Former Whittard of Chelsea CEO, Mark Dunhill, reveals the twists and turns of the tea retailer’s re-birth and ‘premiumisation journey’
I can clearly remember my pitch to the private equity owners of Whittard of Chelsea. It was mid 2013. The UK’s largest specialist hot beverages retailer, after going into receivership in 2008, was in the process of being nursed back to financial health under its new owners. After multiple store closures and significant reductions in head-office costs, the business had been brought to break-even. Its shareholders now had to choose between taking an early exit or staying on board to take it to the next level – with the increased level of investment and executional risk that this course of action implies. Driven by a deep-held conviction that the best was yet to come – they decided to stick: a smart decision!
There were two factors which explain their confidence in the long-term potential of their business: Firstly, Whittard had 130 years of heritage which they felt, if articulated effectively, would underpin the appeal of the brand to an international audience. Secondly, it was catering to an expanding audience: urban, educated millennial consumers, who were taking over a vast proportion of discretionary spending the world over, and were adopting speciality teas and herbal infusions as part of their healthy lifestyle.
The ripples of the premiumisation wave, which had already transformed attitudes towards the consumption of everything from sourdough bread to tonic water, craft beer, gin and artisan coffee, were starting to change attitudes towards tea, the second most consumed liquid on the planet (after water). From Seattle to Singapore, for the past 15 years sales of black builder’s tea had been in decline, while herbal infusions and premium blends of loose-leaf tea had been chalking up double-digit growth over the same period. So Whittard found itself on a rising tide: the challenge was to ensure it navigated the right course to capitalise on this exciting opportunity.
Reversal of financial fortunes
By the end of 2013, although Whittard’s financial health had been restored, its future was far from secure. The healthier P+L disguised the fact that the brand proposition had fundamentally not moved on: it was simply not on the radar of the vast majority of millennial consumers who wanted to spend their money on exotic teas and infusions or freshly roasted coffee. It had become a high street value gift retailer and it’s shops were places you might buy a foil-covered chocolate Beefeater or spotty teapot as a gift of last resort for your least favourite auntie. The business was unconsciously allowing its heritage as a tea, coffee and cocoa merchant to be forgotten – literally hidden behind piles of pasta bowls and “keep calm and carry on” mugs.
I had spent some 20 years working with luxury brands in Asia and Europe, mostly within the Richemont Group (owners of names such as Montblanc, Cartier and Alfred Dunhill). They had taught me a great deal about how to nurture the value of brands. As part of their internal auditing process, every year they commissioned market research to rank the value of each of their brands relative to its peer group using four criteria: relevance, esteem, awareness and differentiation.
When I was pitching for the CEO job at Whittard, I decided to use this methodology (with, I hasten to add, my own subjective views in the place of expensive research) to demonstrate to the owners where the brand stood at that time and that we shared a similar view on the changes needed to unlock its potential. I scored it high on awareness – most of us had heard of Whittard and many of us still had one of their mugs at the back of our kitchen cupboards – but gave it a very low score for esteem, relevance and differentiation.
What did Whittard stand for?
Everybody has heard of Whittard, but in 2013 people didn’t know what the brand stood for. It certainly wasn’t aspirational, and it didn’t have a clear point of differentiation. If you wanted to convey a message of affection and respect to someone you love or respect, would you do so by gifting a Whittard product? Probably not.
The owners of the business were cautiously confident that by re-positioning Whittard from high street value retailer, to global aspirational brand they would unlock significant additional value – which explains why they chose to interview me – someone with a background in international premium brand management.
At one point, during one of my many interviews, I was asked – ‘you can do this, can’t you?’. As you would expect of any interviewee, I replied with a firm ‘yes’! I was then asked a trickier question, along the lines of ‘it won’t cost too much, will it?’ I thought it a bit early to nail my colours to the mast, so opted for an honest, if non-committal reply; something like: ‘while I can achieve this for you, I am not in a position to say how long it will take and how much it would cost.’ Anyway, thankfully I was given the benefit of the doubt!
Defining our purpose and vision, and confronting harsh realities
Over the first 3 months in the job, I spent a fair amount of time with my management team defining a Purpose and Vision for the business and confronting the harsh reality of the situation we were facing to ensure that everybody understood the scale of the transformation required to achieve our goal and was fully invested in the strategy to deliver it.
