Tea Biz
Tea Biz

Episode · 1 month ago

Tea News and Biz Insights - December 3, 2021

ABOUT THIS EPISODE

HEAR THE HEADLINES – Ekaterra Tea Underway | India Steps up Efforts to Halt Illegal Imports | Chinese Archaeologists Discover Oldest Tea Yet | NEWSMAKER – John Davison, CEO ekaterra tea | FEATURES – 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, Pukka, 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. Regulatory and antitrust reviews will take six months to complete. Ekaterra's First Steps – John Davison joined Unilever in March 2021 to carve out the company’s underperforming tea portfolio. Davison discusses the urgency of improving tea quality and adopting sustainable initiatives along the entire supply chain. Listen to his plans for reenergizing the world's largest tea company.

The tee Biz podcast delivers a recapof the week's major tea news headlines, with commentary and cultural trends. Hostedby Dan Bolton, Te Biz is the voice of origin for tea professionals andenthusiasts world. Why? Think of us as a digital caravan of story tellers, bringing authentic, authoritative and exclusive stories to you weekly from the tea lands. The tea industry merits more newance coverage than a mere recitation of production volumesand commodity prices. Each week, tea biz reports news and features with thegreatest impact on the tea industry. Pairing the tea Biz podcast with the moreinclusive tea Biz blog and tea journey magazine delivers information and insight. Hello everyonehere this week's headlines. At catera tea, the EO accelerates his activities, Indiassteps up efforts to halt illegal imports and Chinese archeologists discover the oldest teayet made. Morn a minute, but first this important message. What makesa Perfect Cup of saline tea? The person our face cup is from thetea businesses that ensure the protection of all the children living within their tea estates. We Salute Kailani Valley, tell a Wacky Lee, Bogo, Janthalawa,Harana and Elyptia tea estates. Support Save the Children Sri Lanka. The announcementof the proposed sale of Univer leaver's tea portfolio energized Dick Tary t CEO,John Davison, who traveled from his home in Singapore to Saudi Arabia and Dubailast week to sign production agreements and to meet with operations staff. Davison describedhis two days and Saudi Arabia as the guest of Chik Abdula Bnsgar and avisit to Dubai to tour the company Clildes in Jabal Ali as a fascinating immersioninto the world of tea in the Middle East. The TRIPP he said,reinforces the value of listening carefully to our partners. Davidson mentioned in a socialpost that he has gained many new insights about Lipton. The company's flag shipbrand. Ben's Agar, has distributed, you know, leaver products since theS. global reaction to the sale in Sharlanca was generally positive. Saloon teascomprised approximately thirty thirty five percent of Lipton's blends and are used in many exterities. The head of SHARLOWCA's Tea Exporters Association said the sale is unlikely to impactSalon tea prices and export volumes. Activists...

...and Kenya Express concerns about worker welfare, and the local press citing poor remumoration and drawing attention to a survey bythe Federation of Women Lawyers of Kenya and then Kenya Human Rights Commission that revealedincidents of work or harassment that you know leaver tease Kenya's operations business insight echoteriteCEO John Davison spoke with me virtually during an hour long interview in which hediscusses the urgency of improving tea quality and adopting sustainable initiatives along the entire supplychain. Listen to his plans for the company later in this episode. India'sfood safety and customs officials have stepped up inspections of tea imports, targeting toPaul and citing complaints that large quantities of Fimala and growing tea or being legallypassed off as origin protected dartling tea. It is not clear how great aquantity is involved, but CBIC is asking for proof of export license and seta terry and phytosanitary certificates. After customs authorities discovered that only twenty three pointfour million kiloads of the sixty point four million kiloads imported into India during thepast three years for re ex board had actually been re exploited. The dartlingtea association asserts most of this tea arrived from Nepal and was sold as ifIndia produced it. Growers describe a porous border that makes it possible for rawtea leaves across from Nepal. Scrupulous factory owners can confidently process the tea andpass it off as dartling in a domestic market, reaping a significant difference inprice te venders or in on the game, offering as little as six hundred rupees, about eight dollars us, per kilo, to producers and then doublingthe price for m suspecting customers. Larger quantities of bulk process tea can alsocross the border as a bilateral trade agreement waves tariffs and prevents arbitrary inspections thatcould be viewed as harassment. India is the largest market for Dartling, withfive to six million consumers. As India's premier growing region, dartling has focusedmainly on controlling overseas exports to protect its name and reputation for purity and taste. Joining us today is spur shore wall for generation Darshal and grower at SalemHill t estate, who articulates but domestic thread, which is the import ifte's blended to Dulu, the doorghal brain. That the crusts of the problem isthat if you have spent any time...

