Case Study: Lipton and Kai Shii Competitors in the iced-tea market
Author: Parag Agarwal
Tutorial Group: 7
Tutor: Ms Gillian Scott
1. EXECUTIVE SUMMARY
Unilever Bestfoods, USA and Shin Shii, Taiwan are competitors in the rapidly
growing iced-tea market with their brands Lipton (in alliance with Pepsi) and Kai Shii
respectively. Unilever has also introduced an instant hot-tea can by the name of
Brooke Bond‟s PG Tips. Kai Shii is about to be launched in the US market. The
following study evaluates various market segmentation strategies, potential consumer
target segments, and factors to forecast demand that were used or could have been
used by these two companies. The main reference for this report was Chapter 3 of the
textbook „Principles of Marketing‟ by Kotler et al.
The main results of the analysis are as follows:
? Both companies‟ SWOT analysis reveals that they are dominant and
successful in their home markets.
? Kai Shii would require a great amount of effort to market itself and bridge the
cultural divide and varying tastes and perceptions between Taiwanese and
? Behavioural (seeking convenience, health conscious), demographic (age
groups) and geographic factors largely influence the market segmentation.
? Pricing amongst competitors in the same product category plays a vital role
compared to pricing amongst for example, carbonated soft drinks etc.
? Future demand for the iced tea market or any other segment is based on the
growth rate of current market segment bases such as age, income and
Both companies require different approaches to their marketing strategies. The
following are the recommendations:
? Lipton and Pepsi should expand their market reach across other segments to
ward off emerging competitors and increase product visibility.
? Lipton iced teas should be made available in various packaging sizes and
? Brooke Bond‟s ready-to-drink hot tea cans should capitalise on the parent
company‟s objective of increased customer convenience and the advantage of
having developed a unique technology. Thus, it can be priced higher.
? Shin Shii‟s entry into the American market should focus on selecting a
distributor based on mutual trust and initially conducting trials and pilot
schemes in cinemas, fun-fairs etc. to gauge general consumer response.
? Shin Shii should change the name of its product to suit the American market
and sell at lower prices than Lipton unless it feels that Kai Shii‟s demand is
based on or is increasing due to its unique flavour or product quality.
Page Number 1. Executive Summary 1
2. Introduction 3
3. Analysis and Interpretation 5
4. Conclusions 9
5. Recommendations 9
6. Further Study 12
7. References 12
8. Appendix 12
2. INTRODUCTION The following report focuses on the growing canned iced-tea beverage market, with
an emphasis on the Western market. This development led to opportunities for
Unilever Bestfoods, USA (herein referred to as „Unilever‟) and Shin Shii, Taiwan to
exploit them further through efficient marketing with their brands Lipton and Kai Shii
respectively. A study was conducted to evaluate effective strategies for market
segmentation and identify suitable and potential markets for iced-tea manufacturers to
enter. In addition, factors that could be used to forecast future demand were described.
The main aims and objectives of this study are outlined as follows:
1) Understand what kind of markets drive a high demand for iced tea and the
reasons behind them.
2) Recommend market coverage strategies and market entry strategies for
Unilever and Shin Shii respectively.
3) Recommend brand-positioning strategies for Lipton and Kai Shii and an
alternative hot ready to drink tea beverage by Unilever.
Background: The Unilever Group is one of the world‟s leading suppliers of fast-
moving consumer goods. Their Lipton brand is a leader in the US market, besides
having a significant global presence. They have also developed a ready to drink hot
canned tea product under the name of Brook Bond‟s PG Tips (herein referred to as
Brooke Bond). Shin Shii is a small company based in Taiwan, and already successful
with its oolong iced tea beverages drink in Taiwan. It now wants to target the Western
Assumptions: 1) The market for iced-teas has not undergone any permanent steep
changes either on the demand side or supply side, whether positive or negative.
2) However, it is a steadily growing market with a long way to go before saturation.
3) Lipton‟s iced tea and Kai Shii‟s oolong iced tea are fundamentally very close or
similar and fall under the same product category.
4) „Western‟ markets refer to the North American market.
