1.1 Product Description
To create a new popular healthy beverage,we will use real tea match with popular flavour of dessert to attractconsumers in the UK. Features of product including multi-varieties taste, reliable quality and creative packages.
We provide wide range of options to satisfy the needs and taste of consumers. Almost 6 different taste drink will be sold and include the following combination:
Black tea with cream and chocolate flavour
Green tea with cream and vanilla flavour
Jasmine tea with tiramisu flavour
Oolong tea with vanilla flavour
Each kind of tea has unique flavour and scent of freshness, we will try to retain both of favour in every drink, thus, the tea drink chooses the combination which according to each features of tea, and match them with appropriate dessert flavour, and provide consumers the feelings like drinking afternoon tea.
This drink is established by using a concept of innovation and health to meets the need of people’s desire for sweet things, importantly, they don't need worry about high-sugar problem.We will not only usefood flavourto appear the flavour of tea, consumers can rely on it asour productadd real tea to keeps main healthy nutrients of tea in drink,meanwhile,it will not allowartificial colouring, sweeteners, preservatives, additives in the product,stevia sugar (derived from a plant) or honeywill be better choice as sugar substitute.
It important to design attractive packages and we expect to show our innovative concept through creative packages that is about the combination of tea culture with popular dessert. Also, we will implement more environmentally friendly materials in packages to cater the requirements of government.
Overall company goals:
- In the first year, developing product and building websites to launchit online, using promotion to Increase product visibility and prepared more sales channels (throughconvenience stores and supermarkets)
- Making profits 240,000 pound and reaching the breakeven point bythe end of year 3
- Our product cover major shops in big countries in the beginning of year 5
- Seeking partners tocollaborative and expand market shareto achieve over 8% in Ready-to-Drink tea by the end of year 5
- It estimated achieve 200,000-pound revenue by the end of year 5 of operation
We aim to increase our market share to build strong brand positions and compete other drink brand, In the first year, The Tea & Cake are going to research and develop this new drink, and produce it in small batch, try to sell product online through shopping platforms, like amazon, set up an official website including more discounts to attract consumers as well. After that, we will analyze the sales and find out where the high demand areas are to decide the distributing channels and places where in high sales, so The Tea & Cake can earn a bigger market share and growth to mature.
Key to success
- Initial capitalization obtained.
- Producing unique flavor of healthy drink to cater the increasing need of health-conscious of people
- Cooperate withprofessional team to develop this drink
- Promoting products through direct online sales in the early stage
- The office will be located inBirmingham, which is a major city having most populous British afterLondon
- Successful penetration into retail outlets
Overall, the growth of drinks industry is very fast. According to The British Soft Drinks Association 2015 report, 14.8 billion litres of soft drinks in the UK were sold in 2014, and the value of soft drinks industry is£15.7 billion in globally. Meanwhile, volume of still flavoured water increased by 16.4% to over 250 million litres. Particularly, the Still and juice drinks volumes rose by 0.7% to 1,480 million litres Volume of still flavoured water increased by 16.4% to over 250 million litres Still and juice drinks have an 8% share of the UK soft drinks market. (The British Soft Drinks Association, 2015)
Due to the problem of overweight become serious, most people are conscious of it. According to the WHO, over 1.9 billion adults around the globe are overweight, some of them around 660 million were obese. More and more health-conscious consumers choose RTD tea as their drink because it has healthyingredients(antioxidants) which can help with illness including cancer, heart disease, diabetes,and weight loss.Each year for the health concerns of consumers are increasing which driving the need for RTD tea, which can be reflected by the market growth: The growth of ready-to-drink (RTD) tea market are reaching 7% ever years.
The Tea & Cake will be selling on the Amazon in the early stage, so young people will be the main target group as most of them like new things and shopping online, they willhave more chance to buyit. In the second year, we anticipate distribute this drink through retail outlets, it will attract more consumer buy our product, including most range age of people, particularly,middle aged or elderly people can also choose itas well because they don't need worry any problemscan causeblood sugar rise.
Our target market will be wide including people ages 18 to 45, Because tea and dessert is very popular in UK, especially for afternoon tea, it is Britain's favourite custom that has a long history.As the most quintessential of English customs, the custom of drinking afternoon tea was popularised in England during the 1660s. (Johnson, 2017) We hopethis drink become very popular for most of British byprovidinga similar taste with afternoon tea, and set affordable price for different level of consumers to attract wider range of customers.