...in Dargeling, you know that theborder between Nepal and dodgling is super porous. Right. So there's a large problemof green leaves being smuggled in and then being produced in doging t factories. The second degree problem is these tea shops are buying Nepal teas at afraction of the price of thegling teas. There's not even the problem the growers. To be honest, it's not the growers fault that this is happening.The issue will be ultimately, we will all have to go towards better,more established sourcing of teas using technology, and we ourselves are looking into howyou know, technology like blockchain can be used to be able to improve thesethings. So if and we are right now in advanced conversations with one particularcompany, to be able to do better sourcing for our customers so that theyknow that you know, this tea is not only comes from sellimon it's comingfrom these sections within CETEMENT. Business inside in the is also aggressively challenging importersto monitor or Kenyon tea, threatening to cancel their importing license for violating newrules that require labeling by origin. Kenya had hoped that India would establish aminimum import price, a solution endorsed by the Indian Tea Association. Instead,India stepped up inspections, taking a closer look at quantity and quality to slowa recent surge of low valued teas. Kenya ship to India two point eightmillion keylows of tea from January through June, up from one point five million kilosduring the same period. Last year, Chinese archeologists discover the oldest tea yet. Archeologist extended the age of prepared teas to the early stages of theWarring States. Circuit for hundred and fifty three four hundred and ten BC,a period twenty four hundred years ago. According to a report by Chimuan NewsAgency, the samples were discovered in tombs excavated in the Chandong province in theremains of a city built twenty eight hundred years ago. Stam and leaf carbonizedresidues were found in an inverted porcelain bowl. Researchers led by Professor Wangqing at ShendongUniversity said the residue is likely drags left by ancient people people after boilingso truth in in confirmed. The substance says tea. The findings advanced theage of prepared teas by more than three hundred years. The study was publishedin the Chinese Language Journal of Archeology and cultural relics are bender and there.A man in Bengaluru reports on this week's t auction prices India tea price supportfor the week ending twenty seven November two thousand and twenty one. We're nearingthe close of the tseason in north India.

Most estates and factories were closed bymid December for winter. The last blocking dates will be announced by theTea Board. We got up at the export of pro number and sale ofBensalian code to understand how the season has been for the Indian tea industry,and he says quality tea continues to sell a fantastic premiums for both CTC andOrthodox, unusual for this time of the year. Major packets and blenders havebeen active, and this is good news, especially since Indian tea exports have takena hit due to high CTC prices in India, weather disruptions and supplycheen disruptions. Reflecting this in auctions this week, called Kutas strong demand forOrthodox CTC and dust, with some demand for dagiling tea. Orthodox te alsofound. Take us from the Middle East bias. Compared to last week,there were fewer outlots. Gohati saw good demand for tea, with major blendersactive for both CTC leaf and dust. In the south, Coachin saw gooddemand with middle sinceias. Country is showing good support for Orthodox Leaf. KUNNUTO SA good demand, with over ninety percent of CTC leaf and dust soul. Major blenders were active, absorbing nearly half the C TC leaf and offer. However, over three hundred kilos of green tea and offer remained unsold atKunur. And now a word from our sponsor. Que Trade understands that asuccessful tea blend goes beyond the creative fusion of appearance, a Roma and flavor. Our Multi Award winning product development team is passionate about converting natural ingredients itssensory experiences that customers crave. Every recipe is formulated with a commercial backbone ofdependable quality sourcing, with a pricing structure that supports a safe, regulated,profitable and scalable bland. Que Trade meets every brand's retail, food service ande commerce need. For more information, visit our website, que trade teascom. This week, tea bills travels to Singapore for a conversation with John Davisonsee eel of ater of tea, soon to be the largest tea company inthe world. A CATERA is currently a division of Unilever that houses thurly forwardtea brands including Lipton, Yellow Label, PG tibs, Tozzo, broot bondand red rows. In November, CBC Capital Partners, a multibillion dollar privateequity firm headquartered in Luxembourg, paid five point one billion dollars for Ektara toutbidding. Several competitors and establishing evaluation based on fourteen times earnings before taxes anddepreciation. John Davison joined you to Labor in March two thousand and twenty oneto carve out the companies under performing tea portfolio. Davison was formerly CEO atZulig Pharma, a thirteen billion dollar pharmaceutical...