Limitations: The main reference (Kotler et al text, 2001) is slightly outdated, that
may thus fail to include changes in the company‟s profile or business portfolio. For
example, Lipton‟s alliance with Pepsi may no longer exist. Also, relatively lesser
information could be obtained about Shin Shii, as it is still a very obscure and less
known company internationally.
Theoretical Framework and Methodology: The analysis of this case study is based on the marketing theories of: I) Strategic Planning with SWOT analysis
II) Marketing Planning
Both theories are described in the marketing textbook by Kotler et al and each contain
several other components that would be defined and discussed. Some additional
research was also carried out, especially pertaining to demand forecasting. Non-
numerical data was largely sufficient to support or be used for recommending
marketing strategies except when market share had to be discussed.
Report structure: The report began with an executive summary and a brief
introduction. It will be followed by an analysis and interpretation of the case and a
short conclusion. It will end with a set of recommendations, links for further study,
references and an appendix.
3. ANALYSIS AND INTERPRETATION
Strategic Planning: The fast moving consumer goods (FMCG) market is highly
volatile and trends in market demand or supply oscillate frequently. In such
circumstances, companies entering this market must be clear of their objectives and
purpose to ensure sustainability. For example, Unilever wants to “meet everyday
needs of people everywhere…and to respond creatively and competitively with
branded products and services which raise the quality of life.” Once these are laid out,
it is essential to do a SWOT (strengths, weaknesses, opportunities and threats)
analysis for the company before attempting to plan marketing strategies and
evaluating in detail factors such as brand positioning.
Lipton Kai Shii
i) Already a market leader and a i) Market leader in Taiwan with Strengths
well-known and reputed brand. 70% market share in oolong
ii) Extensive knowledge of local
culture and tastes. ii) Extensive experience in
iii) Wider product range with
technological superiority, e.g.
Brooke Bond‟s hot tea can.
i) Having too many brand i) Totally unknown to Western Weaknesses
extensions can dilute and confuse consumers.
consumer perception and give
fresh and new competitors to seize ii) Limited experience of Western
market share. consumers
i) Alliance with Pepsi to access i) Introduce new type of tea- Opportunities
massive distribution network. oolong iced-tea. Create curiosity
Presence of big, well known and be the first to bring it to
partners drives demand further. mainstream.
ii) Declining markets for other ii) Declining markets for other
beverages such as soft drinks. beverages such as soft drinks.
iii) Greater awareness of health iii) Greater awareness of health
benefits of tea. benefits of tea.
i) Overcrowded and small market i) Major competition from market Threats
with about 200 other brands leader Lipton and other big
which might cause significant manufacturers.
ii) Prospect of rejection in finding
ii) Presence of other major players distribution partner or retailer
such as Coca-Cola and Nestle unwilling to take on new product
leading to tough competition.
Table 1- SWOT analysis of Lipton and Kai Shii
Marketing Planning: The first step in marketing planning is to determine what kind of
factors or bases are to be used to segment the market. Segmentation includes dividing
buyers into distinct groups, each with different needs, characteristics or behaviour,
who might require separate products or marketing mixes. The iced-tea market also has
several groups or segments where consumers perceive or buy a product in a similar
way in each of these segments. Their bases can be classified as follows:
I) Behavioural- consumers seeking convenient and hassle free refreshments.
II) Demographic- age groups.
III) Geographic- urban centres, city suburbs, villages and towns or all mentioned.
Price cannot be considered a major factor influencing buyer perception as canned
iced-teas are more or less equally priced with similar products such as soft drinks or
iced coffee. However, pricing amongst competitors in the same product category
plays a vital role.
The next step involves targeting specific segments with potential for the company in
which the company has a differential advantage over its competitors. The choice of
market segments should enable the company to generate the greatest customer value
and sustain it over time. The choice of segments also varies according to its size and
the resources it has. For example, Shin Shii, with lesser resources might want to target a few segments initially in contrast to Unilever that would want to cover a bigger market by targeting several segments.
