Tea Biz
Tea Biz

Episode · 8 months ago

Tea News and Biz Insights - December 3, 2021

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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 recap of the week's major tea news headlines, with commentary and cultural trends. Hosted by Dan Bolton, Te Biz is the voice of origin for tea professionals and enthusiasts 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 volumes and commodity prices. Each week, tea biz reports news and features with the greatest impact on the tea industry. Pairing the tea Biz podcast with the more inclusive tea Biz blog and tea journey magazine delivers information and insight. Hello everyone here this week's headlines. At catera tea, the EO accelerates his activities, Indias steps up efforts to halt illegal imports and Chinese archeologists discover the oldest tea yet made. Morn a minute, but first this important message. What makes a Perfect Cup of saline tea? The person our face cup is from the tea 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 announcement of 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 Dubai last week to sign production agreements and to meet with operations staff. Davison described his two days and Saudi Arabia as the guest of Chik Abdula Bnsgar and a visit to Dubai to tour the company Clildes in Jabal Ali as a fascinating immersion into 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 social post that he has gained many new insights about Lipton. The company's flag ship brand. Ben's Agar, has distributed, you know, leaver products since the S. global reaction to the sale in Sharlanca was generally positive. Saloon teas comprised 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 impact Salon 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 by the Federation of Women Lawyers of Kenya and then Kenya Human Rights Commission that revealed incidents of work or harassment that you know leaver tease Kenya's operations business insight echoterite CEO John Davison spoke with me virtually during an hour long interview in which he discusses the urgency of improving tea quality and adopting sustainable initiatives along the entire supply chain. Listen to his plans for the company later in this episode. India's food safety and customs officials have stepped up inspections of tea imports, targeting to Paul and citing complaints that large quantities of Fimala and growing tea or being legally passed off as origin protected dartling tea. It is not clear how great a quantity is involved, but CBIC is asking for proof of export license and set a terry and phytosanitary certificates. After customs authorities discovered that only twenty three point four million kiloads of the sixty point four million kiloads imported into India during the past three years for re ex board had actually been re exploited. The dartling 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 across from Nepal. Scrupulous factory owners can confidently process the tea and pass it off as dartling in a domestic market, reaping a significant difference in price te venders or in on the game, offering as little as six hundred rupees, about eight dollars us, per kilo, to producers and then doubling the price for m suspecting customers. Larger quantities of bulk process tea can also cross the border as a bilateral trade agreement waves tariffs and prevents arbitrary inspections that could be viewed as harassment. India is the largest market for Dartling, with five to six million consumers. As India's premier growing region, dartling has focused mainly 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 Salem Hill t estate, who articulates but domestic thread, which is the import if te's blended to Dulu, the doorghal brain. That the crusts of the problem is that if you have spent any time...

...in Dargeling, you know that the border between Nepal and dodgling is super porous. Right. So there's a large problem of 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 a fraction 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 how you know, technology like blockchain can be used to be able to improve these things. So if and 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 you know, this tea is not only comes from sellimon it's coming from these sections within CETEMENT. Business inside in the is also aggressively challenging importers to monitor or Kenyon tea, threatening to cancel their importing 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 quantity and quality to slow a recent surge of low valued teas. Kenya ship to India two point eight million keylows of tea from January through June, up from one point five million kilos during the same period. Last year, Chinese archeologists discover the oldest tea yet. Archeologist extended the age of prepared teas to the early stages of the Warring 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 News Agency, the samples were discovered in tombs excavated in the Chandong province in the remains of a city built twenty eight hundred years ago. Stam and leaf carbonized residues were found in an inverted porcelain bowl. Researchers led by Professor Wangqing at Shendong University said the residue is likely drags left by ancient people people after boiling so truth in in confirmed. The substance says tea. The findings advanced the age of prepared teas by more than three hundred years. The study was published in 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 support for the week ending twenty seven November two thousand and twenty one. We're nearing the close of the tseason in north India.

Most estates and factories were closed by mid December for winter. The last blocking dates will be announced by the Tea Board. We got up at the export of pro number and sale of Bensalian 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 and Orthodox, unusual for this time of the year. Major packets and blenders have been active, and this is good news, especially since Indian tea exports have taken a hit due to high CTC prices in India, weather disruptions and supply cheen disruptions. Reflecting this in auctions this week, called Kutas strong demand for Orthodox CTC and dust, with some demand for dagiling tea. Orthodox te also found. Take us from the Middle East bias. Compared to last week, there were fewer outlots. Gohati saw good demand for tea, with major blenders active for both CTC leaf and dust. In the south, Coachin saw good demand with middle sinceias. Country is showing good support for Orthodox Leaf. KUNNU TO 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 at Kunur. And now a word from our sponsor. Que Trade understands that a successful 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 its sensory experiences that customers crave. Every recipe is formulated with a commercial backbone of dependable quality sourcing, with a pricing structure that supports a safe, regulated, profitable and scalable bland. Que Trade meets every brand's retail, food service and e commerce need. For more information, visit our website, que trade teascom. This week, tea bills travels to Singapore for a conversation with John Davison see eel of ater of tea, soon to be the largest tea company in the world. A CATERA is currently a division of Unilever that houses thurly forward tea brands including Lipton, Yellow Label, PG tibs, Tozzo, broot bond and red rows. In November, CBC Capital Partners, a multibillion dollar private equity firm headquartered in Luxembourg, paid five point one billion dollars for Ektara t outbidding. Several competitors and establishing evaluation based on fourteen times earnings before taxes and depreciation. John Davison joined you to Labor in March two thousand and twenty one to carve out the companies under performing tea portfolio. Davison was formerly CEO at Zulig Pharma, a thirteen billion dollar pharmaceutical...

