http://community.weightwatchers.ca/Blogs/ViewPost.aspx?threadID=1039754Erin Bury, E. (2011, April 14). [Web log message]. Retrieved from http://sprouter.com/blog/how-david-segal-went-from-zero-500-employees-3-years/Garriguet, D. Statistics Canada, Health Reports, Vol 19, no. 4, December 2008. (2008). Beverageconsumption of Canadian adults (82-003-X). Retrieved from website: www.statcan.gc.ca/pub/82-003-x/2008004/article/6500821-eng.pdfGibson, Fenitra with Dr. Hornsby, Jake, June 13, 2009. University of Phoenix. http://drhornsby.com/uop/MBA%20580/week%203/Gibson,%20graded.pdfHorton’s, Tim, website accessed November 26, 2012. http://www.timhortons.com/us/en/difference/environment.htmlJasmin Budak, June08,2011, Steeped in Success http://www.canadianbusiness.com/article/29371--steeped-in-successLaird, K. (2012, October 26). Video: The Leader of Davids Tea Party. Retrieved fromhttp://www.marketingmag.ca/news/marketer-news/video-the-leader-of-davids-tea-party-64540Lutz, Ashley, November 14, 2012. Business Insider. http://www.businessinsider.com/starbucks-just-acquired-teavana-2012-11 14
Public information via Yahoo! Finance, retrieved November 23, 2012. http://ca.finance.yahoo.com/q/is?s=THI&annualPublic information via Yahoo! Finance, retrieved November 23, 2012. http://finance.yahoo.com/q/is?s=SBUXRivka and Sonjas Prezi, Propasal for Company/Brand feature: David’s Tea http://mrkt3421preziproposals.wikispaces.com/Rivka+and+Sonjas+Prezi+ProposalSerecon Management Consulting Inc. Agriculture and Agri-Food Canada, (2005). Canadian food trends to2020 - a long range consumer outlook. http://www4.agr.gc.ca/resources/prod/doc/agr/pdf/ft-ta_eng.pdfTea Association of Canada. (n.d.). Industry statistics. Retrieved from http://www.tea.ca/Page.asp?PageID=122&ContentID=743&SiteNodeID=132 15