The view of segmentation reflects a market orientation rather than a product orientation where market is partitioned on the bases of the products being produced, regardless of consumer need. (Wedel and Kamakura, 2003)
As the increasing of healthy conscious, we will focus on those of people who pursuing healthy living but like eating sweet cake, most of them are work group age 25-45, high-pressure jobs make they have limited time to do physical exercises, and the state of sub-health become common which drive they start to focus on their health, importantly, they usually like using computer, thus, those young people and middle-aged will be our main consumers especially in first stage sale.
The whole non-alcoholic beverageindustry is well established,a highly competitive market, which contains several of categories like carbonated beverage, still and juicedrinks, dilatable, fruit juices, andbottled waters, and consisting of many companies can be small or emerging to very large.
The Competitors mainly come from some big company, which makes ready-to-drink tea market become more competitive. Consumers are seeking beverage alternatives to soda that they think healthier drinkincluding juices and flavoured waters, which makesdecline demand for soda water sold by big companies (e.g. coca cola)propelled a decline for the broader industry, this lead many big soft drink brand (e.g. Pepsi and coca cola company) begin to develop new beveragetoexpand intonew market:
The Pepsi Company
PepsiCo have 40% of the RTD tea market, much of which it gained through a partnership with Unilever, which owns Lipton, even for the Coca-Cola, the biggest-selling soft drink company only has a 5.5% share.Pepsi-Lipton Tea is very popular tea brand has several main pillar brands, which includes Lipton Yellow Label and Lipton Iced Tea. Lipton Tea as one of our main competitors several favours and cheap pricestarted from Scotland,with new flavours and cheap price available in more than 100 countries around the world. It continued to lead RTD tea in 2016 with an off-trade value share of 28%, up from 27% in 2015.
The Coca-Cola Company
The Coca-Cola Companyis one of our main competitors,which have dominated the non-alcoholic beverage industry many years.However, the decline in soda volume sales and net revenues declining, consumer trend for healthy still beverages continues to grow makes Coca-Cola Companybarge into Ready to drink tea markets,joint venture or acquiring the companyare the main way to new drink.
For instance,Gold Peak is one of the fastest-growing iced tea brands, will add real milk and sugar in tea with variety of flavours. As another famous ready to drink tea brand in the US, Honest is a top-selling organic bottled herbal tea,begin selling in the UK since 2016, Coca-Cola later went on to acquire the company in 2011, with Honest operating as an independent business unit. Comparing with Gold Peak drink, Honest tea is a new low-calorie herbal organic bottled tea, looking for a lower-calorie and refreshingly unique tasting drink as well as The Tea & Cake, it will be very competitive for our company.
In certain markets, as healthy drink, our competition also includes some fruitdrink companies,the leading fruitsoft brands will be our competitors in the United Kingdom, it includes Unilever, Lucozade, Robinsons, Volvic, Tropicana, Innocent, Ribena.
· Unique flavour in beverage market
· Healthy drink contains main nutrients of tea
· Low in calories
· Will be selling online in first year
· Established market makes new brand hard to entry
· Cost is high
· It will be operation on borrowings in fist 3 years
· Limited shelf life
· Healthy conscious of people are increasing
· Tea and dessert is very popular in UK
· High start-up costs
· Financing funds
· New tea drink appearing in the market
The SWOT (Strengths, Weaknesses, Opportunities, and Threats) framework is proposed by many as an analytical tool which should be used to categorize significant environmental factors both internal and external to the organization. (Pickton and Wright, 1998)
Strengths and Opportunities
The Tea & Cake has several of flavourscan cater different group of people, whether people who like eating dessert or like tea, there are various dessert taste blend in with tea can be selected. Tea is the most popular beverage in the world after water, the British consume 60 billion cups per year, according to the Tea and Infusions Organisation.
There are many health benefits of drinking tea, it has been proved that having a variety of positive health benefits, and its health properties to polyphenols (a type of antioxidant) and phytochemicals, more importantly, nutritional contents and roles indifferent varieties of tea are not same, like green tea with a lot of polyphenols like flavonoids and catechins, which function as powerful antioxidants specially helps us curing obesity. (In vivo antioxidant effect of green and black tea in man., 1996)
However, many tea drink only keep the flavour of the tea and loss of nutrients in processing, so this product will focus on it and try to retain a large quantity of polyphenols, theanine, caffeine and other nutrients compared to other tea drink.
The Tea & Cake as a healthy drink has a good chance to develop and establish its brand now. On the one hand, more and more people in UK are increasingly aware of how important of tea for their health. According to data about overweight and obesity among adults from the Health Survey for England (HSE), results for 2015 showed that 62.9% of adults were overweight or obese (67.8% of men and 58.1% of women), and the prevalence of obesity among adults rose from 14.9% to 26.9% between 1993 and 2015. The increasing rate of obesity has declined since 2001, although the trend is still growing.