...distribution company employing thirteen thousand workers intwelve Asian countries. Davison, who is British, is a graduate of CambridgeUniversity and Harvard Business School. He began his career with UK retailer Marks andSpencer before joining McKenzie and company in Nineteen Ninety one. He was global headof strategy at Diageo in one thousand nine hundred and ninety five, during theGuinness Merger, and a regional president at Anne for eleven years beginning in twothousand hundred and three. Davison, who lives in Singapore, will relocate toEngland after Christmas. What a private equity for imports five billion to work.They are clearer expectations. We will see sigable returns. In general. Twopatterns of emerged, one and which the management team comes through way to profitability. Trimming staff, INVESTING IN AUTOMATION AND INTRODUCING EFFICIENCIES. The second is spurringgrowth. Why would company like CDC want, as you say, to invest fivebillion in the taking it tear out of Uly? It pulls down tothree or four key points. Number one, it's a growth category, T it'son trend. I think covid if anything, has reinforced the dynamics intea. Is a healthy beverage and it has a lot of medicinal qualities,as you will know, terms of heart health, digestion, you name it. Investors like to be in categories that are on trend and have long termpotential. Secondly, if you look at it Quittera, we are the largestby some stretch. I think three times larger than the next player. Sowe had a leadership position and that leadership position, on lived and alone,stretches across tens and tens of markets. Think city, forty different markets.It's not been something we've built on and really capitalized. Don't, I wouldsay, but I think capital partners, CD see have seen that opportunity tocapitalize and drive that leadership position to greater heights and with that, bring thecategory into into a faster growth so I think that's the second big reason isthe strength of a competitive position relative to to the rest of the Peer Groupin the industry. And I think the third thing is the management team.Than the rookie and the team just joined six months ago, but the teamwe've put together in a quittera is highly experienced. Are On d team,I think is really strong. We have, I think, forty tea tasters andwhen you put all that organization together on top of a great brand portfolioin a growing category, it's clear to see why CDC or anyone else wouldbe interesting investing in the business. Now, that said, we've now got todeliver on all the promise to your point, and that will be somethingtop of mine as we start to engage with with our future owners. Andof course, these these transactions take time to go through the process. There'sa few months now of antitrust filings,...

...regular tree processes and approvals to go. So I think we won't see the close of this deal and coming tillmid next year. Consumers, when asked so, they're willing to pay morefor products that are sustainable and reward manufacturers who close the loop and growers whoconserve water and regenerate soil. So on one hand we have approach premium ofperhaps twenty to thirty percent. At retail the premium is similar to that paidfor or again a goods and by consumers who have demonstrated their willingness to paymore for fair trade goods. On the other hand, team manufacturers face significantadditional cost to cultivate and process premium tea. There is the expense of adapting toa change in climate, cost to comply with requirements 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 topay sufficient to cover the cost of sustainable production? The desires there andthere's money on the table. Can you operate a Quatar tea in a waythat's both sustainable and profitable? That's a great question and I think sustainability andESG philosophies and beliefs are at different stages of development and relevance in different partsof the world. And Cup Twenty six you could absolutely feel that the world'seyes were on everything that was happening. But it's a difficult balance to strike. You know, I would like to believe consumers would sit down and say, yeah, we understand all the packaging instand all the creditations, we getit. He's an extra twenty thirty percent new problem. But I didn't believethat's going to happen overnight and I didn't believe that will happen across the world. I think it may happen in so and societies, but it's not goingto be a wholesale phenomenon at this stage. Maybe, hopefully, in the nextyears to come, which means that, you know, we do, toyour point, have to develop sound business cases to surround the decisions wetake to drive a more sustainable approach to business process and this is why technologyin Ourd so important, because, you know, a few if you removeplastic from your packaging, you know, as I said, it cop twentysix. You know, you do put in an investment to your machines inthe x number of factories that need to do that to make that happen.And if you have the technology in the R and D to design, youknow, a fully recyclable or biodegradable path instead, and that can be madeat a unit cost lower, then that's a win win. But there willbe moments where we have to make those tough decisions and say here's an extraCapex as needed to fit this factory to be able to do x y andZaid in a completely different way. And I think we've got to be courageousenough to have those decisions and make those...

