Nathalie Roos, CEO of ekaterra tea, this week announced “with pride an enthusiasm our corporate name change to LIPTON Teas and Infusions.”
“This change comes together with our commitment to drive the whole tea industry upwards and grow value for all and our planet,” said Roos.
Lipton writes that the rebranding will strengthen the company’s position as the world’s number one tea business and affirm its approach as a consumer-centric organization. Ekaterra currently generates €2 billion in annual turnover from sales in 150 countries. The name change is more inclusive of non-traditional brands in the ekaterra portfolio, such as Pukka and TAZO. The company owns 34 brands including PG Tips, the T2 retail chain, and regional brands such as Brooke Bond Red Label and Bushell’s in Australia.
| The First of Seven Agriculture-Focused Satellites is Safely in Orbit
The SpaceX Transporter safely delivered the first Agri-Focused Earth Observation Satellite (EOS) into orbit Jan. 3. The constellation of seven satellites will each monitor one million square kilometers daily, covering 100% of the largest areas of farm and forestlands, about 98% of the globe’s land surface. The satellites, designed by Dragonfly Aerospace, scan 13 bands to generate panchromatic and multispectral imagery to monitor daily crop growth, water stress, weed spread, the presence of pests, and temperature variations at ground level. Tea growers can use the data to precisely control CO2 emissions, cut energy consumption, decrease water usage and reduce losses to pests.
| The Specialty Tea Institute Ceases Operations According to Peter Goggi, president of the Tea Association of the U.S.A, the decision was driven by economics and a decline in interest. STI will not accept membership applications in 2023 and will not conduct classes anytime in the near future, he said. Goggi writes that STI could not offer many courses over the last three years due to COVID and had experienced a dramatic drop in both membership and interested students. STI is the association’s educational arm, offering basic through advanced training. The institute’s Certified Tea Specialist and Certified STI Instructor credentials and STI Tea Mentors program were well respected with participation by tea professionals around the world.
| PLUS Mou Dasgupta, founder of Brook37 The Atelier in Princeton, New Jersey, is pursuing her passion for tea after 25 years of trendsetting corporate leadership in the financial services industry. She developed a love for fine-quality tea while living in West Bengal, India, where she attended university in Calcutta. She says Brook37 “is proud to bring fresh thinking and an ethical and sustainable mindset to all we do,” she says. “Our unparalleled tea selection of flavors, aromas, and colors from around the world, along with exquisite packaging, help you choose a positive and aspirational lifestyle.”
Episode 76: Tea Industry’s Critical Role in Saving Sri Lanka
Tea News for the week ending July 15
| Tea is Sri Lanka’s Reliable Source of Foreign Cash | India’s Monsoon Rainfall Exceeds 2021 Totals | Vancouver Hosts Canada’s Biggest Bubble Tea Festival | PLUSMore than a Medal, the 5th Edition of the Teas of the World International Contest is underway. Tea producers from around the world are invited to submit entries to AVPA, the Agency for the Valorization of Agricultural Products. Samples are due in Paris on Aug. 1.
Photo Caption: Ksenia Hleap manages communication and development at AVPA
| Nathalie Roos is Now CEO of the World’s Largest Tea Company | Coca-Cola Launches a Bottled Herbal Tea Line in China | A Tea-Scented Perfume Wins Prestigious Art and Olfaction (A+OA) Award | PLUS Tea Book Club founder Kyle Whittington reviews The Teabowl: East and West, by Dr. Bonnie Kemske, a ceramic artist, curator and long-time student of the Japanese tea ceremony.
| Ekaterra Tea CEO John Davison Gets Underway | India Steps up Efforts to Halt Illegal Tea Imports | Chinese Archaeologists Discover Oldest Tea Yet
This week Tea Biz travels to Singapore for a conversation with John Davison, CEO of ekaterra tea, soon to be the largest tea company in the world. Ekaterra is currently a division of Unilever that houses 34 tea brands including Lipton, PG Tips, TAZO, Brooke Bond, Lyons, and Red Rose. In November CVC Capital Partners, a multi-billion private equity firm headquartered in Luxembourg, paid $5.1 billion for Ekaterra tea, outbidding several competitors and establishing a valuation based on 14x earnings before taxes and depreciation.
Ekaterra tea CEO Re-energizes World’s Largest Tea Company
By Dan Bolton
John Davison joined Unilever in March 2021 to carve out the company’s underperforming tea portfolio. Davison was formerly CEO at Zuellig Pharma, a $13 billion pharmaceutical distribution company employing 13,000 workers in 12 Asian countries. Davison, who is British, is a graduate of Cambridge University and Harvard Business School. He began his career with UK retailer Marks & Spencer before joining McKenzie & Co. in 1991. He was global head of strategy at Diageo in 1995 during the Guinness merger and a regional president at Danone for 11 years beginning in 2003. Davison, who lives in Singapore, will relocate to Europe after Christmas. Davison discusses the urgency of improving tea quality and adopting sustainable initiatives along the entire supply chain. Listen to his plans for re-energizing the world’s largest tea company. Read more…
Listen to the interview
India Steps up Efforts to Halt Illegal Tea Imports
By Dan Bolton
India’s food safety and customs officials have stepped up inspections of tea imports targeting Nepal and citing complaints that large quantities of Himalayan grown tea are being illegally passed off as origin protected Darjeeling tea.
