CHAPTER I
INTRODUCTION
1.1 BACKGROUND
1.1.1 The Indonesian Tea Market
As we see today, there are a lot of tea varieties being sold in Indonesia
such as RTD (ready-to-drink) teas, tea bags and tea powder, and bubble teas.
Currently, the tea market is largely dominated by the existence of RTD teas,
which can be seen in almost all modern retail markets (supermarket,
hypermarket, mini market) as well as the traditional markets.
Figure 1.1 RTD Tea Beverages
Source: CCA Investor Day Eastern Greek & Northmead 5 June 2012 "Outlook For Growth In
Indonesia"
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The RTD tea market is dominated by Teh Botol Sosro, the first RTD tea
in Indonesia, since 1970. For years, Teh Botol Sosro has been the market leader
in RTD tea market, grabbing 70.8% of the market share in 2010 (Raviany,
2011). However, as time grows, there are numerous RTD tea brands that
successfully penetrate the tea market such as Teh Kotak, Frestea, Nu Green
Tea, and many more. Nu Green Tea has even been considered as a healthy
lifestyle product (Arta, 2010)that encouraged people to drink tea not only for its
taste, but also because of its health benefits.
According to the Soft Drink Association of Indonesia (Asrim), the RTD
tea market is expected to grow by 7.5% nationally, which is driven by the
increase of the population (Nurmayati & Monalisa, 2011).
Besides RTD teas, there are other market players for tea bags and tea
powders, with both local and international players. Some of the local players
that have penetrated the market are: Sariwangi, Teh Celup Sosro, Teh Bendera,
and Teh Poci, while the international players are Dilmah, Twinings, and Lipton.
Within these players, Sariwangi has successfully taken 84.1% of the total
market share among the tea bags category in 2009 (Nugroho, 2009), making
Sariwangi as the market leader.
Other players in the Indonesian tea market are the bubble teas. In most
shopping malls, we would find bubble tea counters that sell authentic
Taiwanese teas such as Quickly, ChaTime, and Calais. They sell variants of
teas and milk teas combined with their signature chewy tapioca balls. Also,
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they offer additional toppings like egg pudding, fruit and grass jelly, and many
more that their customers can choose according to their preferences. These
bubble tea counters serve their drinks for take away and only ChaTime offers
small seating area for the customers.
Another way to enjoy tea is in coffee shops. Most coffee shops in Jakarta
offer a few tea drinks in their menu. Although the variety of their tea products
is not much, it can be concluded that there is one segment of customer that
prefers tea than coffee while hanging out at the same coffee shop.
Special place for tea, like teahouses, are barely seen in Jakarta. A
teahouse is a public establishment that serves tea and light refreshments
(Farlex, 2012), and in Jakarta, only a few names that can be considered as
teahouses, which are Tea Addict and Cilantro Tea House.
Tea Addict offers a trendy set-up where their customers can enjoy the
varieties of specialty teas while entertaining business guests or friends in a
relaxing atmosphere. This place serves customers’ need for high quality tea and
infuses all of their menu selections with tea as its main ingredient (Tea Addict,
2012).
1.1.2 Reasons for Drinking Tea
To get the reasons for drinking tea, a preliminary observation has been
done toward three respondents. Due to the small number of respondents, these
results are used as indicators only.
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When asked about the reasons why our respondents prefer drinking tea,
two of them said that drinking tea reminded them of certain moments in their
lives. Drinking tea has become a nostalgic moment for certain people. Tea
reminds them of the good things in the past.
Respondents believe that tea has health benefits. They drink tea mostly to
get the healthy trait as well as the relaxing effect. For one of the respondents,
tea can make him relax and help him sleep well. In relation with the health
benefits, all respondents prefer homemade tea (tea bags) because they
considered it healthier than the other tea variety, which is RTD tea. One
respondent thought that RTD teas have a lot of chemical contents inside. He
also said that RTD teas could bring bad influence to his body. In addition,
brewing tea themselves allows them to adjust the water temperature and the
amount of sugar to be used in his tea. On the other hand, respondents like
drinking RTD tea because it reminds her of several moments in her life.
Another insight from this observation is that one of the ways to enjoy tea
is by adding varieties of flavours and/or condiments into the tea drink.
