CASE STUDIES
Lipton Teas Case Study
Achieving longevity in the growing tea market
Reference Code: CSCM0307
Publication Date: March 2010
DATAMONITOR VIEW
CATALYST
th
Unilever-owned Lipton is a tea brand that traces its roots back to Glasgow in the UK in the last few years of the 19
century. The brand’s founder Sir Thomas Lipton first diversified his grocery offering into tea production by using favorable
circumstances (namely the failing of local coffee plantations) to buy his own tea plantations in Sri Lanka. Lipton tea swiftly
expanded overseas to the point where today it is a global brand. Despite its long heritage, Lipton is not affected by inertia,
but is instead keen to innovate its product range and customer communication.
SUMMARY
•
Lipton is a global tea brand that now operates within the Unilever portfolio of brands although it has been in
existence since 1890 as an independent company.
•
Lipton began in the UK by offering pre-packaged tea and did so at a significant discount to the then going rate.
The decision to pre-pack the tea – away from the retail environment, as was the prevailing retailing method at
the time – facilitated this price drop and was one of many innovative merchandising and marketing techniques
used by Lipton’s eponymous founder.
•
The tea market worldwide is experiencing steady growth and is leveraging well the health benefits that reputedly
stem from tea drinking according to various pieces of medical/health research.
•
Lipton is one of many brands embracing new digital media in order to gain greater connection with its customers
and to reduce the cost of advertising while achieving broad scale reach.
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ANALYSIS
Introduction
Sir Thomas Lipton was born in Glasgow in 1850 (and was knighted by Queen Victoria in 1898). At the age of 15 he
travelled to the US, gaining employment in various posts including work in a grocery section within a New York department
store. During this time he was exposed to many merchandising and marketing techniques which he later took back with him
to Scotland, along with his savings. In 1871, he opened his own grocery store and became famed for daring, attentiongrabbing marketing, which reputedly included parading some of the largest pigs available down some of the main streets of
Glasgow (one of Scotland’s main cities) bearing the legend, “I'm going to Lipton's. The best shop in town for Irish bacon!”
Lipton first sold tea in 1889 when he received a shipment of some 20,000 tea chests, which he greeted with a parade of
brass bands and bagpipers. His market awareness was such that he priced the tea at nearly half the going rate of three
shillings per pound, ensuring that his tea was competitively priced in the extreme, thereby bringing the product within reach
of a far greater number of consumers.
In 1890, he sailed to modern day Sri Lanka (then known as Ceylon) to purchase high quality teas. He did so by buying his
own plantations to bring more control over supply directly into his company: the first to do so. Lipton was also the first tea
producer in the UK to sell tea exclusively packaged tea, whereas other brands had hitherto sold loose tea as part of their
market offering. The Lipton brand was aided to some degree by the extent of the British Empire, which allowed Thomas
Lipton to access many of the world’s most-renowned tea-producing countries.
Lipton's original marketing slogan was “direct from the tea garden to the tea pot”, demonstrating his awareness of the
timeless value of freshness and authenticity. Upon debuting in the UK market Lipton was sold in three levels of quality, the
highest grade being ‘Quality No.1’. The color scheme for this tea was a red shield on a yellow background, which now
forms the logo for the modern Lipton brand. During Thomas Lipton’s lifetime his company supplied tea to the British and
other royal families in Europe, such was the high regard in which the company was held. In, 1906 Lipton became the first
British blended tea brand to import into Japan: a country known for its love of tea. However, at a similar time to its
introduction in the UK, Lipton tea was introduced to the US market but found a notably lower degree of success, as US
consumers were somewhat resistant to tea drinking, as indeed they are today compared to their preference for coffee (as
seen in Table 1).