On the other hand, due to the health consciousness of consumers are increasing which leadsthe whole non-alcoholic beverage industry growth is sluggish these years, and the carbonated beverage volumes are falling, meanwhile, the UK government has published draft legislation for a tax on sugar-sweetened drinks, which is launched from 2018, many companies are beginning cutting the amount of sugar in their drinks., this may be a good chance for healthy drink entry into beverage market.
Weaknesses and Threats
In beverage industry, The Tea & Cake drink primary threatsand weaknessesmainly come from big brands, especiallyfor the stage that tea drink start to sell.On the one hand, as a new company, this beverage company concept is to provide healthy tea drink that the taste are different from other traditional tea drink,which means there are a large part of research expenditure in start-up costs, and spending time on market surveys find whether the taste can acceptable by customers. It may have some unexpected things happened to leadextra expense in the changeful market environment. On the other hand, the Tea & Cake drink company expects to make profits in 3 years in UK market, so we need a lot of funds and investment in the long period of time to keepdeveloping stead
Most RTD tea drink products are basically flavoured sugary water which sales are based on huge marketing and distribution budgets. As pointed out in the USDA Database for the Flavonoid Content of Selected Foods, the “mean” flavonoid content in bottled tea products is 9% of the “mean” cup of tea prepared from tea leaves or tea bags. We will use as much real tea in our products as possible and retainsnutrients in this drink.
We are planning import the raw material of tea drink from China, through using local raw material will be cheaper, as the world’s highest per-capita use of tea, UKdoesn’t grow tea of its own.Tea planting needs suitable environment which includes climate andsoil, as the origin of tea, china can provide a suitable climate and soil to produce high quality tea.
We put several affecting factors into consideration like origin, cost and quality of the tea, then we intend to purchaseraw material froman organic tea manufacturer, Vicony Teas Company, which engage in in tea planting, production, selling and research.Itcan supply various kinds of tea what we need, including Black tea, Green tea, White tea, Yellow tea, Oolong tea, Scented tea, Flowering tea, at reasonable pricesusually.
Designing and Packages
The bottle is very important to the tea drink since tea may go stale or rancid much faster, or can accumulate impurities that both alter the flavour and aroma if improperly stored. The Tea & Cake drink needs dense plastic to preserve thetea ingredients, and we will choose low transparency packaging to cover the bottle.
As a new brand in competitive beverage industry,the conceptof our tea drink is necessary introduced into packaging design and convey the features of drink to consumers, expressing the idea that perfect combination of traditional tea culture and modern dessert, with natural colour andhand-painted cartoon dessert images in the packaging. (E.g. black tea package take dark redas the main colour match withdessertcartoon pictures)
The Tea & Cake will select the 250ml Tetra Pak and 500 ml PET bottle as the tea drink container, at the same time, the type of 250ml Tetra Pak is going to group together as family package sell to consumers, each family package contains 9 individual 250ml tea drink:
PET bottles (500 ml) ismade from Polyethylene Terephthalate are usually used for soft drink bottles. It provides very good properties toblockalcohol and essential oil, generally good chemical resistanceand a high degree of impact resistance and tensile strength which provides the safety of store and transportation, importantly, PET bottle can be widely recycled which accordant with environmental protection concepts.
Tetra Pak Aseptic packages (250ml) meet requirements of The Tea & Cake very well. First, Tetra Pak is popular with consumers because it iseasy to open and handle and have a strong environmental profile as they are made with sustainably produced FSC™ marked material and are recyclable.Tetra Pak aseptic processes allow liquid food to retain colour, texture, natural taste and nutritional value for up to 12 months, without the need for preservatives or refrigeration.(Tetrapak.com, 2017)
The Tea & Cake is looking to set acceptable and competitive prices.Through analysing from soft drink market and compared with other same types of product, as a result, we decide to set eachprice of 500ml bottle drink and 250ml Tetra Pak packages are 1.20 and 0.70 pound, family package is priced 5.9 pound.
Firstly, we are aiming todrive brand awareness and planning to put around 20,000 pound in advertising.This will start from Amazon since the tea drink will sell on the Amazon in first year. Amazon Marketing Services has 3 ways to show advertisings, which includes Sponsored Products, Headline Search Ads and Product Display Ads. As new play in the drink industry, Amazon Marketing Services can helpus make a measurable impact with social fans, post social content to your Amazon Page and Facebook, and it uses a cost-per-click, auction-based pricing model,get started with advertising on Amazon with budgets as low as £1.
