Issue link: https://read.dmtmag.com/i/491368
74 STiR tea & coffee industry international means, but the tea retailing industry thrived on these high margin gifts. Luxurious gift- sets have always been an important portion of tea companies' profits; some companies allocated their entire resources to producing tea gifts. The impact of the frugality and anti-corruption campaign of 2013 is no less than a hurricane for affected industries. Beginning in late 2012, the central government cut expense budgets and instituted airtight supervision of lavish spending such as ban- quets, tours, and the acceptance of expensive gifts. High-end restaurants, spas, hotels, and the gifting industry have been impacted severely. According to one government officer, the 2013 budget for banquets hosted by his department was a mere 7% of the previous year. A series of corruption cases have deterred officials from violating the rules. Enforcement of the policy has been army-firm, which suggests these policies are not likely to fade away soon. As a result, tea businesses are pressed to be innovative in terms of product design as well as business structures. The result is greater attention to middle-class consumers, a segment that will ex- pand to 186 million people by 2020. Small-quantity and individually-packed products suit the need for daily usage; and for those accustomed to extravagant layers of packag- ing, the easy-to-use, standardized packages are refreshing. From the perspective of consumer psychology, when making a purchase, consum- ers keep two prices in mind: the first is per capita tea or the 'absolute price.' This is the unit value based on what an individual consumes, calculated as the cost of drinking one cup of tea.The total depends on how many cups of tea one drinks per day, per month, etc. The second consideration is the 'relative price.' These are the actual dollars con- sumers must pay at the register. If a consumer feels comfortable at both price points, then one is likely to make the purchase. The challenge for companies is to make both prices appealing to customers. Consider high-end green tea brand Zhu Ye Qing. Four different kinds of packag- ing are offered at a typical store. The first is a 20-gram tin containing 5 individual tea packets, each containing 4 grams of tea. The tin sells for RMB65 ($10.50). The second offering is a 50-gram bag with 12 individual packages. A larger 100-gram bag contains 25 individual packages of 4 grams each. These sell for RMB158 ($25.50) and RMB268 ($43.20), depending on the grade. The largest "value" size is the 228-gram tin box which sells for RMB698 ($112.50). This includes 57 packets of 4-gram each. Individual packaging makes it easy for customers to calculate the 'absolute price', namely, how much they are paying per brew (i.e. 4 grams), which ranges from RMB10.7 to 13 ($1.72- $2) depending on the grade. Small packages of 25 grams or 100 grams sell for RMB65 to 158 ($10.50-25.00), which is viewed as affordable. The tea is not cheap, yet with a clear 'absolute' and 'relative' price point in mind, customers seem to be more comfort- able in making an informed purchasing decision. Highly processed tea Tea companies now offer a range of tea-derived, highly-processed products to increase sales. Examples include tea gum, tea candy, tea cakes, and entrees. Hawley & Hazel's Darlie green tea and jasmine flavored toothpaste is a top seller and there are even tow- els made of tea fiber. Wuyutai's tea ice cream, which debuted in 2009, is a remarkable example. The company's three Beijing stores annually gross $325,000 each by selling up to $3,000 ice cream cones a day in only two flavors—green tea and jasmine tea—at $1 per serving. On the Chinese version of Yelp—Dazhong Dianping, there are 932 rave reviews with an average ranking of 4.5 out of 5 for the ice cream sensation. Reviewers compared Wuyutai's tea ice cream with MacDonald's and DQ's, praising the slight bitterness of the green tea and the jasmine scent that make the treat authentic and unforgettable. Various travel books and websites insist that tasting the ice cream at the Qianmen Dashilan Street store is a must-do. "Tea ice cream is a product that somehow goes beyond its basic function to cre- ate an emotional connection with the customer," said Chen Xi, the public relations spokesperson at Wuyutai. "People feel like checking out our products while pampered by ice creams even when they have never thought of buying tea. The allure is hidden in the delight generated by the treats. " The result: Company revenue soared to $97 million last year. Display of Zhu Ye Qing green tea at Wuyutai Tea Shop: the 20-gram tin pictured contains 5 individually pack- aged 4-gram servings. Matcha stations at 'Yutai Oriental' cafe Mini pu-erh cakes weigh 6 grams