A (3:02)

So there are different types of teas and matcha in Japan is somewhat a special category like matcha specifically. It's either as a tea ceremony that you drink matcha or as an ingredient as part of something, something else like matcha flavored snacks and what have you. And outside of, like, when I was growing up, I remember, I mean, this must have been. Gosh, I was barely a teenager, but I remember the first time that matcha ice cream was on the market and I think I may have been around 10. I remember eating the ice cream and it was so bitter that I couldn't eat it. And since then, you know, a couple decades fast forward, must be at least 10, if not more years ago that that we started to see matcha incorporated into say, drinks like matcha latte. And I think you can get matcha latte today in Japan, but kind of like California rolls.

B (4:14)

Is matcha latte blasphemous to the Japanese?

A (4:18)

I mean, I don't think a Japanese person would have thought of matcha latte as a drink. Yeah. Because also, again, not slightly, slightly different from matcha, but like green tea, which is slightly different from matcha. Right. Like matcha is a powdered drink, whereas green tea is tea leaves that you brew and you drink the tea. Right. So it's like, I mean, I'm getting technical and I remember like some of my American friends who were living in Japan, again, this is like long time ago, they found regular green tea to be too bitter, so they would put sugar into green tea. And again, to a typical Japanese person, you don't think of doing that.

B (5:00)

Yeah, it's a ceremonial drink. Right. Like you have a whole ritual around it and you have the whole equipment and it's quite an event. Like you kind of do it.

A (5:11)

Yeah. And it's a very specialized ritual. So it's not a regular household ritual that everybody does. Nobody does it. Like today it's become so specialized that you might do it as a hobby or you might do it as a special thing. But it's not an everyday occurrence that you go to a Japanese person's house and you see a matcha ceremony in their house. It's not like that at all. So it's become a still cultural but a very peculiar aspect of the larger Japanese culture.

B (5:45)

We could trace that sort of explosion of matcha adoption today to really the fast foodification of matcha.

A (5:55)

Yeah.

B (5:55)

So Blank street is a coffee shop in New York. It started there.

A (6:00)

Yeah.

B (6:01)

I think in five years, they're in like 90 locations all across the UK and US.

A (6:05)

Oh, wow. Yeah. Yeah.

B (6:06)

They make a lot of money doing sort of very fast automated espresso and matcha mushrooms.

A (6:14)

Yeah, yeah.

B (6:15)

And the matcha is, you know, matcha latte, but they do kind of crazy customization to it. So like blueberry matcha, white chocolate matcha, rocky road matcha and so on. And that's just caught everyone by storm because it's, you know, like you said, plain Matcha or default Matcha is quite bitter.

A (6:32)

Yeah.

B (6:33)

So they added all those layers on top of it.

A (6:34)

Sugar, basically.

B (6:35)

A lot of sugar, different flavors, customization. Very Instagram friendly.

A (6:40)

Yeah.

B (6:41)

And so on. And it's, you know, kind of taken the world by storm.

A (6:44)

Yeah. I think, I mean, you said the food ification. I think it's also, if this is a word, tick tockification of food as well. I think we're probably saying the same thing. And Matcha in the recent years and, you know, just having a mix of green and white is much more Instagram friendly or TikTok friendly in terms of the visuals than let's say, brown, brown water.

B (7:11)

Right.

A (7:11)

You know, and also like, you know, green and pink or those like green and blue. I've seen blue as well. The visual representation, presentation aspect of it, I think helped quite a bit in the recent rise going back to that Suntory guy who started Kuse Mache, because I happen to have met the founder maybe about a year or so ago, and I got to talk to him actually on record not too long ago about the founding of his company. And he said that he found. So when he was still working for Suntory, he was living in the US at the time, before this is before IDEO worked with his company, with Suntory, but it was like around 2014 or 2015, he happened to be in New York on a quick business or personal trip. And back then, this is 10 years ago, he noticed some cafes, not a lot of cafes, but some cafes serving matcha drinks and noticed just enough people drinking matcha at multiple places in New York that he felt, oh, this could be an indication of a new trend. So he then convinced the Suntory people to say matcha drink or just tea drink, but Matcha drink specifically should be sold more widely in the US So he convinced Suntory to start the matcha business that you talked about in San Francisco. There was a cafe in San Francisco that was serving matcha drinks specifically, and he was the one who. Who was in Charge for it.

B (8:48)

That's right. Stone Mill Matcha. That's right.

