• India: What has Changed?

    India produces 20% of the world’s tea. Production, however, has stagnated for years. Costs are up, and prices and exports are flat. Professional tasters report a decline in quality. Marketing tea to domestic consumers is a promising way to move past the doldrums. Tea is found in every household and Indians drink an average of two cups per person per day, consuming 90% of the tea grown there — but mainly purchase lower grades. Per capita consumption is modest at 840 grams due to a preference for tea in blends. Until recently, India exported virtually all its best teas. Tea discovery there is discouraged as imports from China, Taiwan, and Japan are expensive due to high tariffs, but rising affluence is overcoming these obstacles.

    • Caption: Jagjeet Kandal, country head, IDH, The Sustainable Trade Initiative
    Aravinda Anantharaman speaks with Jagjeet Kandal at IDH, The Sustainable Trade Initiative
    Tea by the Lake Mirik
    The Goodricke Lounge by Lake Mirik

    Realigning the Marketing of Indian Tea

    By Aravinda Anantharaman

    State Seal of India

    “When you look back, let’s say 30, 40 years, what has changed in the tea market? That’s the question we need to ask. And to me, there has been no great, no major earth-shattering change. Yes, we went from dabbas to paper boxes, tea bags, then poly packs… stuff like that. But the image of tea has not changed at all. And that, I think, is the basis of many problems,” says industry veteran Jagjeet Kandal, now country head, IDH, The Sustainable Trade Initiative.

    Indian legislators are currently considering a draft Tea (Promotion and Development) Bill to remove colonial-era provisions regulating tea and re-direct the Tea Board of India’s resources to expand existing markets and promote tea domestically.

    In this report, Tea Biz explores the challenges and opportunities of marketing Indian tea by examining:

    • A legacy of marketing tea as a blended, heavily spiced low-cost commodity beverage for the masses.
    • The rise of hundreds of direct-to-consumer (DTC) tea brands that rely on e-commerce as a promising and accessible retail platform.
    • Expanding choices available to tea lovers and how consumer preferences have moved beyond chai.

    Price as a factor

    “I think marketers need to take some of that blame because what they’ve done is made tea a common man’s drink. It has been marketed as the cheapest drink. When you market anything as cheap, it’s going to be very difficult to take that perception people’s mind and then tell them to come and pay more for it. So it was a short-term strategy or whenever this whole marketing stint started, but that’s the basis of what needs to change,” says Kandal.

    Price became a factor in sales, trumping taste. Brands fought on price. Across the country, orthodox tea is not consumed by the masses. South India, in particular, favors dust-grade teas. But every producer and every brand owner talks about how the per cup cost between a mediocre tea and a higher quality tea differs by only a few rupees. The point is convincing, but that message has not been communicated to consumers.

    New to tea

    A century after exports surged, generating substantial wealth, India was still not a big tea market. Seventy years ago, few Indians had ever tasted tea. In contrast, the Chinese have kept tea in their homes for 5,000 years.

    Like other plantation colonies, tea was cultivated in India to cater to demand in Europe. Wars and economic slumps disrupted trade, leading to a glut of tea that forced England to find new markets. The British turned expertly to India’s domestic population, marketing aggressively and creating a tea culture. It was phenomenally successful as tea is now an Indian legacy with deep cultural connotations.

    India was largely rural in 1960, with 82% of the population of 370 million housed away from cities. Household consumption as a percent of India’s gross domestic product peaked that year at 87.4% percent. Manufacturing was focused on domestic needs, and exports consisted mainly of raw goods. Tea was a vital source of foreign income.

    In 1960 India exported 195 m.kgs of tea and consumed 115 m.kgs. Ten years later, exports remained flat at 200 m.kgs, while domestic consumption had increased to 212 m.kgs. Today Indian consumers drink 90% of the tea it produces totaling a billion kilos in 2020.

