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Tea News for the week ending June 30
| Decade Old Oil Debt to be Settled in $5 Million Monthly Installments of Tea
| India Exporters Expect Iran to Resume Buying Tea Halted Since November
| Israel Declares Wissotzky Tea a Monopoly
| Rohit Jawa Takes Charge at Hindustan Unilever
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PLUS
Organizers of the annual Teas of the World contest hosted by AVPA, the Paris-based Agency for the Valorization of Agricultural Products, announced Aug. 31 is the deadline for submitting monovarietal teas, tea blends, and infusions. Ksenia Hleap, responsible for development and communications at AVPA, updates us on the 6th annual competition.
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Barter Eases Constraints Imposed by Sanctions on Iran
By Dan Bolton
Iran and Sri Lanka in July will resume bartering tea.
In a related development, Indian exporters say a resumption of tea shipments from India to Iran is expected soon.
The barter agreement with Iran is to settle an outstanding debt incurred in 2012, effectively bypassing Western sanctions and easing financial hardships in both countries caused by politics, economics, and war.
Terms of the agreement with state-run Ceylon Petroleum Corp. call for Sri Lanka’s treasury to transfer the equivalent of USD 5 million monthly in rupees to the Tea Board of Sri Lanka. The funds will then be paid to exporters. According to Tea Board Chairman Niraj de Mel, Iranian tea importers will pay the National Iranian Oil Company in riyals.
Sri Lanka’s plantation ministry issued a statement assuring all parties that the agreement “will not violate UN or US sanctions since tea has been categorized as a food item on humanitarian grounds. None of the blacklisted Iranian banks will be involved in the equation.”
Trade will begin in July as Sri Lanka exporters initially ship an estimated $2 million worth of tea per month to offset $251 million owed Iran, according to the publication Iran International. The announcement resurrects an agreement signed in December 2021 with Iran’s Trade Promotion Organization to replay the debt in 48 installments.
De Mel explained that barter is a mechanism by which Sri Lanka will make good on its debt. The more pressing concern is production. QUOTE “This year to date, Sri Lanka has fared poorly in supplying Iran largely due to the sharp rise in tea prices for Ceylon tea and, therefore, to the benefit of India. There is at least a good $2 to $3 difference in price between us,” he wrote. In past years, Iran spent as much as $125 million buying Sri Lankan black tea, an expenditure that declined to $70 million in 2022.
In November 2022, Iran stopped issuing a Register Proforma on invoices from Indian suppliers. The Proforma document is mandatory to land tea at Iran’s ports. Anshuman Kanoria, chair of the India Tea Exporters Association, said he expects that trade will soon resume.
Kanoria cautioned “not to read too much into this. Indian tea remains the preferred cup in Iran. Iranian importers have clearly resumed purchases, and a full resumption of registration of contracts for the import of Indian tea by Iran seems imminent. Sri Lanka will find a way to retain space in the Iranian market via this barter agreement. We believe that the Indian Government’s push to increase trade in the Indian rupee will give us the edge in the near future. Rest assured, India will remain Iran’s favorite cuppa, and they will continue to import lots of it.”
India expects tea exports to drop by almost 10% in 2023. In the past, Iran purchased 30 to 35 million kilos of tea annually, about 40% of Indian tea exports. In 2022 for the ten months ending October, exports declined by 9% to 19.5 million kilos compared to 21.5 million kilos during the same period in 2021. This spring (January-March), total tea exports were down 6% to 48 million kilos. Exports totaled 228 million kilos in 2022-23, an increase of 18% compared to 2021, according to the Tea Board of India.
BIZ INSIGHT – In a related development, to preserve foreign exchange reserves and reduce smuggling, the government of Pakistan this month authorized private barter agreements for 26 commodities with traders in Iran, Afghanistan, and Russia and is currently bartering rice for tea with Kenya and East African tea growers.
Israel Declares Wissotzky Tea a Monopoly
By Dan Bolton
Wissotzky Tea Company, Israel’s dominant brand, was declared a monopoly by regulators and must now cease practices that restrained competitors.
Israel’s Competition Authority designated Wissotzky, once the largest tea manufacturer in the world, as a “large supplier” with a market share of 77% in the categories of green and herbal teas. The Authority found that Wissotzky’s market share was less than 50% in black and flavored black tea categories, so neither category nor their related brands were restricted.
The ruling means that Wissotzky can no longer demand retail shelf space or make sales of one brand contingent on purchasing other teas. The company is prohibited from interfering in the final price charged to customers at retail locations.
