Once again, the president of Starbucks Taiwan was able to chat cheerfully with a glow of pleasure.

“It’s making me so excited that I can’t even sleep!” said Hsu, as he gently twirled a specially-made tea strainer in a white mug of water exactly 85℃. He steeped the leaves of Biluochun, originated from Sanshia, Taiwan, and watch them stretch and relax in the warm water, releasing a hint of fragrance.

Starbucks, known for its high quality coffee beverages, is joining Taiwan’s nearly-70-billion-a-year market of tea beverages.

Perhaps it is the indelibly imprinted impression of this “coffee chain” that keeps people from noticing that Starbucks is in fact selling tea globally: tea bags, though, from a US brand, TAZO. However, this time, instead of tea bags, Starbucks Taiwan attempts to start a new trend by introducing a new line of tea products made by loose tea leaves that originate from Taiwan.

Though the new product line featuring local tea leaves already sounds alluring enough, Starbucks Taiwan’s ambition lies beyond. They are looking into integrating a “new tea culture” into the world’s largest coffee chain.

“By refining the tea drinking culture, we aim to push Taiwan tea to the world stage. Starbucks centralizes its purchases of coffee beans, so we hope that Taiwan tea can someday break into this global supply chain, too.” said Starbucks Marketing Manager Chung Ch’ung Ching.

Starbucks used to focus on pure-American products. The first Starbucks Coffee in Seattle sold nothing more than three products: coffee, spices, and tea from TAZO, which could never overtake the sales of coffee.

The Bold Idea of “Using Only Loose Tea Leaves”

TAZO came to Taiwan 19 years ago, just as Starbucks. However, TAZO, with its western taste of tea, never made it more than 5% of Starbucks’ revenue. Nevertheless, the idea of selling tea products still lingered in John Hsu’s mind. He thought: Taiwan produces its own good-quality tea leaves, so why can’t they use them to sale good-quality tea products?

Starbucks Taiwan has long been pretty active in coming up with new ideas. In March 1998, Taiwan’s first Starbucks was opened, and in the very next year, it introduced the new Starbucks Mooncake Gift Box in Moon Festival. Thereafter, it continued to release new products such as Coffee Wafer Rolls, Mother’s Day Cakes, and Icy Dumplings. Apart from innovating products, Starbucks Taiwan also leads in technology. While other Starbucks were still using traditional magnetic stripe cards, Starbucks Taiwan had been building customer database more efficiently by using chip cards.

The original idea of Matcha Frappuccino also came from Taiwan. In 2002, Matcha Flavored Latte was added to the menu. “That was groundbreaking,” said Chung. “Latte has always been one of the highlights of Starbucks. Its flavor and recipe remained the same for a long time.”

In 2008, Starbucks USA was facing huge challenges, closing stores everywhere and laying off workers. Even the press said that Starbucks was in need of a new “twirl.” This was the reason why the Headquarters finally approved the Taiwan team’s sales plan of “Using Only Loose Tea Leaves.”

In summer 2009, Starbucks Headquarters sent a team of 5 to Taiwan to review the tea farms, the manufacturing, and the processing, making sure that all tea leaves were naturally and organically produced. Quality was strictly monitored and SGS-certified from the beginning to the end of the supply chain. Moreover, the traditional way of tea making that used to rely solely on the experience of the ‘tea masters’ has also been standardized. They turned traditional tea drinks into traceable beverage products made from a standard procedure.

Here are some key elements of the SOP of brewing a cup of good-quality tea: Never touch the tea leaves. Sift out the small bits. Keep the temperature fixed to the tea’s ferment temperature. Warm the Cup. Discard the first brew. Brew again. Twirl the tea strainer 5 times in the cup to speed up the brew. At last, tell your customers to wait for another 4 minutes to perfect the brew.

A Chance for Starbucks Taiwan

Starbucks Taiwan sent more than a hundred employees up the tea hills for hands-on experience in tea harvesting and processing, to train them into expert personnel such as the “Coffee Ambassadors” of Starbucks.

The difficult part was that the tea market in Taiwan was already extremely saturated. It seemed that a certain type of “tea drinking culture” had been well-established in the minds of all consumers. However, as Starbucks reached into Yingko and Sangshia to look for teaware and tea leaves suppliers, they saw a light of hope. Tea culture in Taiwan wasn’t as abiding as they thought. The Taiwanese are willing to accept new things. If 224 Starbucks in Taiwan together create a new refined tea culture, “we do have a chance,” said Chung.

Pei Jung Chen, Channel Marketing Management of Starbucks Taiwan, also pointed out that Starbucks used to be a synonym of high-quality coffee, and a comfortable “third place” besides home and work. Now, to enrich customer experience, Starbucks plans to extend its brand from coffee to high-quality tea. “Not to mention that making high-quality tea is even more difficult than making coffee,” said Chen. “For coffee, you’ll just have to import the right beans, but for tea, you’ll have to keep the whole process right and well-managed.” It seems that Starbucks Taiwan is aiming higher than the market in Taiwan.

In Face of Challenges

Starbucks policy of selling tea can also be seen in another context.

After Starbucks started in Taiwan in 1998, it broke even in the third year, and reached its peak in 2003-2005 with its revenue of 2.6 billion and net income near 150 million.

However, starting from 2006, Starbucks has being facing challenges from other competitors. First, 85℃ Café, then City Café of 7-11, both budget-friendly brands have taken Taiwan’s coffee-drinkers by storm, taking over Starbucks’ clientele. For the next two years, Starbucks was in a slump.

Threats from Budget-Friendly Coffee

In the churning years between 2006 and 2007, Starbucks opened 30 branches, closed 20, maintained a small rate of growth in gross revenue but lost a net income of 60 million in 2006. Its net income even dropped to 48 million in 2007.

“It was a difficult time for us. We were under a lot of pressure.” Hsu admitted that it was the disruptive innovation of these budget-friendly coffee brands that forced Starbucks to change. In 2007, with the help of the Headquarters, Hsu focused on improving the existing branches, closing those in bad shape, and enhancing productivity by applying the Headquarter's working-hours policy.

In March 2008, Starbucks cheerfully celebrated its 10^th year, after reaching the goal of achieving a positive growth in revenue, net income, and branch profitability.

Once a pioneer, Starbucks Taiwan had its set-backs. John Hsu could not hide his emotions when he talked about this journey of climbing out of the doldrums.

Starting from 2007, Starbucks Taiwan launched promotional campaigns such as “Pass the Cheer,” and “Bring A Friend,” which were regarded by others as buy-one-get-one-free strategies. Such strategies may be risky for high-class brands like Starbucks, so the Headquarters took it seriously. “It was a long debate, but I finally convinced them,” said Hsu. “So we teamed up with 7-11 to offer buy-one-get-one-free coupons for their 30^th anniversary.” Looking back on these ups and downs, Hsu was now able to share those years of struggle in a gleeful manner.

With the term “Starbucks Way” proudly mentioned 8 times, Hsu claimed that there will be more new ideas of “Starbucks Way” to come.

NT$105 for a cup of tea? People will shake their heads. But for a cup of Starbucks, they might nod yes.

 

Translated by Sharon Tseng.

 

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