HONG KONG
Fortnum and Mason’s London grocery store is one of the emblems of the high end, royalty-tinged, tradition-embodied English tea. It was founded in 1705. Only now is it venturing beyond the “sceptered isle” and “seat of majesty” – Shakespeare’s eulogy – and opening its first foreign store and restaurant, in Hong Kong.
Its center London tea restaurant and tins of loose-leaf blends remain its best-known specialty. It has been boosted by its association with the royal family, stocking produce from its farms, including a princess’s honey, enjoying personal royal warrants from monarchs and princ(ess)es, and creating celebratory blends for its tourist-enticing weddings and jubilees. (William Fortnum was a palace footman in Queen Anne’s reign, selling off its unused candlewax to fund his startup.) Queen Elizabeth II personally opened Fortnum’s Diamond Jubilee Salon almost exactly three centuries.
It has distribution contracts in Hong Kong, Japan, and most recently Korea. A 2014 small joint venture with a holding company to operate a Fortnum storefront in Dubai was abruptly terminated in 2017 and the shop closed.
The move into Hong Kong seems motivated by several major forces:
Expansion of markets: Asia is the center for luxury teas, with TWG in Singapore taking upscale upper and upper. Whittard of Chelsea, comparable in its tea heritage to Fortnum moved from near bankruptcy to healthy growth largely through its base of Chinese tourists who become online buyers when they return home.
Fortnum has the brand, heritage, tourist drawing power, and a strong e-commerce platform to target Asian upmarket tea growth.
Brexit: Many observers assume that Fortnum’s move is the start of a more general strategy: look for growth outside the UK. The interminable farce, fiasco, melodrama, and tragedy of Brexit seems to add plot lines, villains, clowns, and alarms by the week. Companies and money – over $1 trillion so far – are leaving.
The problem will be acute for UK tea producers since every single ingredient is imported. Disruptions are already emerging. Katie Hobhouse, Fortnum and Mason’s Chairman elliptically notes that the Hong Kong move is a significant opportunity for its British suppliers who account for almost 90% of its products. Its executives had earlier complained that it is unable to attract and retain European staff, faces unavoidable cost increases, and urgently needs certainty about the resolution of Brexit in order to make business plans.
Fortnum has set record profit levels from tourism and online sales, with six years of double-digit growth. Brexit seems a growth blocker. Asia is now the tea innovation opportunity.