The Russian assets of ekaterra's Lipton tea brand, which left Russia in 2022, are expected to be sold to local investors this year.
So far, the Russian anti-trust regulator, The Federal Antimonopoly Service (FAS), received a petition from United Tea Company LLC, one of Russia’s largest tea producers, to purchase ekaterra's production facilities and other assets in Russia.
In Russia, ekaterra produced tea under the brands Lipton, Saito and Brooke Bond at a factory in St. Petersburg. According to city administrators, in 2019 the factory's capacity was up to 16,000 tonne of products per year. In August 2022, ekaterra announced its withdrawal from the Russian market and suspension of production in the country.
United Tea Company LLC produces Eastford, Berryford, Kama Sutra and Green Standard teas, and it also packs products, including private label tea. As Alexander Konov, a co-owner of United Tea Company LLC, said in an interview with the Russian Kommersant business paper, the company plans to acquire the facilities of ekaterra, which he called one of the most productive and high-tech complexes for the production of tea in Russia.
According to Konov, the United Tea Company specializes in a fast-growing market segment – contract production – mainly for hard discounters, which requires better prices and production efficiency.
Details of the planned deal have not been disclosed. Representatives of ekaterra were not available for comment.
According to estimates of the Russian Association of Tea and Coffee Producers (Roschaikofe), the volume of the Russian tea market is currently estimated at about 140,000 tonnes per year. Thus, ekaterra's capacities will make it possible to occupy more than 10 percent of the market. The list of other leading players includes May (brands Maisky, Curtis and Richard) and Orimi (Greenfield, Tess).
The General Director of Roschaikofe, Ramaz Chanturia, recently said that the ekaterra factory in Russia was in a modern state and could be of interest to potential local bidders.
Chanturia, as well as other interviewed analysts, believe the demand for tea in Russia is steadily growing, which could create conditions for the expansion of production by leading local players, also by the acquisition of ekaterra assets.
Analysts believe a related interest of leading local players may be the signing of long-term contracts for the production of tea under private labels with leading Russian retail chains. As Chanturia also believes in declining purchasing power in Russia, private label tea is becoming more in demand due to the low price.
In general, the Russian tea market has been able to withstand the consequences of the current Russia/Ukraine conflict. This is also confirmed by official market statistics. According to NielsenIQ, last year, tea sales in Russia in volume terms decreased by 5.7 percent (of these sales, loose leaf tea decreased by 6.6 percent, and tea bags by 3.6 percent) although grew by 12.3 percent in value on a year-on-year basis to RUB 210 billion (US$2.56 billion), mainly due to a significant rise of tea prices (up to 20 percent) in Russia in 2022. Tea bags account for 69 percent of sales in volume terms. A total of 93 percent of the market accounts for domestic producers.
In general, the Russian tea market is characterized by strong, traditional consumer preferences. Black tea is the most popular variety in Russia, occupying about 80 percent of the market.
The main problem with the Russian market is its dependence on imported raw materials. The main suppliers are India, China, Kenya, Sri Lanka and Indonesia. In Russia, there are almost no climatic zones suitable for tea plantings. There are plantations in the Krasnodar Territory and Adygea, but they cannot meet the domestic demand.
There is also the ever-growing interest in non-standard types of tea, which are becoming an alternative to sweet carbonated drinks or bottled iced tea with added sugar.
Since the 2010s, the consumption of tea in Russia has been declining by almost 100,000 metric tonnes over the past 10 to 15 years.
To learn more about ekaterra, visit ekaterratea.com.
World Tea News contributing writer Eugene Gerden is an international freelance journalist, specializing in the global tea and coffee industries.
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