Generally, tea is often consumed by adding sugar, milk, honey, and/or lemon
into it, and nowadays, several establishments have started to offer tea drinks
with fruit essences or fruit bits and tea drinks with bubble toppings. However, a
tea drink is not limited to those flavours only; a wide range of flavours from
fruits, herbs, nuts, processed toppings, etc. can also be added into the drink that
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would create new flavours with vast choices for customers to pick according to
their likings and preferences.
The respondents mentioned that although Indonesia has numerous
varieties of tea products, none of the existing establishment has specifically
delivered the tea drinks where customers can experience the tea in various
flavours. And, considering the health benefits from tea, the respondents
wondered why tea is not as popular as coffee.
1.1.3 Tea-Drinking Culture and Its Relation with the Popularity of Tea in
Indonesia
Based on the analysis from several sources, the tea culture in China and
Japan seem to be stronger than the tea culture in Indonesia because the culture
of drinking tea has been embedded into their daily lives from generation to
generation. Tea has always been used as a way to express every moment and
feeling.
The tea culture is deeply embedded in the Chinese society from generation
to generation for 5000 years (Paling Seru, 2011). The Chinese’s habit of
drinking tea is not merely to get the health benefits of tea or to enjoy the tea
product itself, but tea is also often used in various moments to express and
represent their feelings, celebrations, and many more.
While in Japan, the tea culture is famous for its tea ceremony to entertain
guests. The Japanese tea ceremony was first introduced among the upper class
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of Japanese people and gradually became the main purposes of various social
gatherings. The ceremony itself is conducted as an artistic expression and a
spiritual discipline. As an art, the tea ceremony is conducted for the
appreciation of the simplicity of the room’s design, the company of friends, and
a moment of purity (Japanese Tea Ceremony, 2007).
Drinking tea as a part of the daily life in Indonesia actually exists. In
Yogyakarta, especially along Malioboro Street, there are a lot of places for
drinking tea called angkringan. In these places, we will see many people from
various backgrounds and social statuses enjoy hanging out in these places.
Another example can be seen in most Sundanese restaurants. They serve tea,
instead of water, for the drink. While in East Java, especially Surabaya, tea is
often used for entertaining guests. These examples alone already show close
relationship between teas and the daily lives of Indonesian people (Wina,
2012).
In Nambangan village, Wonogiri, for any celebratory event, the villagers
would appoint someone to brew their tea, which is called Jayeng, to brew the
tea in a room called Jayengan. The task of a Jayeng starts from boiling the
water, brews the tea, and put the tea into a glass. Interestingly, the sugar loaded
one by one into a glass for each guest. So, if there are 100guests, the Jayeng
will pour the sugar, spoon by spoon, into 100glasses, and stir them one by one.
Another different culture happens in Medan. The way of drinking tea there
is to mix tea with milk, pouring it into another cup repeatedly to gain foamy
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milk. While in Padang, they blend the tea with eggs, which is called the talua
tea(Laresolo, 2009).
As for the modern Indonesian, they adopt the European and Chinese
culture of high tea concept, which is a late afternoon or early evening meal that
consists of a cooked dish, bread and butter, and tea. High tea can be found
served in most hotels or restaurants in Indonesia such as Cascade Lounge Hotel
Mulia, Huize van Wely in Papilion or Pacific place, and many more. Rather
than the traditional Indonesian way, high tea concepts offer more exclusive and
classy style of drinking tea (Urbanesia, 2012).
The existence of drinking tea as a part of daily life creates an opportunity
for a new business model to establish a new lifestyle.
1.1.4 Learning from Coffee-Drinking Lifestyle
Indonesian people may know about the health benefits tea since tea has
been known as nature’s wonder drug and the perceptions on tea brings good
health, which has been believed in many countries such as China, Japan, India,
and even England (TeaBenefits.com, 2011). However, drinking tea has yet to
become a lifestyle in Indonesia, compared to coffee.
The growth of coffee shops as the place to drink coffee has become the
indicator of a new lifestyle. For example, Senayan City mall offers more than
five coffee shops namely Starbucks, Tator Coffee, O’Coffee Club, The Coffee
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Bean & Tea Leaf, Bar/Coffee, and the Killiney Kopitiam. However, there is no
teahouse in this mall, except bubble tea counters (ChaTime and Quickly).
In Indonesia, drinking coffee as a lifestyle is triggered when Starbucks
entered the Indonesian market. Starbucks has turned the coffee perspective into
a lifestyle, and influenced the domestic market to follow on their footsteps
(Coffee T&I, 2011).From then on, the Indonesian market has been flooded with
new coffee shops, local and international, and the customers are keen to find
information on coffee such as the health benefits, the types, the roasting degree,
the origin and the coffee creations.
