Case Study #4 – Spring Tea House 8 MS IN HOSPITALITY MANAGEMENT STUDIES Case Study #4 – Spring Tea House RITA SHUNRU ZHANG MSHMS Foundation #1 Instructor: Willy A. Aroca Fairleigh Dickinson University 2015-12-08 Introduction The idea is to open a tea house which provides a unique tea drinking experience. In store, tea service staffs would deliver high quality tea serving, including introducing the different types of tea and different processes of making good teas. The experience in store can give our customers the best taste of tea due to our water purification system, in order to serve the best tea; also, we will provide health snacks or light meals. While they drinking tea and socializing in our tea house, they could slowing down their life tempo and releasing pressure, which also directs them to purchase other products, such as tea leaves and tea sets. In addition, since the modern pace of living is increasing, there is a need of teas to go; therefore, we would also open a tea to-go window. With the measurement of tea leaves and water, we will maintain the good taste of tea. The idea of opening a tea house was coming up with the increasing demand of tea in Canadian market. More and more tea shops have established, such as Teavana store. The company spent US$620 million to acquire about 300 Teavana stores, there are 59 locations in Canada (Friend, 2013). Canadian’s tea consumption is expected to rise 40% by 2020, according to a government agency report on food trends published by Agriculture and Agri-Food Canada (Friend, 2013). This trend was driven by a soaring interest in health and wellness. “Canadians drink almost 10 billion cups of tea each year (83 litres per person x 4 cups per litre x Canadian population 34,755,634 – those who are 15 and younger 5,644,800). That’s 30 litres (120 cups) more than in 2006 (Food Available in Canada and Canada Population Estimate Statistics Canada) (2014 Canadian Tea Fact Sheet & Trends, 2014)”, according to the data from Tea Associate of Canada, we can see tea market in Canada is growing. However, the major tea trends in the market place are western tea. Chinese teas has great potential to growth, which needs more advertisements and marketing strategies to increase market awareness. Thus, it can fulfill the needs of health oriented diet, and catch the opportunism on this growing market. There are six major types of Chinese Tea, see Appendix I & II. The difference are due to: different collecting time (daily or seasonal) of tea leaves, different producing area, different processing methods, and different kinds of tea trees. Different types of tea has different benefit to human body, such as help digestion, reduce fat, and promotes strong bones. See from Appendix III. Main Decisions on Developing Stage Where and how to obtain financial resources · Private investors or Venture capi ...

1. Case Study #4 – Spring Tea House
8
MS IN HOSPITALITY MANAGEMENT STUDIES
Case Study #4 – Spring Tea House
RITA SHUNRU ZHANG
MSHMS Foundation #1
Instructor: Willy A. Aroca
Fairleigh Dickinson University
2015-12-08
Introduction
The idea is to open a tea house which provides a unique tea
drinking experience. In store, tea service staffs would deliver
high quality tea serving, including introducing the different
types of tea and different processes of making good teas. The
experience in store can give our customers the best taste of tea
due to our water purification system, in order to serve the best
tea; also, we will provide health snacks or light meals. While
they drinking tea and socializing in our tea house, they could
slowing down their life tempo and releasing pressure, which
also directs them to purchase other products, such as tea leaves

2. and tea sets. In addition, since the modern pace of living is
increasing, there is a need of teas to go; therefore, we would
also open a tea to-go window. With the measurement of tea
leaves and water, we will maintain the good taste of tea.
The idea of opening a tea house was coming up with the
increasing demand of tea in Canadian market. More and more
tea shops have established, such as Teavana store. The company
spent US$620 million to acquire about 300 Teavana stores,
there are 59 locations in Canada (Friend, 2013). Canadian’s tea
consumption is expected to rise 40% by 2020, according to a
government agency report on food trends published by
Agriculture and Agri-Food Canada (Friend, 2013). This trend
was driven by a soaring interest in health and wellness.
“Canadians drink almost 10 billion cups of tea each year (83
litres per person x 4 cups per litre x Canadian population
34,755,634 – those who are 15 and younger 5,644,800). That’s
30 litres (120 cups) more than in 2006 (Food Available in
Canada and Canada Population Estimate Statistics Canada)
(2014 Canadian Tea Fact Sheet & Trends, 2014)”, according to
the data from Tea Associate of Canada, we can see tea market in
Canada is growing.
However, the major tea trends in the market place are western
tea. Chinese teas has great potential to growth, which needs
more advertisements and marketing strategies to increase
market awareness. Thus, it can fulfill the needs of health
oriented diet, and catch the opportunism on this growing
market.
There are six major types of Chinese Tea, see Appendix I & II.
The difference are due to: different collecting time (daily or
seasonal) of tea leaves, different producing area, different
processing methods, and different kinds of tea trees. Different
types of tea has different benefit to human body, such as help
digestion, reduce fat, and promotes strong bones. See from
Appendix III.
Main Decisions on Developing Stage