The first and obvious observation was that virtually everything that Whittard sold could be bought at a supermarket or online marketplace often for significantly less money. Consequently, if the business was to survive, let alone thrive in the new world of retail, we needed to give our customers compelling reasons to make the effort to enter a Whittard store or type Whittard.co.uk into their browsers. We couldn’t just sell stuff. We had to build an emotional connection with our customers to shop with us, come back and to talk about us to their friends. This couldn’t be a transactional relationship. If we weren’t able to find a way to create engaging, memorable experiences for our customers we had no right to exist. It was as stark and simple as that.
We had to give our customers experiences that cultivated their curiosity in our products, encourage them to explore new tastes and flavours, give them stories to share and eventually build a community of contemporary tea lovers. This required a comprehensive transformation of the customer experience of the brand, covering the physical environment and the quality, packaging and presentation of our products in-store and online. The packaging overhaul had three principal objectives: to make a Whittard-branded product more aspirational, contemporary and giftable.
Meanwhile, the single most important means of providing a more engaging and memorable in-store experience, above and beyond a swanky refit or the introduction of the latest tech, was to elevate the quality of the interaction between customer and colleague. It was vital to the success of our project that our store colleagues were engaged and passionate about their products and proud of working for Whittard. They needed to embrace the challenge of becoming both product experts and brand ambassadors. So, we set about developing the recruitment and training and incentivisation tools to attract and retain a team of engaging, enthusiastic colleagues who genuinely loved talking about tea and sharing their passion with their customers. We came up with the term ‘Friendly Fanatics’ to define how we wanted our customers to describe us.
This brings us back to the definition of our Vision and Purpose. Everyone in the business acknowledged that for Whittard to become a Global Aspirational brand we had to be about much more than ‘selling stuff’. So we set about finding a way to describe the underlying motivation that would bring a customer to one of our stores and build that emotional connection which would bring them back and ensure they told their friends about us. We came up with three words that I believe do that pretty well: ‘Savour The Adventure’. ‘Savour’ is about sensory pleasure and indulgence, while ‘adventure’ expresses the fun and satisfaction that derive from the exploration and discovery of new tastes, aromas and flavours and new ways of consuming them. To dyed-in-the-wool builders’ tea drinkers, these words might well sound a little overblown. However, thankfully, the millennial generation are a curious and obsessive bunch when it comes to food and drink and enjoy nothing more than seeking out new taste experiences and sharing them with their friends.
Capitalising on Whittard’s Englishness
Whittard, as an English tea specialist with 130 years of heritage, had an enviable opportunity to capitalise on the growing fascination with the ritual of English afternoon tea around the world if we were able to deliver a memorable experience to our customers. Three years into the project it was time to find a way to verify if we were on track.
As chance would have it a market research agency had been commissioned by previous owners in 2004 to shed light on the underlying appeal of the Whittard brand. We decided to repeat the exercise in 2016 to evaluate to what extent the work we had undertaken had ‘moved the needle’. Fortunately, the results were extremely positive, demonstrating that significant improvements had been made across those areas where it had been falling short – i.e. Relevance, Esteem, and differentiation.
The results of this research came at just the right time: after 30 months of hard graft and several million pounds of additional investment the Top Line had not moved. Clear evidence that our existing customers loved what we were doing, perceived us as more aspirational and giftable, applauded our excellent customer service and as a result gave us a top-notch net promoter score was therefore very welcome. The explanation for why this hadn’t transformed the financial performance of the business, was simple: we had neglected the fourth pillar of brand development by failing to build awareness. Our target consumers did not know us while our lapsed customers did not know we had changed – we hadn’t done anything to get the word out and get ourselves on to (or back onto) their shopping radars.
That being said, at almost exactly the same time as the Board was debating the results of the survey, our like-for-like figures started to improve. The business then embarked on an unbroken run of near double digit LFL growth over each of the next 13 quarters. Significantly, over the same period margin growth was consistently ahead of sales as the business steadily reduced promotional activity and the product mix shifted towards our higher margin tea category, whose share of the business has doubled since 2013. Positive ‘word of mouth’ from customers was combining with the growing demand for our products to deliver strong growth in a very challenging UK market and internationally. Whittard was re-establishing itself as the preferred destination for the finest teas coffees and cocoas with an expanding international audience of affluent millennials. It is now well on its way to achieving its goal of becoming a global aspirational brand. In addition to its core UK estate, the business now has 11 stores across in 3 continents with more in the pipeline and a fast-growing international e-commerce business, particularly in mainland China. Together with their customers, shareholders and employees are Savouring this Adventure!