It is not clear how great a quantity is involved but CBIC is asking for proof of export license and sanitary and phytosanitary certificates after customs authorities discovered that only 23.4 million kilos of the 60.4 million kilos imported into India during the past three years for re-export had been re-exported. The Darjeeling Tea Association asserts most of this tea arrived from Nepal and was sold as if India produced it.
Growers describe a porous border that makes it possible for raw tea leaves to cross from Nepal. Unscrupulous factory owners can confidently process the leaf and pass it off as Darjeeling in the domestic market, reaping a significant difference in price. Tea vendors are in on the game, offering as little as 600 rupees [about US$8] per kilo to producers and then doubling the price for unsuspecting customers.
Larger quantities of bulk processed tea can also cross the border as a bilateral trade agreement waives tariffs and prevents arbitrary inspections that could be viewed as harassment.
India is the largest market for Darjeeling with 5 to 6 million consumers. As India’s premier growing region, Darjeeling has focused mainly on controlling overseas exports to protect its name and reputation for purity and taste. Joining us today is Sparsh Agarwal a fourth-generation Darjeeling grower at Selim Hill Tea Estate who articulates a domestic threat, which is the import of teas blended to dilute the Darjeeling brand.
Listen to the interview
Agarwal reports “The crux of the problem is that if you have spent any time in Darjeeling, you know that the border between Nepal and Darjeeling is super porous, right? So there’s a large problem of green leaves being smuggled in and then being produced in Darjeeling tea factories. The second-degree problem is that tea shops are buying Nepal teas at a fraction of the price of Darjeeling teas. This is not the problem of the growers, to be honest, it’s not the grower’s fault that this is happening. Ultimately we will all have to go towards better, more established sourcing of teas using technology. We are looking into how technology like blockchain can be used to be able to improve these things. We are right now in advanced conversations with one particular company to be able to do better sourcing for our customers so that they know that this tea is not only coming from Salem Hill, it’s coming from these sections within Selim Hill.”
Biz Insight – India is also aggressively challenging importers to monitor Kenyan tea, threatening to cancel their operating license for violating new rules that require labeling by origin. Kenya had hoped that India would establish a minimum import price, a solution endorsed by the Indian Tea Association. Instead, India stepped up inspections taking a closer look at quality and quantities to slow a recent surge of low-value teas. Kenya shipped to India 2.8 million kilos of tea from January through June, up from 1.5 million kilos in the same period last year.
Chinese Archaeologists Discover the Oldest Tea Yet
Archaeologists extended the age of prepared teas to the early stages of the Warring States, circa 453 to 410 BC, a period 2,400 years ago, according to a report by the Xinhua News Agency.
The samples were discovered in tombs excavated in Shandong Province in the remains of a city built 2,800 years ago. [during the Spring and Autumn period (770-476 BC)]. Stem and leaf carbonized residues were found in an inverted porcelain bowl. Researchers led by Professor Wang Qing at Shandong University said the residue is likely dregs left by ancient people after boiling tea. Tests for theanine confirmed the substance as tea. The findings advance the age of prepared teas by more than 300 years in a study published in the Chinese-language Journal of Archaeology and Cultural Relics. –Dan Bolton
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India Tea Price Watch | Sale 47
Tea Biz caught up with tea exporter Pranav Bhansali of Bhansali and Company to review the Indian tea industry’s past year. He said, “Quality teas have been selling at fantastic premiums for CTC and Orthodox teas, even at this late stage of the season. This is surprising, especially for CTC teas, since it is unusual to see the major packeteers and blenders being this aggressive and active on quality produce at this time of the year.” Bhansali says, “Indian tea exports have taken a hit due to high CTC prices and weather disruptions.” The Tea Board estimates a decline of 8-10% in calendar 2021 compared to the same period last year. “Supply chain disruptions and container shortages are expected to continue into 2022. On the bright side, Iran continues to be the largest consumer of Indian Orthodox teas,” says Bhansali. Read more…
Aravinda Anantharaman introduces the two-part series Frugal Innovations with Abhijeet Hazarika and Indian tea growers Saurav Berlia and Shekib Ahmad who describe cost-efficient experiments and pilots that demonstrate why tea producers should embrace simple technologies with scalable impact. Listen to Episode 47 of the Tea Biz Podcast | Friday, Dec. 10
Sips & Bites: Exploring the World of Artisanal Tea | December 15 | Virtual | Director Dr. Katharine Burnett will share an overview of the Global Tea Initiative. Manik Jayakumar, Founder of QTrade Teas & Herbs, and Rona Tison, Executive Vice President of Corporate Relations at ITO EN, North America, will discuss their work in the tea industry and walk attendees through a tasting of their exquisite teas. The Global Tea Initiative (GTI) for the Study of Tea Culture and Science was established in 2015 to promote evidence-based knowledge about tea. | Register FREE (Zoom) | 6-7 pm PST | Sponsored by the Robert Mondavi Institute for Wine and Food Science, University of California, Davis.
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
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.
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.