...decisions and figure out how to makethe pay back. whither without the twenty five percent extra help from the consumer. Of course, right now, and you hear this from any when youinterviewing consumer products or any product category, there's an enormous escalation in input costs, not only from commodity and pro us but also from logistics supply chain,from corn packaging all over the world. Generally ripple effects or big tideway effectscoming out of COVID and the destruction calls to the planet by that. Andwe're digesting those changes as well as thinking ahead how we motor on on climatechange. It's, we like to put it, a vucca world, alot of volatility, not of uncertainty, because we've generally operated in so manydifferent economies with those kinds of unusually volatile trends historically. I think we've gota team that's pretty creative, pretty versatile and is well equipped to deal withthese kinds of challenges that are often contradicting each other, and I think that'ssomething that is that's why we are employed to do what we do. Youknow, if it was not straightforward, it wouldn't be challenging, it wouldn'tbe fun, it wouldn't be the adventure is to be in this business.So let's talk about the core product, in this case making tea that peopleare willing to pay a premium price to drink. I don't think that anybrand wish to be known from making tea so heavily discounted that it is perceivedas cheap, or blends that tastes worse than in years past. Could teainherent? Several brands on the rise, market leaders and fifty eight regions,but in the world sales are stagnant. Live year. You know Labor CEOwell and jokes at the Dominos in motion by declaring, quote, insanity.Is carrying on doing the same thing and looking for different outcomes. And forten years we have been trying to ignite growth into our tea business, unsuccessfully, and quote, black tea drinkers were blamed for getting older and starting tofall over and then, as the fundamental problem, said Joe Quote, youngerconsumers or looking for novel experiences and the Consumer of builders tea was someone whowas born out of habit and was an ut into experimentation and trying new products. In quote. I know from personal experience te quality as an issue.Do you agree and what are you going to do to make better tea?Tea Category Within nely event has probably been subject to somewhat of a focus onbringing down cost to manage exactly what you describe declining pricing or stagnant pricing inthe market. So any any multinational would probably want to deal with that kindof spiral of decline on value by D engineering the product. I think certainthings we are absolutely going to put right...

...very quickly. Other things may takelonger to fix and we're going to work very hard at making sure we getour blends back to the top of the tree in terms of quality and interms of value to consume. We can't live in an industry if we arethe leader in that industry with second rate teas or teas are not absolutely best. It can possibly be something we've got a job still to do. Wepartially started that program in the last twenteen months before I showed up. Nowthe'm they're with the team. It's something that we're outside right that will linktail key of investments in certain key areas, but also in the way we communicatebenefits to consumers as well. So I don't think we've done a verygood job on that either. Historic I think we tended to pull back onconsumer communications and we've not played the powerful parts. We have an upport payingintrigued by what you've heard in to do is podcast. Would you like tolearn more from our global network of Tubas, journalists and t experts? Remember tovisit the TV is website from more comprehensive coverage. That's wwwt Biz bizcom. Thanks for listening. Farewell. Till next week.

In-Stream Audio Search

NEW

Search across all episodes within this podcast

Episodes (54)