    One would expect that this has reduced the producers’ dependence on the export market. It has not. But given how the COVID-19 pandemic, climate change, marketing costs, and now, war, have impacted trade, freight costs, and exports, the need to cultivate and nurture the domestic market has never been more urgent. There’s a need to nudge consumers towards better quality, higher-priced teas and even specialty tea. What producers seek is 1) convince consumers to look beyond CTC and chai, and even if they must stick to CTC, purchase a better-quality product at a marginally higher cost; and 2) how to increase per capita consumption by at least 100g from its current 750-850g per year.

    There has been news of change brewing, with the Tea Board of India finally saying that they will no longer be a regulator but instead become a body that will market and promote tea. It’s a return to the Board’s original mandate, lost along the way and resurfacing now due to producers’ continuous demands. The Tea Board’s challenge will be to address India’s complex market. 

    Lessons from the past: The rise of packaged and branded tea

    In the 1980s, television emerged as a mass media platform financed by consumer interest in packaged goods. That same decade, Tata Tea, helmed by Darbari Seth and Krishna Kumar, transitioned from bulk sales to branded tea from company gardens. Tata spent large sums marketing Tata Tea, Chakra Gold, and Tetley.

    In 1984, Brooke Bond, India’s most popular and – certainly the oldest brand was acquired by Unilever. They had already diversified and merged with Liebig in 1968, generating $1 billion annually in sales. In 1984 PG Tips held 28% of the UK tea market by sales, and Tetley held 8%. Unilever, then the world’s largest packaged goods company, had acquired Lipton in 1977 but had no UK brands. In October 1984, Unilever spent $480 million to acquire 150 million shares, concluding a protracted and unfriendly takeover of Brooke Bond. Subsidiary Hindustan Unilever Ltd., (HUL) based in Mumbai, reported $5.3 billion in annual revenue in 2020.

    Privately held Wagh Bakri, founded in 1919 and based in Ahmedabad, Gujarat, sold loose tea in wholesale and retail outlets until 1980 when it began distributing packaged tea. The company invests 10% of revenue on advertising has since grown to become India’s third nationally distributed packaged tea brand  

    In 1985, Atul Asthana, currently Managing Director, joined the Goodricke Group. The group was formed in 1978 and now owns 29 gardens in Darjeeling, Assam, and the Dooars. Some of the most prized teas in the world come from the Goodricke portfolio, including Margaret’s Hope and Castleton in Darjeeling. “Goodricke had to diversify,” says Asthana. At first, the company started packaging tea in 250g and 500g packets, with each of their gardens keeping aside a percentage of production to go into retail. Their focus was on serving the north and east India markets.

    “It is different from buying other teas. When you buy from auctions, the tea is already 4-6 weeks old. From there it goes to the warehouse and then on to the blenders. When we pack our teas, it’s fresher, it’s more immediate and it reaches consumer quickly,” said Asthana.

    Gardens have a fantastic advantage for retail, when going direct to consumer: By bypassing the auctions, they could bring consumers a fresher tea. Already leveraged by brands like Lipton, whose tagline was “direct from tea garden to the teapot,” it is surprising that more gardens did not take this up and aggressively brand and market their teas. The reason is that the wholesale market was robust, Asthana explains. In the 1980s, a heyday for the tea industry, demand outstripped supply. As Asthana says, everything that was being produced found a market. The Soviet Union absorbed all the tea produced in India. Few gardens found a need to retail to a domestic market.

    With the disintegration of the Soviet Union, the tea industry, which had expanded to produce large volumes of tea, now struggled. As the share of exports declined, the domestic market discovered tea. Inexpensive and widely available, tea was a daily beverage that was easy to make and reasonably addictive. Before packaged teas, vendors sold loose-leaf in broken grades as blends customized to suit customer preferences (and local water conditions). Packaged blends delivered consistent taste, were cleaner and remained fresh in storage. Packaging was more appealing and convenient. Sales increased during the 1980s and 90s as the preference for branded tea grew. Ultimately a combination of factors, including higher disposable income, the proliferation of television, and other forms of advertising, along with the move toward trade liberalization. The only hitch was that this market was still extremely price-sensitive.

    Chill Out with Chai
    Ad for new iced tea range from Goodricke

    “The wholesale market was robust in the 1980s, a heyday for the tea industry, demand outstripped supply. Everything that was being produced found a market. The Soviet Union absorbed all the tea produced in India. Few gardens found a need to retail to a domestic market..

