Hua Xiang Yuan Tea of Xiamen (How Mr. Xiao taught Chinese to Drink Tea!)

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Hua Xiang Yuan Tea (华祥苑茗茶)
How Mr. Xiao Taught Chinese to Drink Tea!
by Dr. Bill Brown, Xiamen University MBA Center
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Tiandao Chouqin (天道酬勤God helps those who help themselves)
华祥苑茗茶教中国人品茶
天道酬勤自助者天助

The Price of Tea in China used to be a mystery not just to foreigners but Chinese as well—at least until 21-year-old Xiao Wenhua （肖文华）from Anxi revolutionized China’s ancient tea industry. Even Chinese, with the exception perhaps of experts, could not be sure if they got what they paid for. Wuyi’s “Big Red Robe” tea, for example, is sold in shops and online for anywhere from ten dollars to thousands of dollars per pound, but in reality, with the exception of cheaper 2nd and 3rd generation grafts, this legendary tea is not sold at all. The only way for anyone but heads of state to obtain the rare leaf is through auctions like that held in the 2nd Annual Canton Fair in 2002, where a mere 20 grams fetched 180,000 Yuan ($400,000 per pound). But Mr. Xiao’s innovative packaging, marketing and transparent pricing changed virtually every aspect of this most Chinese of industries. Most importantly, perhaps, was his success in educating Minnan people to appreciate, and pay for, quality teas—quite a feat for a country boy who started his career in Xiamen in 1992 as a poorly paid construction laborer, mushroom salesman and failed shopkeeper!

Background Deng Xiaoping’s visit to South China in 1992 gave a stamp of approval to China’s controversial market-oriented Special Economic Zones. That same year, Xiao Wenhua left his mountain home in Anxi to seek his fortune in Xiamen Special Economic Zone, but with only a high school education and no experience, his first goal was simple day-to-day survival. After a month as a construction laborer, he leased a convenience store, but after he started pulling in a few hundred Yuan a month the landlord illegally evicted him. Mr. Xiao said, “He was a local and I was an outsider, with no one but my sister, so what could I do? I did not understand the law, and I was afraid.” He tried selling mushrooms, but this too failed, and in the end he tried his hand at selling what his own family had been producing for three generations—Tieguanyin tea.

Teaching Chinese to Drink Tea Mr. Xiao’s family had produced tea for almost a century, but Xiamen people were not ready for fine mountain tea. For decades they could afford only the cheapest (two to three Yuan per box), heavily processed teas from which flavor and caffeine kick had been processed out—which may explain why tea in Xiamen used to be so strong it could dissolve a teaspoon. By the 90s, Xiamenese could afford better teas, but while they downed their potent black brews with gusto, they feared that delicate, lightly processed natural Anxi teas might be harmful to health. Mr. Xiao said, “But I told myself to never give up, never regret. I knew my teas were good. I had faith, and confidence, so I never quit.” Xiao just needed a strategy to teach Chinese how to drink tea.

Pedaling Tea Mr. Xiao became a one-man army as he educated Xiamen on the benefits of quality tea. “I used the simplest of strategies (醉土的办法),” Xiao said. “From 1993 to 1995, I pedaled my tea-laden bicycle to 40 or 50 shops, visiting some of them 3 or 4 times. Smaller shops were more open to trying new teas, but the larger shops were hard to crack. I was even run out of some places. But in the end I was successful with all of them—though one in particular was a tough case.”

After Xiao’s 4th visit to one of Xiamen’s largest stores, the owner ran him off, so he changed strategies. “I figured if I met him at his home he might be more receptive, but how to find where he lived? So I decided to secretly follow him home—but it wasn’t as easy as I’d thought.”

Cloak and Dagger Marketing Xiao waited outside the department store at closing time and when the manager left on his motorcycle he pedaled furiously behind him, but could not keep up. The next day, at about the same time, he waited at the spot where he’d left his quarry the day before, and managed to follow him a little further before losing him again. “It was like a relay, every day getting a little further, though some days he did not show up and I waited in vain. I was careful to never let him see me, but on the 6th day I finally made it to his home. He was astonished that I knew where he lived because it was a long way from his store.”