3. Where and how to obtain financial resources
· Private investors or Venture capital
· Offer investors partnership and give dividend
Location for the business model
· Near Vancouver city hall, on W Broadway, corner store.
· Reason: having our target customers (higher income, 30 to 65
years old, and interested in health diet), business and quite
atmosphere.
Private company vs. Public company
· First five years will stay private, since it would be easier to
operate
· During the expansion stage, will consider to go public in order
to collect expansion capital
Marketing Strategy
· Pricing
· In store, price are depends on different types of tea
· To-go, price of a cup of tea would be around $3 to $5
· Branding
· Quality is the key of our tea store; therefore, employees will
have professional training, and understand the knowledge of
teas in order to create a unique experience.
· Product development
· In the first stage of business, we will provide six different
types of tea, and each types of tea will have different varieties.
We sell tea leaves and provide in store tea service. The water
purification system provides water which is good for making
teas that the PH is around 7.2 to 7.3 and water hardness are
between 20 to 70 mg/l, which is similar as the natural spring
water. The water quality can maintain the tea taste. Tea-to-go
will have our home-made tea bags, and will have the proportion
measurement of tea leaves and water. The snack options would
be all health oriented, such as dried fruits, nuts, organic light
meals (salads, sandwich, and dessert).
· For the future expansion, tea ice cream or tea slush will be
produced in our store.
· Expansion

4. · We will focus on Vancouver market in the first five years, and
will open new stores for the next stage.
· Also, we offer franchise options, which can increase the
market shares.
Michael Porter’s Five Forces Model
Threat of new competition
· Industry profitability
The overall profitability of tea industry has improved
moderately since 2005 (The Canadian Tea Industry, 2010). Due
to the increasing volume of tea drinkers (Friend, 2013), the
profitability of tea industry in Canada will increase; thus, the
threat of new competition will increase.
· Established brands have high customer loyalty, which will
threaten your new brand.
In Vancouver, there are direct competitors, such as O5 Tea,
which is a tea bar selling tea leaves and serving tea in store, and
there are also some indirect competitors, such as Teavana,
David’s Tea, and some coffee stores that also sells teas.
However, the awareness of O5 Tea are not strong enough, and
Teavana and David’s Tea are targeting people who want tea
drinks and do not care much about the quality of tea leaves.
Therefore, the loyalty of the existing stores are not high, which
could be an opportunity for the new entry of tea business in
Vancouver.
Threat of substitute products or services
· Relative price performance of substitute
O5 Tea would be too pricey for some people who interests in tea
but do not have much tea knowledge, which will set a berry for
potential customers, and the price of David’s tea, Teavana, and
other stores selling tea would be much cheaper, costing less
than $5 for a cup. This makes our price of the tea leaves is more
affordable compare to O5 Tea; therefore, depends on different
customer groups, if they have the desire for high quality tea
drinks and experience, they will go to O5 Tea; the customer
who is only looking for tea drinks and do not care much about
the quality would go to David’s Tea or Teavana. And the

5. customers who choice bottle of tea drinks and tea bags are due
to the convenience they can have, although the price of this
substitute products are much lower, but the tea quality have
huge different. The substitute products or service are all
depends on the need of customers. What our tea house would do
is to satisfy the needs of majority customers in the market
place, both who needs tea drinks or tea experience.
· Buyer switching costs
The switching cost for customers would be high if they go to O5
Tea, since what we offer is more affordable, we charge in store
customer base on what type of tea they order, and charge them
on time base. Besides, the switching cost for customers to
purchase a bottle of tea drinks or tea bags from grocery store is
low. However, our tea house are not competing with them, since
what we offer is different value, the target customers between
this substitute products are different from us.
· Number of substitute products available in the market
In Vancouver, there are not many Tea houses; therefore, it
would be an opportunity to open a tea house. Also, there are
countless bottle of tea drinks and tea bags are easily found in
market.
Bargaining power of customers
· Availability of existing substitute products
Due to there are not many substitutes of tea house, customer
would have limited choice, and compare the price of our tea-to-
go, which is similar as David’s tea.
· Buyer price sensitivity
There are two different types of customer, one group of
customers are more not sensitivity of price but focusing on the
experience they have. For this group of customer, the tea house
need to maintain the high quality of service and tea drinks.
Another group of customer who enjoy tea drinks on daily bases,
they are more sensitivity of price. This group of customer are
target for the tea-to-go drink section; thus, our tea house would
maintain the affordable image for the tea-to-go drinks.
Bargaining power of suppliers