    – Atul Asthana, Managing Director, Goodricke Group


    • We end the two-part series with the questions needed to solve the mammoth task of rebranding the industry and realigning the domestic market toward quality tea.
    Margaret's Hope at Sunset
    Sunset at Margaret’s Deck, Kurseong, a tea lounge operated by the Goodricke group

    How Tea Came to be Swadeshi

    Swadesh was the call for independence – it translates roughly as our ‘own country.’ Mahatma Gandhi promoted swadeshi products to build national pride and self-reliance.

    By Ramya Ramamurty 

    Tea was planted by the British in India to ensure an optional country of origin for their favorite beverage. China was the leading tea producer at the time. Tea plantations in India were an astute way for the British East India Company to de-risk this commodity in case the balance of trade with China was threatened by war or insurgency. 

    As the chapter on ‘Snacks and Biscuits’ in my second book Branded in History mentions, tea was seen as a ‘drug food’, and planted in India in Assam, West Bengal, and Tamil Nadu. Optimal conditions, conducive for the growth of tea, meant adequate rainfall, the right pH of the soil, and cool temperatures by Indian standards. The tea plantations were fairly oppressive under the colonial powers – indenture was common as a way to supply low-cost labor to the expanding plantations. But there were a few brands that came up in India with indigenous tea bushes or entrepreneurs.

    In 1823, Robert Bruce, a Scot who was wandering in the upper Brahmaputra Valley, near Rangpur in Assam, came across some wild bushes that changed the tea industry forever – it was the first discovery of indigenous tea. The Chinese imports had not taken as well as the British had hoped because of the summer heat in India. A couple of years later, 12 chests of Assam tea were sold for the first time at London auctions, paving the way for the foundation of the first tea plantation company in India: Assam Company India Ltd., (ACIL). The company was founded in London in 1839 and although they focused on tea, the management, which included dignitaries like Charles Alexander Bruce and Prince Dwarkanath Tagore, wanted to keep options open to trade in other commodities like lime, coal or oil so the word tea was not referred to in its name. The company is still around, with its registered office in Kolkata, off Bentinck Road, named after Lord William Bentinck who was the Governor General who set up the first tea committee in Calcutta.

    Another company that was born in colonial India and survived the various political upheavals and is still going strong is Wagh Bakri. Its founder Narandas Desai owned 500 acres of a tea estate in South Africa. His experience of racism there forced him to move back home to India with nothing more than a few valuables and a reference letter from Gandhi, in which Desai was hailed as an honest and experienced tea planter in South Africa. Desai started the Wagh Bakri Tea Company with a retail shop in Ahmedabad in 1915 with a logo espousing their values of equality. It showed a wagh (tiger symbolizing the upper class) drinking tea from the same cup in harmony with the bakri (goat) lower class. These are just two of the brands that launched in that era. Clearly tea took off as India is now the second largest tea producer worldwide, with 13,000 tea gardens, employing more than two million people.

    Back in the pre-independence era, tea drinking became more acceptable in certain strata of society, and in those pockets, it replaced alcohol as a social lubricant. By the 1940s, as calls for Indian independence reached fever pitch – tea was seen as synonymous with colonial oppression. Notably, Gandhi discouraged Indians from drinking it as he felt it legitimized British presence in the country. British tea brands like Lipton, Twinings or Tetley that were being patronized by the British in India were replaced by the local Assam and Darjeeling teas that became more popular as we moved to Swadeshi.

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  • Q|A John Davison

    In November Luxemburg-based private equity firm CVC Capital Partners, with investments totaling more than $100 billion, out-bid several competitors to acquire Unilever’s tea portfolio, re-branded as ekaterra tea. Lipton Yellow Label, Brooke Bond, Lyons, PG Tips, and 30 more tea brands, many regional, have a combined turnover of $2.3 billion (€2 billion). The agreement is subject to regulatory review and will not close for several months, but there is no time to waste as CEO John Davison takes on the task of re-energizing the largest tea company in the world.

