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Wednesday, October 12, 2011

Happy Lemon vs. Serenitea (A Micro Market Analysis)

Happy Lemon vs. Serenitea
A Micro Market Analysis

Jonee Bilasano
Yna Cruz
Marc Guison
Maris Lim
Jaja Sahilan

A Report Submitted to
Professor Jorge Saguinsin

In Partial Fulfillment of the Requirements in Entrepreneurship

AGSB, Rockwell Center
Makati City


Led Zeppelin. Heidi Klum. Maggie Grace. Oprah Winfrey. Gwyneth Paltrow.

The names above have one thing in common: they are all celebrities. They bask in limelight and drown in adulation. But, aside from the glitz and the glamour, they all have another thing in common. They all love tea.

Tea, however, had been in vogue before these celebrities have patronized them. It has been a beverage in China as early as 10th century BC. Many nations throughout history have savored it and some of them are China, Japan, Korea, Vietnam, Greece, India, Iran and Turkey.

Also, aside from being considered as a run-of-the-mill drink, tea presents supposed health benefits. Some authorities say that drinking tea allegedly helps in preventing cancer. There are experts who say that those who consumed tea are less likely to decline cognitively compared with those who don't drink it at all. Of course, there are detractors who say that drinking tea can also cause coronary disease. Some even say that the consumption of various forms of tea results in acute liver damage. Considering all of these, tea therefore can be divisive.

There is, however, another way that people uniformly view tea: it can be a viable product or business. In fact, almost all restaurants in the country offer iced tea. Nestle makes money out of Nestea. Different coffee shops like Starbucks and Coffee Bean and Tea Leaf offer variations of tea. Tea indeed is a profitable business venture.

Nowadays, there is a new tea craze sweeping the metropolis. People line up to savor this new incarnation of tea. Some even spend more than 30 minutes just to drink this new fad. It is milk tea.

Having observed that selling milk tea is a booming industry, the authors of this report decided to conduct its research on two of the more prominent brands in the country: Happy Lemon and Serenitea. This report therefore shows how the authors conducted their research relative to these two businesses. Most of all, this presentation, though grounded in observational study, presents believable results. And perhaps by producing this written work, others who may want to do business in the milk tea industry may think one way or another. 

Scope and Limitation

The scope of this report covers the following establishments: Happy Lemon branch in Eastwood Mall, Eastwood City, Pasig City and the Serenitea branch in Cybermall, Eastwood City, Pasig City. The authors observed both businesses from 8:00 pm up to 9:30 pm on 5 October 2011 respectively.

And as for the subjects of this study, the research was only limited to observing the personnel of these business and their respective customers.


In line with the parameters of this report, the method employed in this study was purely observational. Specifically, the authors' of this written work resorted to naturalistic observation, which means "observing subjects in their natural environment." (4th Paragraph,

And to further ensure that the occurrence of the Hawthorne Effect would be downplayed or excluded altogether, the authors did not inform the subjects about the study. Thus, the authors practically were low key observers, jotting down notes and recording data while their subjects were oblivious.

Background of the Businesses

Happy Lemon is not an indigenous business. The brand, in fact, is originally from Hong Kong. And it was only brought to Philippine shores via the efforts of Kelvin Gaisano, Kristine Gaisano, Chris Tiu, Andy See, Wesley Pardilla, and Edward Go.

These entrepreneurs, incidentally friends since grade school, wanted to enter the milk tea industry. They felt that there was a demand for this kind of product.  But, they were in quandary since they couldn't find a brand which soothed the Filipino palate. And "In their quest to find the best milk tea, the seven young businessmen went everywhere and tried different milk tea brands. One day, they chanced upon Happy Lemon, a Hong Kong-based milk tea business that has been in the market since 2006." (Lee & Baniqued, 14th paragraph, Manila Bulletin, 2011)

After finding Happy Lemon, these entrepreneurs started the arduous and tedious process of trying to a secure a franchise locally. At first, they received no reply. But, they didn't stop and decided to write Happy Lemon in Hong Kong again. And after preserving, they hit pay dirt: Happy Lemon's management responded and said that it was open to pursuing business opportunities in the Philippines. Meetings then followed, and the rest as they say is history or current history for that matter because in 2010 Happy Lemon opened its doors locally.[1]

On the other hand, there is Serenitea, a company founded by Juliet Herrera and Peter Chen in 2008. Unlike Happy Lemon, this brand is homegrown; it is Filipino in corporate origin.

The founders, after college, wanted to put up their own business. They thought of tea because coffee already is a saturated market. "Realizing this, the two immediately went to work by doing the necessary research which led Chen to go to Taiwan and immerse himself in studying the making of tea. That is why in making their drinks, all the ingredients are source [sic] from Taiwan. After this, they immediately went to work and the first branch of Serenitea opened in San Juan."[2] (Villano, 4th Paragraph, Philippine Star, 2010)

The founders also claim that their brand is different from the competition because customers have the option to choose the sugar level or content of the drinks they're purchasing. Quite innovative.