As Xiao had hoped, Chinese hospitality won out and the manager invited him into his home, where Xiao brewed tea for him and won yet another loyal customer. Xiao said, “I worked hard, but in the end I won all of the stores over because I believed in my product. I had to leave my teas on consignment, and some stores closed or moved without paying me, which hurt. But I never gave up.”

Word of Mouth. In 1994, Xiao opened a modest little tea shop on Zhongshan Rd. “Specialty shops had a tough time, and it was hard getting people to spend on expensive teas, so I focused on the people in the neighboring shops. Once I won them over, they told their friends, and the business grew through word of mouth. By the end of the first year I was earning a little, and from 1994 to 2000 I opened 9 shops—all small, only 20 to 30m2—and hired about 30 people. I also started a factory and packaging facility.”

Unique Packaging Tea packaging in Xiamen was not well developed in the early 90s. “Xiamen people just bought the cheapest tea on the shelf so packaging did not matter.” Mr. Xiao visited Shantou, in Guangdong Province, and returned with some very creative ideas. Mr. Xiao said, “Xiamen people had never seen such elegant tea packaging, and it got their attention, even though one jin of my tea went for 40 to 100 Yuan, compared with 20 Yuan for competitors’ teas.”

Mac Tea “By 2000 I had 9 shops,” Mr. Xiao said, “but no one knew it because most tea shops in Xiamen looked about the same. So I decided to create a large flagship store to help build our image and offer free tea tasting to VIP clients who would buy quality teas as gifts. The problem was choosing the right location. To do this I learned from McDonalds.

“McDonalds would never choose a location without a good reason, so when they opened a large store on an obscure new street, I checked the area out. Before I opened my store I asked owners of other shops why they’d chosen that area, and what their goals were. Even so, many people said I was making a big mistake opening a 300m2 tea store because no one had ever opened such a large one before. And I did lose money the first six months, but it paid off, and now many others are copying this idea.”

Mr. Xiao also noted McDonalds’ emphasis on image, and remodeled his other 9 shops to resemble his flagship store. “People were shocked to see Huang Yuan Xiang shops spring up overnight all over town!” Mr. Xiao said. “But they were just my old shops with a new name and face!” Mr. Xiao’s next innovation was standardized pricing.

Sun, Moon and Stars Chinese tea shops, especially in tourist areas, often follow up their free tea ceremony demonstrations by selling their teas at several times its actual value—a good strategy, since many people feel obligated to buy something. Tea merchants also vary prices according to the seasons, holidays, or shop locations. In 2000, Mr. Xiao attacked unreasonable pricing by adopting yet another McDonald’s innovation: standardized packaging and pricing.

“I created 3 main categories of teas,” Mr. Xiao said. “Sun (1000 Yuan and up), Moon (500 to 1000 Yuan) and Stars (under 500 Yuan). The prices aren’t on the packages but you can tell the cost from the combinations. A moon and 3 stars, for example, is 800 Yuan.” Mr. Xiao explained, “Whether expert or amateur, Hua Xiang Yuan customers always know what they are getting and what it should cost. Prices never vary. And the packages include an explanation so gift recipients can know how much you spent without you telling them.”

Going to Pots Mr. Xiao expanded the market for fine teas even further by expanding into the production and sale of fine tea sets and utensils. “In 1995 and 1996, Taiwanese tea shops became very popular in Xiamen, even though they were very expensive—several hundred Yuan for a pot of tea. So in 1997 and 1998 I started making fine tea sets for home use. Of course, this increased our tea sales because no one would brew cheap tea in an expensive tea set. And many Minnan people bought the tea sets as gifts for Northern Chinese. This too helped increase tea sales, because no one would brew northern tea in a Minnan tea set.”

Going National Mr. Xiao’s success in Xiamen gave him the impetus to open shops in other provinces. Here, however, he may have made a tactical error. “Those places had money, so I decided to go there before I targeted the rest of Fujian, but I had many problems. Shanghai people had lots of spending money but they were not as quick to spend money on quality tea as we Minnan people. Another problem was that they were used to green tea, which you brew and drink differently (larger cups, for one thing). Our Shanghai business is still not doing well even today. Shenzhen is doing a little better, but it is hard getting a foothold without good local connections. Were I able to do it over again….” Still, his teas are now sold in almost 100 shops around China, as well as in numerous other countries.