6. · Supplier concentration to firm concentration ratio
Since all our products would be imported from China, and there
are countless suppliers of tea leaves; therefore, the
concentration ratio is low.
· Supplier competition
The majority suppliers are in Mainland China, and the volume
of suppliers are large. The competition between suppliers are
high. Hence, the bargaining power of suppliers are low.
Intensity of competitive rivalry
· Sustainable competitive advantage through innovation
The innovation of existing tea stores are low. They do not have
any innovation products besides tea sets and new flours of tea.
What our tea house can do better is we offer different products
to satisfy our customer, and we have product development plan
for tea ice cream and tea slush.
· Level of advertising expense
The majority advertisement of existing tea store are on social
media. The cost of this type of advertisement are low but
efficient since modern days people are highly relying on social
media. For our tea house, we can also use this type of
advertising method. Furthermore, we can also establish our own
tea magazine or our website for more tea culture sharing, and
can hold some tea events or make connections of the events of
Vancouver. Which can help the brand to create a professional
tea image, and increase the market awareness.
Conclusion
Due to the increasing demand of tea drinks, and there are only a
few tea houses, which serves good quality of teas. The
consumption power is high especially in Vancouver. It would be
a great opportunity to open a new tea house that sells good
quality tea leaves, tea drinks, health oriented light meals, and
good service.

7. References
Friend, D. (2013, Nov 3). Having a cup: Canadian business
owners see big growth in tea drinkers. Retrieved from
CANADIAN BUSINESS:
http://www.canadianbusiness.com/business-news/having-a-cup-
canadian-business-owners-see-big-growth-in-tea-drinkers/
The Canadian Tea Industry. (2010, December). Retrieved from
Agriculture and Agri-Food Canada:
http://www.agr.gc.ca/eng/industry-markets-and-trade/statistics-
and-market-information/by-product-sector/processed-food-and-
beverages/the-canadian-tea-industry/?id=1298047470064
chinese pastry. (2012, 7 5). Retrieved from TeaGoer:
http://teagoer.blogspot.ca/2012/07/blog-post_5.html
Major Types of Chinese Tea. (n.d.). Retrieved from Shen-nong:
http://www.shen-
nong.com/chi/lifestyles/chinese_tea_types.html
Tian, H. (2013, 8 2). Introduction of different kinds of tea.
Retrieved from People News:
http://paper.people.com.cn/smsb/html/2013-
08/02/content_1277024.htm
titie. (2010, 06 9). Travel Experience. Retrieved from ROODO:
http://reader.roodo.com/summer828/archives/12638845.html

8. Chinese Tea And Health Benefits. (2012). Retrieved from the
chinese tea shop: http://www.thechineseteashop.com/tea-
health.html
2014 Canadian Tea Fact Sheet & Trends. (2014). Retrieved
from Tea Association of Canada: http://www.tea.ca/about-
us/media-kit/2014-canadian-tea-fact-sheet-trends/
Appendix
I. Tea Processing
II. Six Majors Types of Chinese Tea
Tea is produced in over 20 Chinese provinces. Chinese tea
bushes are cultivated in the mountain areas of tropical and
subtropical regions or wherever there is proper climate,
sufficient humidity, adequate sunshine and fertile soil (Major
Types of Chinese Tea, n.d.).
Chinese tea is classified in many ways, e.g., quality, method of
preparation or place of production. The main processing
methods include fermentation (oxidation), heating, drying and
addition of other ingredients like flowers, herbs or fruits. These
help to develop the special flavor of the raw tea leaves (Major
Types of Chinese Tea, n.d.).
Green tea
Freshly picked leaves only go through heating and drying
processes, but do not undergo fermentation. This enables the
leaves to keep their original green color and retain most natural
substances like polyphenols and chlorophyll contained within
the leaves. This kind of tea is produced all over China and is the