    • Caption: John Davison was the only passenger on the plane from Singapore to Judah, Saudi Arabia
    Hear the interview
    Ekaterra tea CEO John Davison

    “I’m much more of a grower than a cutter,” says ekaterra tea CEO John Davison

    Re-energizing the World’s Largest Tea Company

    By Dan Bolton

    The Singapore sun is high and the room alabaster bright when ekaterra tea CEO John Davison answers the Zoom call. It is the dark of night and snowing heavily outside my Winnipeg window in central Canada. Davison, 58, is energized. Singapore was quick to instituted mass lockdowns in early 2020, becoming one of Asia’s most stringent COVID-zero economies, largely sealing off its borders, and testing. After 18 months of isolation Davison has just returned from the COP26 Glasgow Climate Summit in Scotland and would soon depart for Judah, Saudi Arabia and to visit the company’s massive tea packaging operation in Jebal Ali, near Dubai, UAE.

    In March 2021 Davison was named to oversee a “carve-out” of the least desirable tea brands from the Unilever portfolio. Unilever CEO Alan Jope announced in January 2021 that the company would jettison underperforming legacy brands Lipton, PG Tips, Lyons, Brooke Bond, Red Rose ? all black tea stalwarts acquired in the 1980s and 1990s ? along with more recently acquired and fiscally promising T2 retail in Australia, TAZO, an American packaged good brand formerly owned by Starbucks, and Pukka, a fast-growing herbal tea brand founded in 2001 in a home kitchen in Bristol.

    Davison spent his first nine months at Unilever reorganizing billions in assets including 11 factories across four continents that employ 4,000 workers doing business in more than 100 countries. A big portion of Unilever’s suppliers and partners will transition to ekaterra at the close of the sale. Ekaterra will operate company owned tea estates in Kenya, Rwanda, and Tanzania and contract with thousands providing a livelihood for one million people.

    Davison, a Harvard Business School Graduate with a master’s from the University of Cambridge, spent five years at Diago as a strategy director during the merger with Guinness and worked for 11 years as a senior executive with Danone. His last job was managing the Asian division of Zuellig Pharma, a $13 billion global leader in pharmaceutical distribution. After leading a turnaround that he initiated in 2014, Davison spent the first year and a half of the pandemic focused exclusively on resolving formidable distribution challenges brought by COVID-19.

    Unilever, ranked 175 on the Fortune 500 with 400 brands and turnover of $58 billion, kept its most profitable and fast-growth tea gardens and factories in India, Nepal, and Indonesia and in North America remains in a joint venture with PepsiCo to manufacture and market Lipton tea in bottles and cans. The portfolio’s remnants are expected to generate more than $800 million annually, making it the world’s fourth largest tea company, according to Euromonitor.

    One man’s cast off is another man’s treasure. Davison is eager to make the most of CVC Capital’s $5.1 billion investment.

    Dan Bolton: John, when a private equity firm puts $5 billion to work they expect sizeable returns. In general, two patterns have emerged, one in which the management team cuts their way to profitability, trimming staff, investing in automation, and introducing efficiencies. The second is spurring growth.

    John Davison: Why would a company like CVC want, as you say, to invest $5 billion in taking ekaterra out of Unilever?

    It boils down to three key points: Number one, it’s a growth category. Tea is on trend, I think COVID, if anything has reinforced the dynamics that tea is a healthy beverage. It has a lot of medicinal qualities, as you well know, in terms of heart health, digestion, you name it. Investors like to be in categories that are on trend and have long term potential.

    Secondly, if you look at ekaterra, we are the largest, by some stretch, I think three times larger than the next player. So, we have a leadership position. That leadership stretches across 10s and 10s of markets ? 3,040 different markets. It’s not been something we’ve built on and really capitalized on.

    I think Capital Partners, CVC has seen that opportunity to capitalize and drive that leadership position to greater heights and with that bring the category into faster growth. That’s the second big reason, the strength of our competitive position, relative to the rest of the peer group in the industry.