Now that the parameters and preliminaries have set the stage for the report, the next step is to present the findings of the authors.

[1] At this juncture, the local franchise has three branches: Greenhills, Power Plant Mall, and Eastwood Mall. The branch in Eastwood Mall is the subject of this report.

[2] Serenitea, at this stage, now has four branches: Paranaque, Banawe, San Juan and Alabang Town Center

Observational Study Chart

Definition / Innovation[1]
Happy Lemon, Eastwood Mall, Eastwood City
Observation done on Oct5, 2011 from 8:00-8:30PM
Serenitea, Cybermall,  Eastwood City
Observation done on Oct5, 2011 from 9:00-9:30PM

Customers (Who)
Individuals or organizations that use or consume a company's offerings to satisfy certain needs
Customer Attributes:
1.  Male/Female – Although females comprised 60% of the sample customer base, Happy Lemon seems to be non-biased when it comes to gender.
2.  Age – Customers mostly range from 18-29 years old, comprising 75% of the 20 individuals randomly observed for this analysis.
3.  Culture – Happy Lemon's façade and packaging suggest an affinity with the Chinese culture as given away by the noticeable Chinese sub-texts. Such didn't stop Filipinos from patronizing its products, though.
4.  Location – Customers – either in corporate attire or casually in shorts – seem to be from around the area, either working or living in Eastwood.
5.  Financial Ability – With Happy Lemon's prices ranging from Php60-110 a drink, customers seem to belong to classes ABC1.
6.  Buying Habits – 55% of the sample customer base took their drinks out. Of those that took out, 67% came and lined with a friend from the opposite sex. Of those that came with a friend, 44% went to see the movies. Of the 45% that dined in at Happy Lemon, 67% were couples and 33% were families. Of the entire sample customer base, only 5% had shopping bag/s.
Customer Attributes:
1.  Male/Female – Oddly similar to the other establishment, 60% of Serenitea's customers is comprised of females. However, just the same, Serenitea is non-biased in terms of gender.
2.  Age – Serenitea's customers are equally distributed across different age groups, specifically, of 18-29 years old and 30-49 years old, each totaling to 50% of the sample population.
3.  Culture – Chinese affinity is also evident in Serenitea due to the Chinese characters plastered across its façade and product packaging. Most customers, though, remain to be Filipinos.
4.  Location – Customers, mostly clad in corporate clothes with Company IDs, appear to be from around Eastwood.
5.  Financial Ability – With prices ranging from Php35-125 a drink/snack, Serenitea's customers are usually from the ABC1 classes.
6.  Buying Habits – 50% of the population sampled took their drinks out, with 80% of such accompanied by a colleague. On the other hand, 100% of the remainder of the population (50%), stayed with a group of people, mostly ordering snacks to go with their drinks. Most buyers are usually repeat customers.

Discover unmet customer needs or identify underserved customer segments

Presence (Where)
Channels of distribution that
a company employs to take offerings to market and the places where its offerings can be bought or used by customers
Happy Lemon is located at the 4th/ Top Floor of Eastwood Mall*, between Starbucks and Cinema 7, across Timezone Family Entertainment Center, and a few steps from the escalator. Happy Lemon itself has an approximate capacity of 16 seats – 12 lounge sofa chairs and 4 cushioned stools. To Happy Lemon's advantage is the mall's lounge area within its proximity – about 50 seats all-in-all, available for use of Happy Lemon's customers. Around the vicinity, too, are other restaurants and establishments such as McDonald's, Red Box, Candy Corner, and Eastwood Cinema's Concessionaire Stand.

*Eastwood Mall, a 4-Floor recreational building, is at the middle of Eastwood City, located beside both commercial and residential buildings.
Serenitea is located the ground floor of Cybermall*, right beside the entrance, before Abenson's, across Krispy Kreme Doughnuts, and few steps from the escalator. The establishment has about 21 seats – mostly of hard plastic but with several cushioned ones.  Nearby establishments are National Bookstore, BPI Family, and A1 Driving.
*Cybermall, a 30-Floor (approx) commercial building, is at the entrance of Eastwood City, located beside other commercial buildings such as IBM Plaza and Citibank.
Create new distribution channels or innovative points of presence, including the places where offerings can be bought or used by customers

Offerings (What)
Firm's products and services
Happy Lemon currently offers specialty beverages in tea and coffee bases. Best seller, as per the store's service crew, is Cocoa with Cheese and Rock Salt (Php80-90). Drinks are non-customizable.
Serenitea has varied tea offerings and finger-food snacks, of which Okinawa Milk Tea (Php75-95) and Chic 'n Chops (Php75) are considered best sellers. Drinks are customizable.