9. most popular category of tea. Representative varieties include
Dragon Well (Long Jing) 龙井 and Biluochun碧螺春 from
Zhejiang and Jiangsu Provinces respectively (Major Types of
Chinese Tea, n.d.).
Black tea
The tea leaves are fully fermented giving them to have a strong
flavor and dark color. In comparison to other tea categories, its
flavor is longer lasting and it has the highest concentration of
caffeine. This is most popular form of tea in south Asia and
Europe. The taste is mellower and black tea is also easy to stock
and maintain the quality of tea leaves. The famous Chinese
Black Tea are Lapsang Souchong Black Tea 正山小种, Lichee
Black Tea 荔枝红茶, and Yunnan black tea 滇红 (Major Types of
Chinese Tea, n.d.).
Oolong tea
The tea leaves are partially fermented, imparting to them the
characteristics of both green and black teas. Its taste is more
similar to green tea than black tea, but has less a "grassy" flavor
than green tea. The three major oolong-tea producing areas are
on the southeast coast of China e.g. Fujian, Guangdong and
Taiwan. Dongding Oolong冻顶乌龙, Tie Guanyin 铁观音, and Wuyi
Rock Tea 武夷岩茶 are some of the famous Oolong tea (Major
Types of Chinese Tea, n.d.).
White Tea
Fujian Province are the major producing are of White Tea, the
fermentation of white tea is 20% to 30%. Since the processing
method are more simple compare to other tea leaves, white tea
only need to roasted, thus the white tomentum are still kept on
the tea leaves, the color of dry tea leaves looks white. White tea
can help calming the body. Baihao Yinzhen白毫银针 and
Shoumei寿眉 (Major Types of Chinese Tea, n.d.).
Yellow Tea
Yellow tea is mild fermented tea, the color of tea and tea leaves
are yellow, due to the processing method; when the roasted of
the tea leaves are not completed, the rest of the water content
would oxidize, and thus the tea leaves would become yellow.

10. The fermentation is low, only10% to 20%. It can help digestive
and decompose fat. Junshan Yinzhen君山银针 and Huoshan
Huangya霍山黄芽 are some of the typical yellow tea. (Major
Types of Chinese Tea, n.d.)
Dark or Pu’er tea
The tea leaves have undergone years of fermentation, giving
them a unique earthy flavor. Dark tea is 100% fermented tea,
the tea leaves are dark, the longer the time it stock, the better it
taste. Compare to other kinds of tea, the taste of dark tea are the
mellowest, tea leaves was compress into certain shape which is
easier to stock for a longer period of time. This variety of tea is
usually compressed into different shapes like bricks, discs and
bowls (Major Types of Chinese Tea, n.d.).
III. Traditional Chinese Medicine
For reference purposes only, here list some of the benefits of
Chinese Teas as commonly recognized in Traditional Chinese
Medicine:
Black Tea
Reduce fat, protein and low-density “bad” cholesterol
Rich in fluoride, promotes dental health
Reduce fatigue, stimulating the central nervous system
Promotes strong bones
Enhance blood vessel elasticity and strength
Green Tea
Tea catechins have anti-bacterial and anti-virus properties
Regulates cholesterol and high blood pressure
Bacterial killing properties in the mouth and intestines
Tea catechins and polysaccharides can lower blood sugar
Improves blood flow
White Tea
Can reduce inflammation caused by rheumatoid arthritis
Can control insulin secretion
High source of Vitamin A, can prevent dry eyes and night
blindness
Can reduce radiation levels and repair DNA damage

11. Oolong Tea
Polyphenols prevent tooth decay
High source of Vitamin C, good for the skin
Can reduce skin irritations
Can improve the performance of enzymes that break down fat
and increases fat metabolism
Can lower cholesterol
Muscle relaxant in the bronchial tract
Can regulate body temperature
Dark / Pu’Er Tea
Aids digestion and fat break down
Has been used in the treatment of arteriosclerosis, colds,
bleeding and hepatitis
High level of Vitamin C which is soluble in water and can be
rapidly assimilated by the body
(Chinese Tea And Health Benefits, 2012)