Table 1:
Category
Coffee
Tea and coffee market value (US$ m), US 2005-15
2005
2010
2015
CAGR 2005-10
CAGR 2010-15
6,423.2
6,520.1
6,815.3
0.3%
0.8%
Tea
2,379.4
2,682.2
3,111.5
2.4%
3.0%
Overall
8,802.6
9,202.3
9,926.8
0.9%
1.4%
Coffee
73.0%
70.9%
68.7%
-0.6%
-0.6%
Tea
27.0%
29.1%
31.3%
1.5%
1.5%
Source: Datamonitor Market Data Analytics (MDA) database
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By 1892, the Lipton Company had moved from Glasgow to London where it employed 300 clerks. Additionally, the
company employed 5,000 people in Sri Lanka and ran more than 150 stores in England. Today, the brand is owned by the
global consumer packaged goods producer Unilever, and is the global branded leader (according to the Lipton website)
and present in more than 110 countries worldwide. The parent company Unilever states Lipton sales currently total €3bn
annually. Ironically, in the UK, Lipton is available in ready-to-drink (RTD) format but not in great volumes in its original black
tea format, as Unilever markets PG Tips as its flagship brand instead (see Table 2 for details). The Lipton product portfolio
varies by national market but it includes the following general categories:
•
Standard and decaffeinated black tea in tea bags;
•
Granulated/powdered instant teas and other hot drinks;
•
Lipton Fruit and Herbal Infusions and Green Teas with Fruit;
•
Lipton iced tea in tea bags and (ready-to-drink) RTD versions.
Table 2:
Tea market brand shares by volume (Kg m), UK, 2003-2008
Company
Brand
2003
2004
2005
2006
2007
2008
Associated British Foods plc
Twinings
1.9%
2.1%
2.4%
2.7%
3.1%
3.4%
Associated British Foods plc
Jacksons of Piccadilly
Associated British Foods plc
Others
0.6%
0.5%
0.5%
0.5%
0.5%
0.6%
42.5%
42.7%
42.9%
42.8%
42.8%
42.8%
Tata Tea
Tata Tea
Tetley
9.3%
9.3%
9.3%
9.3%
9.2%
9.2%
Others
0.1%
0.1%
0.1%
0.1%
0.1%
0.1%
Unilever
PG Tips
9.2%
9.0%
8.9%
8.6%
8.6%
8.6%
Apeejay Group
Typhoo
0.1%
0.1%
2.4%
2.4%
2.5%
2.5%
Taylors of Harrogate Ltd
Yorkshire Tea
2.2%
2.1%
2.1%
2.0%
2.0%
1.9%
Clipper Teas Limited
Clipper
0.5%
0.5%
0.6%
0.6%
0.6%
0.6%
Premier Foods plc
Typhoo
2.2%
2.3%
0.1%
0.1%
0.1%
0.1%
Private Label
19.9%
19.6%
19.3%
20.1%
19.9%
19.6%
Other
11.6%
11.9%
11.7%
10.8%
10.7%
10.7%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Overall
Source: Datamonitor Market Data Analytics (MDA) database
DATAMONITOR
Tea is commonly purchased on the open-market in auction formats
Coffee, the major rival hot drink to tea, is bought and sold as a commodity on global markets, which makes it very different
to tea in terms of trading and supply. This means its price can fluctuate in line with supply and demand factors, as is true of
all types of commodities. Key supply factors for coffee include climactic variations and common agricultural issues such as
pest infestation; both of which will negatively affect the quantity and quality of crop yield. When adverse conditions affecting
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supply and demand remains constant the companies and brands that purchase coffee in the open market are exposed to
supply uncertainty and rising prices in the open market. For producers, these supply-side problems mean a higher selling
price, but the quantity of yield means that they too face great uncertainty. This is one of several reasons why the Fairtrade
movement began in order to help farmers in less fortunate economic circumstances to a have a level and pattern of income
that better allows them to invest in the infrastructure for their business and their local communities. Lipton as a brand is
committed to becoming 100% certified as ethically sourced. It is intended that by the end of 2010, all of Lipton Yellow Label
tea bags will be 100% Rainforest alliance certified, with all Lipton following suit by 2015.