At the same time, socialmedia is another good way to promote our products. It is very easy to choose the group of people we want to see our advert, because there are more accurate of personal information such as interests, devices or past actions, so we can promote this drink by choosing people who like tea or dessert see the advert.
Except selling on the Amazon, we need an official website to introduce and promote our product, which means consumer can through theadvertising link on Amazon or Facebook entry our website. Importantly, people can register as member and we provide discount using bonus points systemto make people can have cheaper price.
At the early stage of the sales, the main distribution channel will focus on online sale. It is a good choice for selling the tea drink through Amazon since there are many opportunities making the new product can reach millions of customers, which means products are easier to find and buy. Then, the supermarkets, convenience stores and on-trade will be considered according to the sales in the early stage. It predicts that its sales are more likely distributed in large cities where people having higher purchasing power online, also, it is very inconvenient to buy drink for some people who living in areas far from centre of city,they will be another main target group buy our drink.
The initial investment will be around 150,000 pound at first year, the initial funds rely on bank borrowings to meet the capital requirements, and it includes:
Market research expenditures
Cost of drink research
Cost of the bottle design
Rent a factory to produce drink
Purchases of raw material
Promotion and advertising expenditures
Registration of companies
Quality standard certification
Each bottles of The Tea & Cake drink anticipated prince is 1.20 pound and its cost 0.4 pound per bottles (500ml). The Tea & Cake drink are planning produced 100,000 bottles in the first year, and then increasing the yield according to need by 20-30% every single year. The Tea & Cake’s goal is to achieve breakeven level in the third year, and makes profits in the beginning of 4th years, so it is estimated that the total profit in the closing balance is around 125,000 pound.
According to The British Soft Drinks Association researching, sugar intake from soft drinks is falling year on year – over 16% since 2012. Importantly,the draft legislation of tax on sugar-sweetened drinks has published by the UK government in 2016, which is launched to begin from April 2018. As sugar-free tea drink, it is very important for our product to exempt from the sugar tax.
Death Valley Curve
As the Death Valley Curve of The Tea & Cake product shows, we are planning spend 1000 pound on marketing research in the first 3 months, find out the popular combine flavour (tea and dessert).Then researching of the drink will cost about 30,000 pound within 3 months. After that, we are going to invest 40,000 pound withsmall scale produce, and this product will appear on the Amazon at the 12th months. It estimated that there are approximately 3 months of time to adapt competition of market and make profits, but thestart growth of revenue is very low. In this period, the maximum loss will be 13000 pound at the 15thmonth. Along with higher market recognition, the consumers are increasing that makes our product can make more profits. Between 24th month and 33rd month, the growthbegins growvery fast until it achievesmaturity.
The fixed cost of this product is 100,000, which mainly include following fees:Research and Development (R&D);Rent (e.g., factory, office building and warehouse); Property taxes; Utilities expenses; Depreciation charge; Staff. It is estimated has 50,000 variable costs:Material costs;direct labour; Maintenance costs.
We are going to produce 320,000 bottle of drink,thus, according to the formulation:fixed cost/sale price-variable cost, the breakeven point is around 125,000.
According to the latest market research report by Technavio, the global ready to drink (RTD) tea and coffee marketsexpected to reach 49.78 billion litters in terms of consumption in 2019. We expected increase production after reaching 320,000 sales, add more different channel that makes customers find this drink easier, enlarge the occupancy of the product on target market.Meanwhile, research and develop new flavours to find more potential customers who from different ages. Importantly, when company achieve sustainable profitsthatcan attract more investors and business,we can expand the scope of our business through cooperation, which is an effective way to compete big brand as well.
Cash flow and income statement:
According to the projected cash flow statement, the cash available at the end of the month tends to increase largely; however, it would continue to experience a decline in cash flows (Refer to Excel Sheet, Cash flow sheet). This is because the cost of operating expenses is expected to increase largely and the overall sales revenue would not rise accordingly (Finch 2016). As a result, the organisation might find difficulties in maintaining its business operations in the long-run.
From the income statement (Refer to Excel Sheet, Profit and Loss Account sheet), it has been found that the net income after tax would increase for the first two years; however, it would realise net loss in the third year. This is because it is anticipated that the existing market players would exert competitive pressure on the Tea and Cake. However, the scenario would change in the next two years, as the organisation would change its strategy to attract maximum number of customers. As a result, it has resulted in increased net profit for the organisation (McKeever 2016). Thus, it is expected that the organisation would be able to create a brand image in the UK market.
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