However, Shin Shii, in its domestic Taiwanese market was an exception because it had to use aggressive advertising methods to create a totally new market for oolong iced-tea, which was virtually non-existent. In such a case, it targeted all age groups, even the tradition bound older generation who were very much used to drinking hot tea and were least likely to give up this habit. It‟s selling point of Kai Shii drinkers being a „new breed of people‟ in a „new world‟ along with it‟s natural ingredients and health benefits appealed to everyone, including the elderly who tend to be more health conscious in the Far East. The concept of being unique and different appealed to the younger generation, while the therapeutic benefits of iced-tea attracted the stressed middle- aged working class besides providing them with the convenience of a canned drink to complement their busy lifestyles. Other segments such as geographical locations were also collectively considered although the level of penetration might not have been the same for rural markets.
Unilever‟s target segments for Lipton were broadly based on similar factors as far as the health benefits of iced tea are concerned. However, it could further narrow down to focus on athletes and industry workers involved in large amounts of physical activity and mental exhaustion. Geographically, most of America‟s population are in urban centres or towns that are well connected. Thus, it made sense for Lipton to not restrict itself to purely urban centres only. However, busy cities like New York, Boston and Chicago hold great potential for the working class to be the targeted consumers as Lipton iced teas could be a quick refreshment between snacks or lunch.
For Unilever, it is essential to note that it would be unfeasible for it to modify its Lipton iced-teas to serve different parts of the country, as America is largely a homogenous market with hardly any diverse tastes for beverages. Shin Shii, however, might want to modify Kai Shii oolong iced-teas to suit the tastes of the American consumer and also to counter competition by claiming to be exclusive and better.
Forecasting Demand: Current demand for iced-tea in America is so huge, that it
forms 80% of all tea consumed in America. It has become a uniquely American habit, despite having a relatively shorter history of participation in the tea trade. As the convenience of ready-to-drink iced teas lure new tea drinkers, a roll-over effect should occur in the demand for other types of more specialised teas, such as herbal iced-tea to increase. Several other factors can be utilised to forecast the demand of iced teas or for any other market segment. Most of them largely relate to the growth rate of current market segment bases such as age, income, and certain nationality groups. Changes in lifestyle, or in the socio-economic condition are amongst the larger developments that might influence demand especially in the long run. Specific to the iced-tea market for example, a decrease in the proportion of working class due to a rapidly ageing population might hinder demand in urban centres especially in commercial areas.
Overall, however, the outlook for iced-tea beverages is still very much positive with instant tea becoming more important in certain markets. According to a study by Goradia (mentioned in „Commodity Supply Management by Producing Countries‟), the global consumption of liquid tea rose by 145% while that of tea leaves rose by only 92% between 1951 and 1970. Such rapid growth is expected to continue into the near future.
As Lipton and Kai Shii both serve and cater to the same market, they use similar
marketing strategies but with different approaches to achieve their company‟s
objectives. Both companies differ largely in size in terms of financial and human
resource capital. This affects the way they implement their strategies. Lipton, being a
global brand has a slight edge in terms of expertise in the tastes and culture of its
target group of consumers. It also has wider product range and technological
superiority and is planning to launch a radical new product- Brooke Bond‟s hot tea
can. However, although Shin Shii would be a new player with Kai Shii in the
American market with no international experience, Unilever should be wary of its
past achievements of revolutionising a new type of product very successfully in the
Taiwanese market. Despite successfully facing domestic competitors in the
overcrowded iced-tea market, it might want to review its marketing policy to be better
prepared to face a small but unpredictable competitor. Both companies can look
forward to competition in an encouraging and growing market with demand expected
to rise steadily in the immediate long run.
5. RECOMMENDATIONS The following lists the recommendations for Lipton and Pepsi with regard to:
i) Market coverage strategy: As Lipton and Pepsi are already well established across
several segments, they should use an undifferentiated marketing strategy spanning the
entire market. As the number of competitors exploiting the demands of each segment
increases, it is essential to remain clearly ahead in the consumer‟s mind. This can be achieved by increasing visibility across other segments such as tourist places. Pepsi‟s