Based on a study on consumers’ perceptions of tea and coffee, the overall
consumers’ attitude is better on coffee rather than tea (Monirul & Jang Hui
Han, 2012). This study shows that consumers choose coffee over tea because
tea does not have enough variations of flavors and limited options, while coffee
companies are aware about their consumers’ choice thus keep introducing new
flavors to the consumers, like Americano, Black coffee, café au lait, café
macchiato, and more.
In addition, coffee is chosen more than tea because there are very few
teahouses that can attract consumers, while there are different types of coffee
shops that are available in the market. The study shows that coffee shops offer
more pleasing environment with a lot of features such as good interior design,
good music, and free Wi-Fi. This is the reason as to why people’s attitude
toward coffee is better than toward tea (Monirul & Jang Hui Han, 2012).
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When compared to coffee, tea excels in the health benefits. Tea contains a
high level of antioxidants called flavonoids, caffeine, theanine (tea’s unique
amino
acid),
polyphenols,
vitamins,
minerals,
and
methylxanthines
(TeaBenefits.com, 2011). These contents give a lot of health benefits for the
human body that may help improve muscle endurance, reduce the risk of heart
attack, help protect against cancer, helps fight free radicals, lowers the risk of
diabetes and many more (Newcomer J. , 2012). Tea also protect bones, good for
gums and teeth, bolsters immune systems, helps keep our body hydrated,
calories free, and increases metabolism (iVillage Health, 2005). Besides health
benefits, tea also gives beauty benefits for its drinker such as eyes
revitalization, skin care, sooth sunburned skin, and ease toothache.
Coffee also offers various health benefits such as helps lower the risk of
diabetes, dementia, cancer, and heart disease. However, there have been studies
and research that compounds inside coffee can raise cholesterol and decrease
blood flow to the heart (Ovsyannykov, 2012).
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Figure 1.2 Tea and Coffee Facts
Source: The Health Benefits of Tea vs. Coffee [INFOGRAPHIC], retrieved from
http://inspirationfeed.com/inspiration/infographics/the-health-benefits-of-tea-vscoffee-infographic/ on 7 September 2012.
Figure 2 shows that tea offers more benefits than coffee and tea should be the
first choice for people who are health conscious. However, since drinking tea as a
lifestyle has yet to be developed, this opens up an opportunity to offer a business
model for teahouses as the driver towards lifestyle.
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1.2 PROBLEM DEFINITION
The existing tea market in Indonesia can divide the tea drinkers into several
segments: RTD tea drinkers, homemade tea drinkers, bubble tea drinkers, tea drinkers
in cafés and/or coffee shops. Yet, after getting insights from the tea drinkers, there is
still one more segment that has not been served yet, which is the self-customized tea
segment – segment of customers who want to choose freely the additional ingredients
they put in their own tea drinks. This is the gap we captured from the customer side.
Based on the establishments of coffee-drinking lifestyle, we understand that
coffee’s ability to upgrade its position into a lifestyle was through the experience in
conducive environment created by the pioneering Starbucks, the American coffee
giant. As for tea, teahouses exist but still cannot create a lifestyle of drinking tea. This
situation creates an opportunity to build a new business model.
1.3 BUSINESS IDEA
The business idea is to expose the essential tea-drinking cultures of Indonesia
and turn it into a lifestyle, like coffee has. Based on the analysis above, the
opportunity occurs through the establishment of a place where customers can
experience drinking tea. The idea is to adopt the coffee shop’s business model and
turn it into a new business model with tea as its main product.
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Tea also has a lot of health benefits that should be introduce to the public. Tea
should be the flagship for healthy lifestyle that is delivered through a modern style as
coffee, but with more flares, which are its health benefits.
Therefore, by creating a tea café that serves customized tea products with
healthy ingredients in a comfortable environment, the awareness of tea as trendy and
healthy at the same time can be achieved.
1.4 BUSINESS MODEL OBJECTIVES
The objectives of this business model are:
1. To expose tea-drinking cultures in Indonesia and turn tea into a lifestyle.
2. To create awareness about the importance of tea’s health benefits into the
public’s mind.
3. To create the right positioning and value propositions that differentiates the
business from the others.