A (8:50)

Is that the name of the cafe?

B (8:53)

Yeah, I do the branding, I believe. And the founder. Right. When he started the company, this was.

A (8:59)

I see, yeah.

B (9:01)

Yeah.

A (9:01)

So that was a Suntory backed venture.

B (9:03)

I don't know if it was Suntory backed, but he. I know it very quickly spun out very shortly after Stone Mill Cafe launched.

A (9:09)

Yeah.

B (9:10)

But, you know, I mean, I think the biggest story here is like, why did it take so long for Matcha to, you know, kind of get an espresso version of it? Which is really what Kuzen Matcha is. Right. It's a very kind of automated way to prepare Matcha at home. Very similar to Nespresso.

A (9:30)

Yeah.

B (9:30)

And it makes me, you know, sort of wonder around the sort of cultural fluidity, you know, and maybe coffee is much more, you know, present everywhere because of a lot of immigration that happen.

A (9:45)

Yeah, yeah.

B (9:46)

And maybe there's just less sort of cultural exchange that way.

A (9:51)

I think specifically for coffee, the distribution of the population, I think helped over many, many decades, if not centuries. Matcha just happens to be so specific to come from a singular country or single culture. And on top of that, there isn't as much diaspora of Japanese people of matcha drinkers going to so many different countries and so many different cultures spreading it versus, say, coffee or even the regular tea. So that's, I think one. I think the other thing, like in, in the case of cuisine Matcha or this specific example is the combination of the local original heritage inside of the original heritage of Matcha. So this guy, Ejo Scada, who was at Suntry and who's the founder of Cuzia Macha, he was part of the tea business Asantree. So he knew the tea business inside out quite a bit and he understood the culture and the manufacturing aspect of Matcha, the original sort of matcha manufacturing process. But also I think the other thing is that him having the understanding but coming to a different context and seeing that, say in New York, which is quite literally the opposite end of Japan, and seeing the original thing sort of consumed in a different context by different people. I think taking things outside of the context is another thing that that was needed for somebody to realize.

B (11:17)

I'm just trying to figure out like why it took till the 2010s at minimum, at minimum, 2010s. If you look at coffee, obviously it goes back centuries, right?

A (11:28)

Yeah.

B (11:28)

But if you look at even say a more recent phenomena like Boba, like Boba tea, I remember it becoming exported probably around 2000s. Early 2000s. Early 2000s.

A (11:45)

Yeah.

B (11:46)

Even probably like late 1990s. I remember it used to be like an awkward thing that the Asian Americans would go during high school to get a boba tea. And it was considered very weird, like 98 early 2000s. You know, 2002 was when it sort of got really popular.

A (12:06)

Yeah.

B (12:07)

But it's kind of, you know, stayed on and the flavors have continued. But yeah, it took around then when that bubble tea, which was still a very new concept from Taiwan to be exported. And obviously Taiwan has a very long tea culture and very similar Boba is sort of the fast food version of their tea culture. Just if you go into Alishan and you know, sort of the, the tea mountains, their tea is extremely premium. There's an entire ritual to preparing that tea. You know, the double rinse, the temperature, the time to be steeped. It's all quite ritual, you know, quite ritualistic. And then they packaged it into this fast food version, Instagram version of Bob, like, you know, that's called boba tea. And added little pearls to it. I don't know where the pearls came from. I gotta dig into that. And then exported that and that sort of took off. I mean, largely in the U.S. i would say, not so much Europe, but in Southeast Asia and Asia generally it's very popular. Like it was a time where you couldn't walk five steps without seeing a boba shop.

A (13:14)

Right, right, right, right. Yeah. But just to double click into why does it take so long for something that seems so I, I, I might not even say obvious, but something that is to go back to the matcha machine and the coffee machine that we. Oh, the espresso machine. There was something that was very similar that existed in a slightly different adjacent but slightly different product with coffee and making an espresso. Right. In a very convenient. So instead of having to grind the coffee and then put it into a scoop and then pressing it, you know, Nespresso came up with a pod that you can just put into a machine and then burn. So Kuze Matcha product is very similar in terms of the concept. It's just a different ingredient. Right. And to sort of try to unpack the mystery of something that seems relatively straightforward for it to take many, many decades for that to be invented. A cultural insight, the origin insight, cultural insight, meaning like matcha being consumed overseas and then somebody understanding enough like the technicality of it and being able to either have the money and, or the will to spend to create it. Those three things are the Nuggets that I can find.