The authority examined the 250 million shekalim ($68 million) tea category during an 18-month investigation followed by months of hearings. The black, green, and herbal segments each account for about one-third of the total market — which Wissotzky dominated. In their finding, the Authority confirmed that competitors had for years complained that Wissotzky unduly influenced prices, preventing rivals from increasing sales even in cases where they offered lower prices and in situations where successful overseas brands failed after entering the new market.
The announcement declared that Wissotzky’s “significant market power” in green tea allowed the company to charge higher prices than competitors. The company has the option of appealing the decision in the court system.
Wissotzky, founded in Moscow in 1849, dominated the world market from the early 1900s to 1917, when it was forced to relocate to London following the Russian Revolution. Headquartered now in Tel Aviv with a manufacturing and packaging factory in Galilee, the company’s teas are exported to the UK, Australia, Japan, South Korea, Hungary, Russia, Ukraine, and the US.
BIZ INSIGHT – It has been 20 years since the Authority declared a monopoly in Israel. Sixty-one legally defined large suppliers must comply with restrictions to prevent exploiting the public, only a few of which manufacture food, including Coca-Cola (Central Bottling), Strauss Milk, Osem pasta, Tivol margarine, and Elite chocolate bars. The country’s economy and industry minister said he is “happy to see the Competition Authority waking up from a long sleep.”
Rohit Jawa Takes Charge at Hindustan Unilever
By Dan Bolton
Rohit Jawa took charge as managing director and chief executive officer of Hindustan Unilever this week following a long career as an HUL executive.
Jawa joined the company in 1988. His 35 years of experience is the most of any incoming CEO since 1990. In a LinkedIn post following the formal retirement of Sanjiv Mehta, Jawa wrote, “India is full of opportunities, and the consumer story is getting more exciting as it evolves.”
During his ten years as CEO, Mehta nearly doubled the number of brands with turnover exceeding Rs 1000 crore to 19. He oversaw a fourfold increase in market capitalization, making HUL India’s 5th most valuable business. The India subsidiary accounted for more than 10% of global sales during his years. During his last year, turnover grew 11% on volume growth of 3%, “significantly ahead of the market,” according to Unilever.
Tea is an important part of the 35-brand portfolio, Brook Bond Red Label is one of six FMCG brands that generate more than Rs. 2000 crore (about $250 million in US dollars), but tea is not as fast-growing as Dove, Lux, Lifebuoy, Vim, Wheel, and Surf laundry brands. Nine in 10 Indian households use HUL brands. The company employs 29,000.
Mehta predicted in 2022 that India would become the top market by value among Unilever markets. He predicted local brands would grow to challenge Unilever stalwarts such as Lipton tea and Magnum Ice Cream.
“As a nation and in this generation, we’re leaving behind the colonial past. There is pride in India, which is very apparent,” the Financial Times quoted him as saying. “Now Indian brands get as much respect, if not more respect, than imported brands.”
Jawa has extensive experience in India and global insights from his decades of managing low-priced, high-volume brands. He is well-positioned to exploit the rush to expand India’s almost $4 trillion market.
FEATURES
A Call for Entries for AVPA’s 6th Teas of the World Contest
By Dan Bolton
AVPA is a non-governmental, non-profit organization mainly composed of producers and taste enthusiasts. AVPA’s annual Teas of the World contest offers more value than a medal. Services include tasting workshops, technical support, and distributor staff training.
During the past six years, the organization has elevated the status of tea and herbal producers, large and small, not only on the global stage but in their local markets. Teas must be traceable from origin and cannot be chemically flavored. A technical jury of professionals evaluates the teas, followed by a gastronomic jury of enthusiasts that mirror consumer preferences. The deadline to enter is Aug. 31, 2023.
Register at AVPA.FR (Agence pour la Valorisation des Produits Agricoles)
Over the last five years, there’s been a steady increase in how many producers entered the competition, says Ksenia Hleap, Development and Communications Director at AVPA. “Last year, we had more than 300 participants, 33% more than the previous year,” she said.
This year is very rich in possibilities for us. We are in contact with all producing countries for monovarietal, infusion blends, and herbal teas. Unfortunately, not all tea boards respond. The difficulties sometimes are just the way of communication because we contact the tea boards in every country. We are also contacting the associations and tea cooperatives. So, it depends on the countries and their desire to promote tea producers,” she said.
Related: AVPA Has More than a Medal to Offer
Hleap said the product recognition in Paris, the capital of gastronomy, gives contest winners a big possibility to communicate about this, to showcase the logo of the medal on their packaging, and to promote their tea or their products all over the world but first of all in their local market because this is an international recognition. Even those who do not earn a medal benefit, she explains.
“All our participants are winners because they dare to register for the contest and sell their products. Unfortunately, not all of them are winners this year, but they will probably be next or another because they are doing a very great job. They are putting their hearts and time into what they are doing,” she said.
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