4. To design an innovative business model concept that meets the expectations
of our customers.
5. To develop an attractive and feasible business model to attract potential
investors.
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1.5 METHODOLOGY AND TOOLS
For this business model creation, we will use these methodologies and tools
listed below:
1. Preliminary Research
We conduct a desk research to find enough secondary data that will help us
understand more about tea and its benefits, the tea cultures, and the tea market.
2. Five Forces of Porter
We use Five Forces of Porter to further analyze the attractiveness of the
café industry. This tool will help us plan the right strategy to enter the market
and to create the right positioning that fits in with the target market.
3. Research Approach
a. Research Objectives
o To understand the reason behind drinking tea deeper.
o Identify tea consumption behavior
o Identify type of tea drink the most and the reason behind it.
o Identify key driver motivations behind the reason of drinking
tea, which will help to check whether our business concept has
delivered these benefits to the potential consumers.
o Check acceptance in the market by using simple concept
checking test in the quantitative questionnaire.
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o Checking our business concept’s uniqueness, which describes
how different the concept that will lead the excitement for the
consumers to try the product later.
b. Research Design
This study will use both qualitative and quantitative research. The
questionnaire will be developed based on the inputs from the qualitative
research and from related references.
The objective of quantitative research is to understand the usage and
attitude to identify customer’s key motivator of drinking tea and the reason
of choosing tea instead of any other beverage types. A limited
understanding on the reasons of drinking tea has been captured through a
qualitative research design. However, the sample is not sufficient. Hence,
the function of developing qualitative research first is because it provides
insight and understanding of the problem, and enhances more on the
exploratory side (Maholtra & Peterson, 2006).
Moving forward, quantitative research is also needed to test the
hypothesis that we have by selling our concept to the potential consumers. It
is also needed to quantify data based on representative sample size, which
will be used as final action from our side (Maholtra & Peterson, 2006).
c. Respondent Criteria
The respondent criteria are:
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Drink tea minimum once a week.
Female/ Male
Age minimum 15 years old.
Social Economic Status (SES) AB. Social Economic Status is the
monthly routine expenditure per household as per AC Nielsen’s
SES Survey in 2010 (Lasalle, 2010). We target people with monthly
routine expenditure per household is at minimum IDR 2,000,000.
d. Sample size
For the qualitative research, three people were interviewed. These
respondents are considered representative enough for getting insights on
tea-drinking habit and preference.
For the quantitative approach, the sample size is 30 people, at a
minimum, to represent the correlation research design (Onwuegbuzie &
Collins, 2007).
e. Research Methodology
1. Respondent recruitment based on screening questions, we will check
the eligibility of the respondent before proceeding further.
2. Qualitative Research: In-Depth-Interview (IDI), to identify key
motivators of drinking tea.
3. Qualitative Research: Tea usage and concept checking test
f. Key Information To Be Collected
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Tea usage and consumption behavior
Tea drinking motivators
g. Key Information To Be Collected (For concept checking test)
Overall appealing/ liking
Spontaneous likes and dislikes
Message conveyed
Purchase/ trial intention
Uniqueness and what uniqueness they can find from the concept
Relevancy of the concept to the consumers
Excitement of the concept
Suitability to a tea café concept
h. Analysis Plan
The data will be analyzed by total, as it will only be able to look at the
total level of respondent due to minimum sample size.
4. The 9 Building Blocks: Business Canvas
To help create structured and creative plan for the business plan, modeling
of the business will use 9 Building Blocks’ business canvas from the Business
Model Generation book (Osterwalder and Pigneur, 2010).
5. Business Plan
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The business plan will include the brand information and company
overview on the business model, SWOT analysis, cost estimation and financial
projection, marketing plan, and management plan.
1.6 THESIS OVERVIEW
This thesis is a business model creation.
Chapter I
The first chapter will describe the background of the thesis, general business
idea, methodology and tools used, and the objectives of this business model.
Chapter II
The second chapter will describe the business’ value proposition; analyze the
café industry using Five Forces of Porter as well as the idea generation through
business model canvas.
Chapter III
The third chapter will further elaborate the business model canvas using 9
building blocks and the strategy on how to implement the building blocks.
Chapter IV
Chapter four will describe the business plan that includes company structure,
financial plan, location layout, timeline, survey results, and more.
Chapter V
The last chapter will conclude this thesis with the feasibility of the business
model and future areas for further investigation.