Offering a blend of luxury and tea

Lin Rongxi is deputy general manager of Eight Horses Tea Co in Anxi county, Fujian province.

Chinese companies aim to grab slice of high-end market in Europe with gourmet products

Even as some Chinese companies are reducing prices to boost exports, others like Lin Rongxi are looking to make inroads in the high-end luxury market with gourmet tea products.

"Right now everyone is talking about the rise of China. In my opinion, Chinese tea should be the symbol of that rise, much as Louis Vuitton bags and Porsche or Ferrari sports cars are," says Lin, deputy general manager of Eight Horses Tea Co.

The company along with four other tea companies from Anxi county in Fujian province, will soon open its first marketing center for oolong tea in Saint-Germain-des-Prs, an area in the 6th arrondissement in Paris.

"With the launch of the marketing center, we plan to enter the core area of the high-end market in Europe and build up our network and regional influences," says Lin.

In April, Eight Horses, Empereur, Zhong Min Wei Shi and Ping Shan, entered an agreement as a group with a European partner, Leblond Gre'gory. According to this agreement, the five companies will operate the center jointly with the brand name "Anxi Tieguanyin", aiming to provide tea as a luxury product for the European premium market.

Tieguanyin, or Iron Goddess of Mercy in English, is a renowned variety of Chinese oolong tea. According to an ancient Chinese legend, an iron statue of Guanyin, or Goddess of Mercy, gave a farmer the tea and helped the poor to prosper. Being grateful, the farmer named the tea Tieguanyin.

"The European market is the symbolic spot for Chinese tea companies to go global, especially Paris, which hosts many luxury brands," says Wang Wenli, head of Anxi Tieguanyin Tea Association.

"Through this marketing center, we would like to fully promote Tieguanyin as a luxury good and look for a broader international market," Wang says.

Every year, China exports about 20,000 tons of oolong tea to the world at a price of between $2 and $3 a kilogram. In Lin's opinion, the current export price is not consistent with its true value. "Tea is a good and fine product, not just some raw material for industrial processing of bottled drinks."

The company has more than 800 chain stores across China, with domestic sales of 1,000 tons per year. It exported 2,000 tons of oolong tea in 2010, accounting for 15 percent of China's annual oolong tea exports.

The first container of Tieguanyin has already been shipped to Paris, and is likely to be priced at about 50 euros ($64.6) to 500 euros per kilogram. The center will be ready by Spring Festival and the five companies will together invest about 30 million yuan ($4.76 million, 3.59 million euros) for the initial construction, management and promotion. Lin, however, does not expect huge profit or record sales in the short term.

"Chinese tea used to be a prized possession among the upper class in Europe some 300 years ago for its health benefits," he says. "What's more important is that we are back in the high-end market, and promoting the Anxi Tieguanyin brand."

The center will be spread over 100 sq m and decorated with distinctive Chinese architecture and divided into two areas, the sales zone and tasting zone. It will also hold various cultural activities with local Chinese communities to promote tea culture.

Lin says that the main barrier for promotion of Tieguanyin in Europe is the introduction of Chinese tea culture. "Previously our products were mainly sold overseas in bulk. Now we want to sell packaged tea, at a much higher price. Western consumers may need time to accept the fact that tea can be really expensive.

"The second issue is the tea making process. Europeans are used to drinking the beverage with tea bags. But traditionally, Chinese tea needs to be treated with care and more complicated procedures. Besides, tasting tea also requires certain understanding and education of Chinese tea culture."

Besides tea sales, tea-making performances and training courses will be held on a regular basis for consumers. Lin hopes that the new marketing center will provide a test case for local producers to change their strategy in international markets.

"We want to raise another round of Chinese tea mania in Europe," Lin says.

He expects Tieguanyin to be popular in the EU market within five years. "It is our aim, but it all depends on our long time effort."

Meanwhile, positioning tea as a luxury product has also raised some doubts from industry experts.

Shen Qing, CEO of King Building, a Beijing-based firm in industry planning and marketing, says that the current trend of high price has deviated from the nature of tea.

"In recent years, local tea companies are putting more efforts into raising tea prices in the domestic market. But tea is not a luxury good, and it should not be. It is just an ordinary necessity of people's daily life, like seasonings and rice," says Shen, who is also a consultant to the Anxi government in upgrading the local tea industry. "The higher the price, the quicker it will lose its consumer base and finally the whole market."

Chinese companies should figure out a way to make the best tea with the lowest price, just as Lipton does. That is the only way for domestic producers to go back to the global market, Shen says.