Figure 1:
Fairtrade is a common label on many packets of tea
Source: Datamonitor analysis
DATAMONITOR
Lipton sources its tea from a mixture of its own plantations and the open market
Tea, as mentioned above, is commonly purchased in open-market auctions and so is regarded as less of a commodity in
economic terms because it is not widely traded in commodity markets by speculators. It is still subject to the general
problems that affect all cash crops, which cause fluctuations in price. Buying uniquely on the open market in the event of a
season of adverse growing conditions entails price uncertainty for all companies using this ‘outsourcing’ of supply. In order
to avoid this situation, Lipton, since its inception, has been the proprietor of its own plantations in Sri Lanka. In many
industries the trend of the last two decades has been to outsource what had hitherto been considered as core functions
such as supply chain management, customer care and admin tasks. Fortunately for Lipton it has resisted outsourcing its
tea leave production and now has plantations in Kenya and neighboring Tanzania in addition to those held in Sri Lanka. By
owning plantations in different countries and continents, Lipton has diversified its supply risk due to such factors as
changing climatic conditions and political factors, which is important considering the unrest and civil war in Sri Lanka (which
appears to be coming to an end after many decades of struggle). The fact that Lipton owns plantations also allows it to
experiment with new growing and harvesting techniques to constantly improve its product.
However, in addition to its own plantations, Lipton also sources tea on the open market from 35 other countries to mitigate
its supply risk and to be able to blend its tea to the same flavor profile regardless of supply bottlenecks. Lipton says its tea
bags can in fact contain as many as 30 different types of tea in order to achieve the right blend. Lipton manages the
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process of blending by employing a team of professional tasters and blenders in seven regional hubs located around the
world. This is deemed necessary given that the flavor of tea can vary widely due to factors such as:
•
country of origin;
•
structure and quality of the soil;
•
weather conditions and altitude.
Despite having its own plantations, Lipton does not extol its authenticity attributes as much as its rivals
Tea connoisseurs attribute tea to have distinct flavors depending on the variety and where it is planted. Even the weather
on the day of picking can make a difference, with perceptible differences in flavor resulting from the same area of the same
plantation depending on whether or not it has rained on the day of picking. This corollary of influences can be likened to the
different factors that feed into the notion of ‘terroir’ in wine production. This raises the question of whether the authenticity
narrative is left under-exploited by Lipton (as well as other mainstream tea producers). By contrast, emerging producers
such as Dilmah from Sri Lanka explicitly makes its authenticity attributes a key part of its branding.
Figure 2 shows a photograph of a pack of Dilmah tea and reproduces the central text on front of packet. In this text it
leverages the word ‘traditional’ and mentions traditional practices such as hand picking (which many tea estates will do in
order to use the human ability to spot leaves in their peak condition). The label then pinpoints the point of production
(Kahawatte region of Sri Lanka) and the ethical production used by the family that owns the brand. This further humanizes
the brand by helping to make a connection between the producing family and the end consumers in a way that larger
corporations cannot achieve. Elsewhere on the packaging Dilmah also announces that its tea is single origin (and is in
some way localized), pure and fresh; all attributes closely linked to an authenticity narrative. These examples show the
untapped potential for Lipton (owned by Unilever) and other major tea brands to promote the authenticity of its brand
beyond the long, rich tradition it already communicates.
Figure 2:
Dilmah, one of Lipton’s more niche competitors, is keen to state its authenticity attributes
Source: Datamonitor Product Launch Analytics Database
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Green tea drives the worldwide tea market
Around the world, green tea is the most commonly consumed type of tea (by volume). It is closely followed by (oxidized)
black tea, which is forecast to remain in second place until 2015 (see Table 3). These market figures do not include iced
tea – either ready-to-drink or other formats – as Datamonitor classifies such beverages as soft drinks. The growth of subsegments beyond standard black and green tea is interesting and shows that consumers’ tastes are fragmenting as much
as the popularity of tea is increasing.