Develop innovative new products or services
Value Capture
Mechanism that a company uses to recapture the value it creates
Given that Happy Lemon only served drinks, Average Sales per Visitor (ASV) is synonymous to the price of their drinks. If we're to assume that each customer would buy the lowest-priced beverage, ASV would be Php60.
Serenitea's strategy to include snacks into their menu increases their Average Sales per Visitor by about Php17.50. Assuming that each customer opting for takeout avails of the lowest-priced beverage (Php65), while each customer opting to dine-in avails of both the lowest-priced beverage (Php65) and snack (Php35), ASV would be around Php82.50. Serenitea's Loyalty Card also helps with marketing the establishment.
Redefine how company gets paid or create innovative new revenue streams
/ Platform (How)
Configurations of business activities used to
conduct internal operations
Given Happy Lemon's fixed/non-customizable set of offerings, they have applied a modular process design. Each element of the drinks has already been pre-prepared, making it easier for service crews to put an order together. However, people still wait and crowd around the area, probably attributable to the fact that Happy Lemon doesn't follow an assembly line. Each crew is responsible for a certain order, as such, bottlenecks really are bound to happen. Tables, too, are not cleared on time because operating processes have not been perfected and so employees become preoccupied with taking (and coming up with) orders.
Serenitea's customizable drinks create major operational issues. Because customers can choose the base, sugar levels, and "floaters", Serenitea's production floor always seem to be chaotic. The company, however, has made attempts to put some order into the business by investing on sticker labels for each drink (detailing the order, down to the level of sugar) as well as buzzers (sometimes faulty) to notify customers of ready orders. To manage long lines, a service crew is often times pulled out from his/her station to assist the cashier in taking orders. Similar to the other establishment, tables at Serenitea are hardly cleared.
Redesign core operating processes to improve efficiency and effectiveness
The way in which a company structures itself, its
partnerships and its employee roles and responsibilities
Happy Lemon has 4 employees stationed at Eastwood – 1 acting manager, often times helping out with order-taking, 1 cashier, and 2 servers tasked to complete orders.
Serenitea has 6 employees stationed at Eastwood – 1 cashier/order-taker, 1 service crew to prepare snacks, and 4 servers tasked to complete orders.
Change form, function, or activity scope of the firm
Customer Experience
Considers everything a customer sees, hears, feels and otherwise experiences while interacting with a company at all moments
Areas contributing to CE:
1.  First Impression / Employees' Level of Engagement – Employees were warm and accommodating. Customers were eagerly greeted by the crew with a smile. Crew also suggested bestsellers to first-timers – or those who'd like to try something new, without falter.
2.  Level of Service – Average service time from time of order placement until the time of order receipt is 5:57, 2:25 being the shortest, and 9:04 the longest.
3.   Delivery against Promise – Drinks are consistent to what the customers expect. To those that know what they want and would always purchase their favorite drink, they can be assured that what they receive will be of the same quality as their last. For those trying out drinks for the first time, they can expect the same level of "taste bud-tickling" in whatever drink that they are surely to enjoy.
Areas contributing to CE:
1.  First Impression / Employees' Level of Engagement – Service crew, specifically the cashier / order-taker, lacked warmth when welcoming guests. Instead of a smile, the crew opted for a nod as if gesturing to the guest to proceed and give out his/her order.  The service crew also lacked a sense of responsibility / initiative to look for customers with long-pending orders.
2.  Level of Service – Average service time from time of order placement until the time of order receipt is 13:18, 9:25 being the shortest, and 16:13 the longest.
3.  Delivery against Promise – Given that most of their offerings are made up of "core components" built into their own unique drinks, guests can be assured of consistency in terms of taste and quality each and every time. 
Redesign customer interactions across all touch points and all moments of contact


[1] Sawney, M., Wolcott, R., and Arroniz, I. 2006. "The 12 Different Ways for Companies to Innovate".


At the start, there is a discussion on the scope and imitation, methodology and background of Happy Lemon and Serenitea. After this the results of the observational study are shown as well. And the parameters for the research are: customers, location, and establishment.

Admittedly, this report is succinct and brief, pithy to an extent. But in spite of its abridged nature, the research does speak volumes.

For instance, the data shows the observable demographics of both businesses. Customer profile, i.e., age, financial ability and buying habits can be seen as well. A discussion on the pros and cons of the each establishment's location is shown, too. Of course, this report wouldn't be complete without a deliberation of both businesses' product offerings. More important, the written work analyzes customer experience. This is vital since any business that wants to thrive must be customer centric.

All in all, the authors learned from this research. They now have a better understanding of the milk tea industry. But aside from that, their powers of observation have been sharpened and heightened by this project. This will come in handy once they try to put up their respective businesses in the future. For that alone, this study was worth it.  4

Comments by Prof:

This is an exercise in Micro market analysis.  It is a preparation for making a business plan.  Estimating the market follows from this observation  An entrepreneur must be able to make a direct observation.  OLO:  Observe Learn Observe

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