    The third thing is the management team. I’m the rookie and just joined nine months ago, but the team we’ve put together in at ekaterra is highly experienced. Our R&D team is really strong. We have 3,540 tea tasters. When you put all that organization together, on top of a great brand portfolio in a growing category, it’s clear to see why CVC or anyone else would be interested in investing in the business.

    Now that said, we’ve now got to deliver on all the promise to your point. And that will be something top of mind as we start to engage with our future owners. And of course, these transactions take time to go through the process. There’s a few months now of anti-trust filings, regulatory processes and approvals to go. We won’t see the close of this deal probably till mid next year.

    Dan: At COP26 you sent a clear message that sustainable tea at large scale is doable. So, do you intend to be a tea company that is ethically mindful? Or an ethical firm that sells tea?

    John: That’s a trick question. I think you can be ethically mindful and kind of watch from the sidelines, right?

    We need to get in the game and drive the rules of the game. I don’t mean that in a threatening way, I think part of the reason we wanted to step out at COP26 was to make that point, which is that the status quo ? having a nice program to share with your customers and partners and consumers ? probably isn’t enough at this stage.

    If we don’t get beyond that, towards driving real change, and not just change inside of our business system, but industry wide, as well as with consumers, in 10 years time we’ll be really panicking about what we can do to reverse things that are probably irreversible by that stage.

    We need to get beyond watching and following. We need to get into the game and lead. We have the technologies discussed by the Ethical Tea Partnership, and a bunch of new technologies that are in development that were mentioned at COP26.

    We need to deploy that technology as soon as possible into pilots, which we’re doing. And as soon as we get them into pilot, we need to get them into action on our own tea estates and as soon as possible thereafter, broaden that to the entire supply base. And as soon as possible thereafter, the entire supply base of the industry. If there are technologies that can help other players, you know, I think we need to make them available. There’s no point in jealously guarding a technology that you deploy to 5% of the tea crop of the world, if 50% of the tea in the entire world is at risk.

    We need to develop proper resilience in climatic challenging circumstances, which you know, are becoming more and more difficult, as you said earlier, already affecting crop yields.

    If we can get these technologies properly piloted and properly rolled out, then we should be able to help our tea farmers manage much more productively much more resiliently in the face of real dramatic climate change. And that can only be a good thing, not only for ourselves, but for them and for the industry. And that’s something we’re going to work very hard to deliver.

    So, in that sense I think the answer to your question is that we need to be both an ethical company, as well as a tea company acting ethically.

    Unilever already set us on a wonderful course. It’s a great company. I think in many respects, we’re sorry to be leaving, and they are sorry to be losing us. But at the same time, it is for the best reasons to give us this chance to drive a leadership that I think would be difficult to do inside such a large multinational.

    Davison taking tea with the ekaterra staff

    Jebel Ali
    United Arab Emirates

    Dan: So, let’s talk about the core product. In this case, making tea that people are willing to pay a premium price to drink. I don’t think any brand wants to be known for making tea so heavily discounted that it is perceived as cheap or market blends that taste worse than in years past. Ekaterra tea inherits several brands on the rise, market leaders in 58 regions, but in the west sales are stagnant.

    Senior Beverage Consultant Matthew Barry at Euromonitor writes that “mass-market black tea bags are in consistent decline in nearly all developed markets. Unilever saw retail sales of black tea decline by $27 million from 2015 to 2020 in these countries, even with the benefit of a large 2020 pandemic-related retail spike.”

    Last year Unilever CEO Alan Jope set the dominoes in motion by declaring “insanity is carrying on doing the same thing and looking for different outcomes, and for 10 years we have been trying to ignite growth into our tea business unsuccessfully.” Black tea drinkers were blamed for getting older and starting to fall over, and that is the fundamental problem… said Jope, “younger consumers are looking for novel experiences, and the consumer of ‘builders’ tea’ was someone who was born out of habit and was not into experimentation and trying new products.”

    I know from personal experience tea quality is an issue. Do you agree? And what are you going to do to make better tea?

    John: The tea category within Unilever has been subject to a focus on bringing down costs to manage exactly what you described, declining pricing or stagnant pricing in the market. Any multinational would probably deal with that kind of spiral of decline on value by R&D engineering the product, so I think certain things we are absolutely going to put right very quickly. Other things may take longer to fix.