B (14:46)

I think it's classic innovators dilemma. Right. So like. Yeah, innovators dilemma doesn't usually happen to a culture. It happens to an enterprise where. Yeah, you have a sort of a, you know, some sort of baked system or established system that's like working.

A (15:03)

Yeah.

B (15:04)

And you find it hard to break patterns. Right. There's an adherence to that and typically it takes an outsider or a labs or something that's slightly outside or adjacent to the core, the margins or the fringe to be able to disrupt it itself. And a lot of big companies struggle to do that. And I wonder if that applies to culture as well. I mean, Blank street was started by, you know, to Americans, probably Gen Zers.

A (15:32)

Yeah.

B (15:32)

Who weren't Japanese. They loved Matcha and wanted to make it quick and easy to drink it.

A (15:39)

Right, right, right. Another story that came to my mind that's very different from the Matcha, the coffee, the food industry or even the cultural industry. Do you know about Audi's foray into the Formula one and how they managed to become number one?

B (15:56)

No.

A (15:57)

You know the story about.

B (15:58)

So, no, I don't know. Please tell me.

A (15:59)

Yeah, so this is probably about 15 years ago and Audi decided to enter the. Not the Formula One, but there's a race called the 24 Hour Endurance Race called the Le Mans. It takes place in France and it's different companies competing for 24 hours, you know, full day, different drivers, obviously, but one car, different drivers and then the, the crew, you know, making sure that the car runs smoothly for 24 hours straight. Right. And Audi decides to enter that race. This is back in like two, 2006. Five, six. About 20 years ago. And a couple years after they entered, they become number one and they dominate the race for several years. What they did wasn't about making the car go faster, but some engineer, Audi, said, you know what, instead of trying to make the car go faster, why don't we design the car, the engine and all the parts of the car to break less so that the racing car doesn't have to come into the pit stop as often as other cars. So it was less about making the car go faster for 24 hours, but it was about making the car stop less so that over the course of 24 hours that the car didn't have to make as many pit stops as the other companies. And then when they did that the first year, they won by the biggest margin. Like each year, you know, the margin was only like a couple of minutes. But then when Audi did That the, the margin of victory was so much bigger than any of the previous years and then they dominated the race for many years to come. So it wasn't like an amazing innovation, but you were just like looking at it from a slightly different angle and then focusing their energy on something else and help them innovate in a major, major way. So like when you mentioned the innovators dilemma, sometimes it just takes a slightly different perspective to make something new drastically better.

B (18:26)

Yeah, 100%. I think I'm always, I mean my entire career has been around that. So like breaking assumptions and breaking patterns. Right. And I think it's actually quite hard to do. It's quite hard to do when you're inside the culture. And then I think the question is for both companies and cultures, like how do you keep or preserve tradition and legacy while also allowing for innovation in there.

A (18:51)

Yeah, yeah. And then just having that kind of slightly different angle to take a look at the same problem from a slightly different angle or in a slightly different light and focusing on a different problem to solve as opposed to trying to fix or make something better, the existing thing better. But then change something from a different angle can result in a major improvement.

B (19:18)

Or just allowing for openness, allowing for diversity of ideas is how I call it. I think that's really important. And I think that sometimes when a system or a culture is so entrenched, it doesn't allow for flexibility in thought.

A (19:36)

Yeah.

B (19:36)

And I think that that can be an Achilles heel for, you know, a lot of companies.

A (19:41)

Yeah, yeah.

B (19:42)

I mean, I would say the next, probably the next, I think, global trend, you know, going kind of going back to food. I can think of so many. I can think of instant coffee. Instant coffee has not been innovated for a long time. You know, those packets and you know, freeze dry coffee. Yeah, yeah, I can see that totally taking off. I think that's one probably Vietnamese coffee or Thai iced tea. Although it's really somewhat popular. I can kind of see it going, you know, in an interesting, kind of interesting direction.

A (20:12)

Yeah. Can you think of anything else that may have the possibility or the opportunity to take off? It doesn't have to be. Yeah, it doesn't have to be in the food industry.

B (20:23)

Yeah. And that's an interesting one. I mean, you, you come from a culture that's very rich in tradition. I'm kind of thinking of any other traditions that's worth probably, you know, some.