Table 3:
Tea market value (US$ m), global, 2005-15
Segment
2005
2010
2015
CAGR 2005-10
CAGR 2010-15
Green Tea
8,508.8
9,542.9
10,839.5
2.3%
2.6%
Black Standard Tea
7,617.7
8,916.6
10,648.4
3.2%
3.8%
Fruit/Herbal Tea
4,862.6
6,300.2
8,475.4
5.3%
6.1%
Black Specialty Tea
5,157.7
5,802.9
6,540.8
2.4%
2.5%
903.9
1,023.0
1,149.2
2.5%
2.4%
27,050.7
31,585.6
37,653.2
3.1%
3.6%
Instant Tea
Overall
Source: Datamonitor Market Data Analytics (MDA) database
DATAMONITOR
Lipton is reacting well to this fragmentation by increasing the range and depth of its product portfolio. The expansion of the
Lipton (and the wider Unilever) product portfolio of tea brands is tailored to each national market and helps ensure
Unilever’s retention of its position as global leader in tea, as can be seen in Table 4. Unilever, through its ownership of
Lipton, among other brands, led the global market by volume in 2008, with approaching 20% share. This puts it far ahead
of its branded rivals and ahead of private label. However, the market is fragmented globally, which is explained by the high
number of individual brands, many of which are present only in one continental region or in one country which dilutes their
traceability. While these 'other' brand shares are low individually, they amount to more than half of the market.
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Table 4:
Tea market volume share (kg m) by company, Global, 2003-08
Company
Unilever
2003
2004
2005
2006
2007
2008
19.6%
19.8%
19.5%
19.4%
19.2%
18.7%
Private Label
4.5%
4.6%
4.6%
4.8%
4.8%
4.9%
Associated British Foods plc
4.0%
4.0%
4.0%
4.0%
4.0%
3.9%
Tata Tea Pvt Ltd
3.2%
3.3%
3.4%
3.5%
3.7%
3.9%
Tapal Tea Ltd
2.1%
2.2%
2.2%
2.2%
2.2%
2.2%
The Shanghai Tea Company
1.6%
1.6%
1.6%
1.6%
1.6%
1.6%
Dogus Cay
1.3%
1.4%
1.5%
1.5%
1.6%
1.6%
MJF Group
1.5%
1.5%
1.5%
1.4%
1.4%
1.4%
Ahmad Tea Ltd.
1.4%
1.4%
1.4%
1.4%
1.4%
1.4%
Tata Tea
1.2%
1.2%
1.3%
1.3%
1.3%
1.3%
Çaykur (Government-owned)
1.1%
1.2%
1.2%
1.2%
1.3%
1.3%
Maisky Tea Company
1.4%
1.3%
1.3%
1.3%
1.2%
1.2%
Duncans Industries
1.0%
1.0%
1.1%
1.1%
1.1%
1.2%
Zhejiang Tea Group., Ltd
1.0%
1.0%
1.0%
1.0%
1.0%
1.0%
Mitsui & Co., Ltd.
1.0%
1.0%
1.0%
1.0%
1.0%
1.0%
Other
Overall
54.0%
53.6%
53.5%
53.3%
53.3%
53.4%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Source: Datamonitor Market Data Analytics (MDA) database
DATAMONITOR
Innovations are core to the Lipton brand
Lipton is a strong brand with a long history which might draw perceptions of it being a staid brand, riven with inertia.
However, it is a brand with an equally long tradition of innovation. Below is a brief snapshot of some of the innovations the
company reports to have driven through.
•
1910: First to use printed tags with brewing instructions;
•
1944: Brisk tea (an iced tea brand) launched in US;
•
1954: The Flo-Thru double-chamber teabag introduced;
•
1964: Lipton Iced tea mix introduced in the US;
•
1972: Lipton Iced tea in a can introduced in the US;
•
1992: Pepsi-Cola and Lipton announce a joint partnership to create RTD tea drinks.
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Health is a growing area of innovation interest in the tea market
Another innovation for Lipton and a key future focus for the tea market is an accent on the health attributes of the various
st
types of tea. A Unilever presentation dating from 2007 confirmed that the company’s intention in the 21 century for its
Lipton brand was to “Transform Lipton into the healthy beverage brand” in Asia. In Asia Pacific, Lipton is promoting health
benefits by employing the Hollywood actor Hugh Jackman as a brand ambassador. Mr Jackman, who hails from Australia,
is set to become the face of Lipton and will star in television commercials from March 2010 onwards. He will promote the
range of Lipton Ice Tea products and the adverts will emphasize an alignment between his ‘positive outlook’ and the ‘Drink
positive’ brand values of Lipton Ice Tea. This focus on health in Asia is also mirrored elsewhere by Lipton which promotes
the health credentials of its teas via its own website. These benefits include the presence of antioxidants (frequently linked
to cancer-fighting properties), the hydrating effect of tea, and its absence of calories (if no milk or sugar is added).