    We’re going to work very hard at making sure we get our blends back to the top of the tree, in terms of quality and in terms of value to consumers. We can’t live in an industry if we are the leader in that industry, with second rate teas or teas that are not absolutely the best they can possibly be.

    So, I think we’ve got a job still to do. We started that program in the last 12 to 18 months before I showed up and it’s something that we’re now accelerating. That will require clear investments in certain key areas, but also in the way we communicate benefits to consumers. I don’t think we’ve done a very good job on that, either. Historically, I think we’ve tended to pull back on consumer communications. And we’ve not played the powerful cards we have in our portfolio.

    “We’re going to work very hard at making sure we get our blends back to the top of the tree, in terms of quality and in terms of value to consumers. We can’t live in an industry if we are the leader with second rate teas or teas that are not absolutely the best they can possibly be.”

    – John Davison

    Dan: When asked by the online polling site YouGov, consumers say they are willing to pay more for products that are sustainable, and to reward manufacturers who close the loop; traders who reduce transit emissions and growers who conserve water and regenerate soil. So, on one hand we have a price premium of perhaps 20-30% at retail. The premium is similar to that paid for organic goods and by consumers who have demonstrated their willingness to pay more for fair trade goods.

    On the other hand, tea manufacturers face significant additional costs to cultivate and process premium tea. There is the expense of adapting to a changing climate, costs to comply with requirements set by third party certifiers, new equipment and more expensive plant-based tea bags and earth-friendly packaging, and set-asides to pay for carbon credits. Is the premium consumers are willing to pay sufficient to cover the cost of sustainable production? The desire is there, and there’s money on the table, can you operate ekaterra tea in a way that it’s both sustainable and profitable?

    John: That’s a great question. I think sustainability, and ESG [Environmental, Social, and Governance] philosophies and beliefs are at different stages of development and relevance in different parts of the world. At COP26, you could absolutely feel that the world’s eyes were on everything that was happening. But it’s a difficult balance to strike.

    I would like to believe consumers would sit down and say, ‘yeah, we understand all the packaging, we understand all the accreditations, we get it, here’s an extra 20%, 30%, no problem.’ But I don’t believe that’s going to happen overnight. And I don’t believe that will happen across the world, I think it may happen in certain societies. But it’s not going to be a wholesale phenomenon at this stage, maybe hopefully, in years to come.

    Which means we develop sound business cases to surround the decisions we take to drive a more sustainable approach to business process.

    This is why technology R&D is so important, because to remove plastic from your packaging, you must put in an investment to machines and the X number of factors needed to make that happen.

    If you had the technology to design a fully recyclable or biodegradable pack instead, one that can be made at a lower unit cost, then that’s a win-win.

    But there will be moments where we have to make tough decisions and say, ‘there’s an extra capex’ [capital expenditure] to fit this factory to be able to do X, Y, and Zed in a completely different way.

    I think we’ve got to be courageous enough to make those decisions and figure out how to make the pay back with or without the 20% to 30% extra help from the consumer.

    Right now, and you hear this from anyone you interview in consumer products, or any product category,  there’s an enormous escalation in input costs, not only from commodity crops, but also from logistics supply chain, from packaging, all over the world, big tidal wave effects coming out of COVID and the disruption caused to the planet. We’re digesting those changes, as well as thinking ahead how we motor on, on climate change.

    It’s a VUCA world [Volatility, Uncertainty, Complexity and Ambiguity] a lot of volatility, a lot of uncertainty. Because we’ve generally operated in so many different economies with those kinds of unusually volatile trends, historically, I think we’ve got a team that’s pretty creative, pretty versatile, and is well equipped to deal with challenges that often contradict each other.

    That’s why we are employed to do what we do, if it was that straightforward, it wouldn’t be challenging. It wouldn’t be fun. It wouldn’t be the adventure it is to be in this business.

    Davison signing a distribution agreement with Sheikh Abdullah Binzagr in Judah, Saudi Arabia. Binzagr Group has distributed Unilever products since the 1920s.

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