A (20:33)

Exploration around one of the topics that we talked about recently. I think the topic last week was the love economy and like the virtual pet or the virtual companionship industry may have an interesting growth opportunity. Yeah. I think it's potentially tricky and sensitive industry just because it becomes so personal and you know, the line between what's real and what's virtual can be a very tricky territory to explore. Whereas things like, you know, food is, it's a real thing, a physical thing that you consume. So there's less sensitivity around, you know, what's virtual versus what's real.

B (21:20)

Yeah. If we go back to the business of food, which is interesting how this episode turned out to be. I mean I would argue that these beverages by the way, which are extremely high margin businesses in terms of just the drinks itself. Right. It's like$7.8 per pot for sort of ingredients that probably take a lot less to make.

A (21:40)

Yeah.

B (21:41)

I would argue that that sort of segment is commoditized. So you know, whether you get coffee from A or B or C or chain store, it's largely more or less undifferentiated right now.

A (21:55)

Yeah.

B (21:55)

So I think what's interesting is like brands that can differentiate themselves. So people who, they don't just sell Matcha but they sell like customization on top of Matcha.

A (22:04)

Yeah, yeah.

B (22:05)

Which I think is interesting. Another dimension to sort of differentiate is around price. So Luckin coffee is lucky.

A (22:13)

Yes, yes.

B (22:14)

Have you had that was in New York?

A (22:16)

I, I have not had it. I see it popping up like literally within four block radius of my.

B (22:22)

So their entire strategy, two or three. Their entire strategy is around like coffee is commoditized. So we're just going to make you the best cheap, consistent coffee you can find.

A (22:33)

Yeah.

B (22:34)

Going back to the chain store. I mean if you go to a Starbucks right now, it's just so expensive.

A (22:37)

Like seven bucks, eight bucks, seven bucks.

B (22:40)

So there, I don't know how much it is in the US but in China it's like a 150 or $2.

A (22:45)

Oh wow.

B (22:46)

Per cup. So all they do is like cut OPEX like aggressively so that they can deliver the cheapest, most consistent coffee.

A (22:54)

Right.

B (22:54)

You know, just like that's the entire model.

A (22:57)

I see, I see one Lucking store just a couple blocks away from my place and I see on my way to the subway station and they're giving away a trip to Kyoto as a way to get people to be to download their app.

B (23:12)

They know their audience is what I can say.

A (23:14)

Yeah, it's this Chinese brand trying to make it in the US Selling Matcha and then giving away a trip to Kyoto.

B (23:23)

They know their audience, they know Their audience, they're like, who doesn't want to go to Kyoto for a visa?

A (23:27)

That's right.

B (23:28)

That's right. But yeah, so like, you know, dimensions where sort of highly commoditized industries can differentiate would be either hyper customization or personalization or just price.

A (23:39)

Yeah, well, I mean, lucky, I guess, is definitely competing on price and. Yeah. And accessibility to it. I mean, like I said, you know, they have opened just multiple locations in my neighborhood alone, so they're going aggressively. And it's also interesting, like the timing that they decided to enter the US market. Yeah. Politically, it's probably not the easiest for a Chinese company to enter the U.S. market.

B (24:04)

You know, doing the McDonald's model. I think that's interesting where you just deliver the same product but just at a. And I think consumers are, you know, quite hungry for it. Something that's just reasonably priced.

A (24:16)

Yeah.

B (24:16)

Consistent. I think this is the right, in some ways, the right time for them to do it.

A (24:20)

Right, right. Cool.

B (24:21)

For the strategy.

A (24:23)

So just to wrap up, what do you take away from this conversation?

B (24:26)

I think it's interesting. I think they're. My takeaway is probably what we last talked about, which is in order to differentiate in a very hyper competitive market, it's either on the dimension of taste, which is customization or price. And I think that those two are interesting levers to play with.

A (24:45)

Yeah. My takeaway is related to the innovations dilemma topic that you mentioned. Sometimes a new opportunity is right under your nose and it just takes either somebody else from outside to look at it and then notices that opportunity. Or like the Audi case, you know, these engineers have worked in the car industry for a long time, but somebody had a brilliant, simple and brilliant idea just to look at it from differently and to solve the problem differently. That led to a much, much bigger improvement than they anticipated. So maybe like, you know, if you're stuck at one problem solving, then hey, is there a different problem that we can solve to make an improvement? You just, you never know how that might turn out.

B (25:36)

That's a great note to end on. Thank you, Ray.

A (25:38)

All right.