Describe Dilmah’s Approach To Market Segmentation

Sunday July 31, 2022

If you ever thought that tea was boring and old-fashioned, think again. Dilmah is crafting tea as high-end, exciting, and fashion- Lable. At Dilmah, teatime rocks! Dilmah, a company founded in 1988 by Merrill J. Fernando and named after his two sons Dilhan and Malik, has been inspired by the vision of its founder. Fernando had noticed with concern that tea had, over the years, become an old-fashioned commodity, blended with tea leaves from various parts of the world, with an eye toward cost reduction and sold at discounts. With the arrival of coffee and many other drinks in the Indian subcontinent, tea had lost its earlier heritage and class. As a supplier of “pure Ceylon tea” to many countries, Fernando understood the consumer need for a premium quality tea. He observed that a large segment of end cus- tomers were longing for the traditional quality, freshness, and authenticity in tea. He decided to offer what these customers were looking for, as he loved tea. Dilmah used its strength in controlling the value chain of tea to offer authentic garden-fresh, single-origin, pure Ceylon tea to these tea drinkers with the promise of tea “the way it used to taste.” As part of the strategy to upgrade the image of tea in the minds of people and to provide premium tea to discerning customers, Dilmah focused on an interesting customer group-the hotels and restaurant segment. Fernando noticed that the quality of tea avail- able even at five-star hotels and restaurants left much to be desired. The patrons seemed to prefer their home-brewed tea to the tea served in these places. Discussions with these institutional cus- tomers (executive chefs, food and beverage directors, and purchas- ing managers) uncovered many interesting insights. Most of them were not aware of the opportunities in tea as they considered it as an unimportant add-on. The purchasing of tea was simply added on to the supply contract of the chosen coffee supplier. Most of these hos- pitality customers were interested in differentiating their offerings to provide innovative and exciting customer experiences, but they did not know how. Realizing this potential, Dilmah launched a mul tifaceted program called the Seven-Star Luxury Tea Experience, which aimed to add excitement to tea drinking through stylish pres- entation, better service, and by pairing tea with gastronomy. The key element in the Seven-Star Luxury Tea Experience was the product. Dilmah launched a paradigm shifting range of teas called “Watte,” which, in Sinhalese, means “garden.” Watte positioned tea like fine wine, borrowing the terminology that described structure, depth, tone, and strength in “Watte” tea. Four unique teas, representing the four finest tea-growing regions in Sri Lanka, were produced and matched in style to four categories of wine Champagne, Pinot Noir, Shiraz, and Cabernet Sauvignon. The Watte single-region and single estate teas were positioned as The super-premium Watte series of boutique super-premium, teas—Yata Watte, Meda Watte, Uda Watte, boutique teas. The and Ran Watte-boast of the unique heritage hospitality appeal of each Sri Lankan tea-growing location of Watte which alone grows that special brand. enhanced using distinctive acces- sories such Watte-branded fine porcelain tea bowls and tea pots. What’s more, a Watte tea service was also created, which elevated the act of serving tea to that of a ceremony. was as YANA MELY WINTE ADMINTE WANTS PIETRO LULUI CERT The Watte range helped break the perception often as an ordinary and unexciting beverage As part of spreading the word, Dilmah initiated strategic partnerships with masters of wine, wine writers, and the World Association of Chefs’ Societies to sharpen the synergy between tea and gastronomy. It initiated two programs- ENE TE The Culinaire,” which challenged chefs in Asia, the Middle East, and parts of Europe to create recipes where tea formed a dominant taste ingredient, and Tea Sommelier,” which challenged bar- tenders and hospitality professionals to use their expertise in mixology to create alcoholic and nonalcoholic tea-based beverages. Hospitality operators wel- comed Dilmah’s fresh thinking and were very receptive to such collaborations. The parallels in tea and wine, which were readily accepted by the industry, excited the hoteliers The next challenge for Dilmah was the youth segment that was moving away from tea. According to Dilhan, “This was partly due to the traditional image of tea and partly because of the propensity of the younger consumers to want a ‘break with the past and with “what their parents did.” In order to cater to the needs of the youth, Dilmah launched the t-series of radically different collections of designer gourmet teas including t-cocktails (teas expertly mixed with spirits), t-mocktails (teas with juices and other nonalcoholic beverages), and other hot and iced teas. The t-series was presented in bright and colorful packaging and launched with the exciting theme of “Teatime Rocks!” In addition, Dilmah enhanced the appeal and style of the t-series by launching t-bars-standalone, chic-and- trendy outlets selling Dilmah tea. T-bars succeeded in presenting teas as trendy and fashionable to the youth. Dilmah’s innovative and bold approach toward Dilmah t-bars target urban satisfying the unmet needs sophisticates from around the world. Here, fine-quality tea is of its variety of customer being savored in a t-bar in Europe. segments has paid rich div- idends. The success of Dilmah with the boutique tea concept in the hospitality sector also aided the brand’s image and appeal amongst retail customers, where the sales of Dilmah shot up. Founded in the midst of a civil war in 1988 and competing with giants of the FMCG world, Dilmah has effectively created a new market segment for super-premium tea. Dilmah is not a niche player anymore. It is now the world’s third-largest standalone global tea brand, with the super-premium or “bou- tique” tea category contributing over 20 percent of the com- pany’s turnover.’

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