Coping with Competition I asked Mr. Xiao how he viewed the increased competition, now that chic tea shops are on every corner. He said, “We are in the forefront of the industry, but the large, powerful competitors are good for us because they give us incentive and pressure for faster and better change, products, and service. And competition is good for the market—but only if the government helps regulate industry practices and quality. Many small companies with no standards try to create special brands. We need standards.”

Mr. Xiao’s friend, Mr. Shen Tiantu (沈添土), Chief Editor of Xiping Tea Magazine (《西坪茶叶》主编), noted that China has 80 million tea plantations—most of them tiny and poorly run, with low standards. Anyone can do this because entry barriers are so low. This leads to problems with product, pricing, packaging and quality. “

“Attention to detail; always seek perfection” (注重细节，不断完善). Quality is certainly not a problem at Hua Xiang Yuan, where Mr. Xiao scrutinizes quality at every stage, from picking to packaging. His 100 hectares of organic high altitude tea plants thrive on an Anxi mountainside at over 1000m, nourished by fine soil, clean air, mountain mists and pristine mountain water. National-level senior tea appraisers in Tong’an’s 2-hectare ISO9001-certified processing center judge every detail, from appearance, bouquet, taste and hue (汤色) to leaf bottom (叶底). Some of the finer grades require over 600 days of processing. Personally, I don’t even know what “leaf bottom” means, but I can vouch for the taste, which lingers sweetly upon the palate long after I’ve drained my miniscule Minnan teacup.

Award Winning Tea Hua Xiang Yuan has won over 200 domestic and international awards and was designated as the official tea for Beijing’s Diaoyutai State Guesthouse (钓鱼台国宾馆). It 2006, it was chosen as the commemorative tea for the “United Nations Silk Route Investment Forum” (联合国丝绸之路投资论坛纪念茶”). Mr. Xiao is perhaps proudest that when the new Beijing International Airport opens for the 2008 Olympics, the only tea shop will be Hua Xiang Yuan—fitting, I think, because Mr. Xiao is an Olympian in his own right—but he is not resting on his laurels. He’s considering going international, but he’s cautious. He said, “Foreign purchasers want to buy tea by the ton and market it under their own brand names.” True—but with luck, Mr. Xiao may do for Chinese tea what Blue Mountain did for Jamaican coffee, and make Hua Xiang Yuan a household word worldwide.

Mr. Xiao’s Success Secrets? Mr. Xiao has done quite well for a 21-year-old with only a high school education, and I asked him his secret. He replied, “The key was hard work and spirit. Most Anxi people have spirit, of course, and many leave Anxi to seek their fortune, but few find it. But God helps those who help themselves!”

Mr. Xiao also emphasizes teamwork. “It was a one man show in the beginning but as the company grew I developed a core team (Hexin Xiaozu核心小组).to work through problems and ideas. That team consists of 5 people, none of whom are from Anxi—mainly because most of my contacts are based in Xiamen. The key is to never cease improving the team’s corporate culture and quality (不断的努力来创造自己的文化和品质，很好的团队).

3-Years of Tea School! Want to learn more about Anxi tea? Hua Xiang Yuan has teamed up with Xiamen’s Little Egret Art School (小白鹭民间舞团) to provide a 3-year program in tea culture and arts. Courses cover Minnan tea ceremonies, history of tea culture, tea practices, tea-related cultural courses, South Fujian dialect, ballads, Southern opera, dance and vocal training, tea production and marketing, etc. If you haven’t got 3 years, visit Hua Xiang Yuan’s elegant two storey, 300m2 flagship store on Xiamen’s He Xiang Rd., or visit website: www.hxytea.com
E-mail: hxy@hxytea.com Tel: (0592)505-0588

Acknowledgment: Thanks to Xiamen’s Secretary General Mr. Cáo Fàng (副秘书长曹放) for introducing me to Mr. Xiao.
鸣谢：感谢厦门秘书长曹放把我介绍给肖先生。

Mr. Shen Tiantu (沈添土), Chief Editor of Xiping Tea Magazine
中国国际茶业博览会顾问安溪茶叶协会副秘书长
《西坪茶叶》主编
福建省厦门市七星西路196号501室 361012
592 8812389 0595 23316888 手机：13505043609 传真：0592-5320373
xipingtea@sina.com

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