However, these benefits are not widely communicated by Lipton, or other tea brands in mainstream media, so the impact
could be said to be limited. This may change as tea brands fully exploit the health attributes of their products.
Lipton is also embracing social media and viral marketing
Social networking sites and viral marketing have already become a preferred choice of media for ‘edgy’ youth-oriented
brands, but they are also being adopted by a wider range of consumer packaged goods brands. This now includes Lipton,
which has a presence on the micro-blogging site Twitter. In China, where it has been present since 1992, Lipton is also
using the power of viral marketing combined with consumer involvement. Lipton customers have been encouraged to send
in their own viral videos of Lipton being consumed in the workplace. Karaoke is a firm favorite in China (even though it was
invented in Japan), so many of the videos submitted to Lipton, via various online video sharing websites, feature workers
singing the praises of Lipton (as shown in Figure 3).
Figure 3:
Lipton is now embracing online media
Lipton has encouraged participation with consumergenerated ‘adverts’ in China.
Source: Datamonitor analysis
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The videos have been passed around from consumer to consumer, as is the intention of viral campaigns. This approach
involves consumers, encourages them to share videos with friends and creates additional buzz in the market place. The
concrete output of hundreds and thousands of videos dedicated to Lipton negates the need for Lipton to conceive, create
and broadcast its own commercials. It does, however, wrest creative control over brand message away from the producer,
which can prove a worry. Nonetheless, due to the growing creative control of individual consumers and the ‘democratizing’
effect of the internet, it is perhaps best that powerful consumer brands experiment with their usage of online media in order
to experience its benefits and shortcomings before their competitors gain too much advantage. Another problem for
branded producers caused by not participating in the internet revolution is allowing potentially hostile consumers shape the
image of their brand in their online absence. Tentative steps in this direction are better than non-involvement.
Conclusions
Lipton is a brand in rude health that is continuing to innovate and flourish under its corporate parent Unilever. The irony for
many consumers in the UK is that while the brand traces its roots to Scotland, it is a brand of tea that is less prevalent in
the UK than other high profile tea brands. However, this is because it is a truly global brand leader, with the intent to evolve
and adapt to emerging consumer trends, both in core products (and new spin offs) and in new ways of communicating with
the end consumer. Lipton is also incorporating more environmental and ethical considerations into its business practices to
make it more sustainable and to create a more favorable impression among consumers. This is increasingly becoming the
baseline expectation in hot drinks due to the long tradition of Fairtrade within the market. The innovations and flexibility the
st
Lipton brand demonstrates suggest that it is well-placed to succeed further in the 21 century.
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APPENDIX
Case study series
This report forms part of Datamonitor's case studies series, which explores business practices across a variety of
disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and
insurance, pharmaceuticals and software.
Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations,
highlighting the ways in which the company has become one of the best in its field or how it deals with different problems
encountered within that sector.
Methodology
A variety of secondary research was carried out for this case study. This included researching the tea market in the US, the
UK and globally, with company specific information pertinent to Lipton tea products including media coverage and the
progress of financial statements, alongside an extensive review of secondary literature and other in-house sources of
information.
Secondary sources
•
The Lipton tea commercials you don’t want to miss; CNN Go (online) (November 2009)
•
Tea in Asia; Unilever (November 2007)
•
Sir Tea; Tea Muse (February 2002)
Further reading
•
Consumer Hot And Soft Drink Preferences: New Trends & Future Perspectives (Datamonitor, DMCM4594) January
2008
•
Teavana case study (Datamonitor, CSCM0213) October 2008
•
Twinings case study (Datamonitor CSCM0189) August 2008
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askcm@datamonitor.com
Datamonitor consulting
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