...distribution company employing thirteen thousand workers in twelve Asian countries. Davison, who is British, is a graduate of Cambridge University and Harvard Business School. He began his career with UK retailer Marks and Spencer before joining McKenzie and company in Nineteen Ninety one. He was global head of strategy at Diageo in one thousand nine hundred and ninety five, during the Guinness Merger, and a regional president at Anne for eleven years beginning in two thousand hundred and three. Davison, who lives in Singapore, will relocate to England after Christmas. What a private equity for imports five billion to work. They are clearer expectations. We will see sigable returns. In general. Two patterns of emerged, one and which the management team comes through way to profitability. Trimming staff, INVESTING IN AUTOMATION AND INTRODUCING EFFICIENCIES. The second is spurring growth. Why would company like CDC want, as you say, to invest five billion in the taking it tear out of Uly? It pulls down to three or four key points. Number one, it's a growth category, T it's on trend. I think covid if anything, has reinforced the dynamics in tea. 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 term potential. Secondly, if you look at it Quittera, we are the largest by some stretch. I think three times larger than the next player. So we 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 would say, but I think capital partners, CD see have seen that opportunity to capitalize and drive that leadership position to greater heights and with that, bring the category into into a faster growth so I think that's the second big reason is the strength of a competitive position relative to to the rest of the Peer Group in 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 team we'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 and when you put all that organization together on top of a great brand portfolio in a growing category, it's clear to see why CDC or anyone else would be interesting 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 mine as we start to engage with with our future owners. And of course, these these transactions take time to go through the process. There's a 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 till mid next year. Consumers, when asked so, they're willing to pay more for products that are sustainable and reward manufacturers who close the loop and growers who conserve water and regenerate soil. So on one hand we have approach premium of perhaps twenty to thirty percent. At retail the premium is similar to that paid for or again a goods and by consumers who have demonstrated their willingness to pay more for fair trade goods. On the other hand, team manufacturers face significant additional cost to cultivate and process premium tea. There is the expense of adapting to a 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 to pay sufficient to cover the cost of sustainable production? The desires there and there's money on the table. Can you operate a Quatar tea in a way that's both sustainable and profitable? That's a great question and I think sustainability and ESG philosophies and beliefs are at different stages of development and relevance in different parts of the world. And Cup Twenty six you could absolutely feel that the world's eyes 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 get it. He's an extra twenty thirty percent new problem. But I didn't believe that'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 going to be a wholesale phenomenon at this stage. Maybe, hopefully, in the next years to come, which means that, you know, we do, to your point, have to develop sound business cases to surround the decisions we take to drive a more sustainable approach to business process and this is why technology in Ourd so important, because, you know, a few if you remove plastic from your packaging, you know, as I said, it cop twenty six. You know, you do put in an investment to your machines in the 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, you know, a fully recyclable or biodegradable path instead, and that can be made at a unit cost lower, then that's a win win. But there will be moments where we have to make those tough decisions and say here's an extra Capex as needed to fit this factory to be able to do x y and Zaid in a completely different way. And I think we've got to be courageous enough to have those decisions and make those...

...decisions and figure out how to make the pay back. whither without the twenty five percent extra help from the consumer. Of course, right now, and you hear this from any when you interviewing 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 effects coming out of COVID and the destruction calls to the planet by that. And we're digesting those changes as well as thinking ahead how we motor on on climate change. It's, we like to put it, a vucca world, a lot of volatility, not 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 these kinds of challenges that are often contradicting each other, and I think that's something that is that's why we are employed to do what we do. You know, if it was not straightforward, it wouldn't be challenging, it wouldn't be 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 people are willing to pay a premium price to drink. I don't think that any brand wish to be known from making tea so heavily discounted that it is perceived as cheap, or blends that tastes worse than in years past. Could tea inherent? Several brands on the rise, market leaders and fifty eight regions, but in the world sales are stagnant. Live year. You know Labor CEO well and jokes at the Dominos in motion by declaring, quote, insanity. Is carrying on doing the same thing and looking for different outcomes. And for ten 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 to fall over and then, as the fundamental problem, said Joe Quote, younger consumers or looking for novel experiences and the Consumer of builders tea was someone who was 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 on bringing down cost to manage exactly what you describe declining pricing or stagnant pricing in the market. So any any multinational would probably want to deal with that kind of spiral of decline on value by D engineering the product. I think certain things we are absolutely going to put right...

...very quickly. Other things may take longer to fix and 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 consume. We can't live in an industry if we are the 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. We partially started that program in the last twenteen months before I showed up. Now the'm they're with the team. It's something that we're outside right that will link tail key of investments in certain key areas, but also in the way we communicate benefits to consumers as well. So I don't think we've done a very good job on that either. Historic I think we tended to pull back on consumer communications and we've not played the powerful parts. We have an upport paying intrigued by what you've heard in to do is podcast. Would you like to learn more from our global network of Tubas, journalists and t experts? Remember to visit the TV is website from more comprehensive coverage. That's wwwt Biz bizcom. Thanks for listening. Farewell. Till next week.

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