Despite the ongoing war with Russia and a tough business environment within the country, the Ukrainian tea sector is steadily developing and maintaining stable demand.
Prior to February 24, 2022 the Ukrainian tea market demonstrated good dynamics with the average growth rates of 10-13%, both in value and volume terms. Most of the sector accounted for packaging of tea imported to the country at the capacities of local factories. The country has its own production, which accounts for about 8% of the market, mainly Carpathian herbal teas. Prior to 2022, the annual volume of domestic production was estimated at about 15,000 tonnes, however, in the last 2.5 years, it has declined by up to 35%.
Despite this, the Ukrainian tea market was positioned as one of fastest growing tea markets in the entire post-Soviet space and Eastern Europe. The beginning of the war with Russia led to a sharp drop of the entire hot beverages market of Ukraine, including the tea sector (up to 35%).
Among the major reasons for this was the mass migration of Ukrainians and the occupation of some of their territories. The situation has been improving since the beginning of 2023 after a general stabilization of the military and economic situation in the country. This created conditions for the growth of tea sales within the country.
According to experts at the Ukrainian Pro-Consulting agency, in terms of structure of consumption, the largest share of the market accounts for black tea (68%), with green tea being the second category (17%). The remaining part of the market is made up of fruit tea (7%), herbal tea (5%), and specialty teas (3%).
About 79% of tea is imported to Ukraine from abroad and packaged locally. At the same time, the share of branded imports account for 12.5% of the market. Most of the raw materials for packaging are supplied to the country from India and Sri Lanka, while packaged imported tea products in Ukraine come mainly from the UAE, as well as Sri Lanka, Azerbaijan, India, China, and Poland.
Among the bestselling tea brands in Ukraine are Greenfield (17.3% of the total sales in 2021), Ahmad Tea (12.8%), and Tess (5.7%).
After the beginning of the war, a number of local tea producers were forced to stop or suspend operations in combat zones. For example, Ahmad suspended its factory in the Kharkiv region. Other operators of the tea market in Ukraine also faced serious supply disruptions due to the breakdown of the usual logistics chains and a sharp growth of prices.
Prior to February, 24 2022, 40% of the Ukrainian tea market was occupied by companies affiliated with Russia and its business (while among the biggest were such companies as "Orimi Ukraine" and "Company May Ukraine"). After the beginning of the war, most of these products disappeared from Ukrainian retail. However, according to a recent report by the local Obozrevatel business paper, they have started to reappear under new brands in recent months.
Still, despite the overall tough business environment in the country, the development of the Ukrainian tea sector is ongoing, which is also reflected by the appearance of new players in the local market.
For example, in June 2024, the local "Chance Vik" company, which is based in the Volyn region, officially presented its own brand of organic tea, Travka.
Travka Co-owner Volodymyr Olkhovik said in an interview with the Ukrainian media that the company puts big hopes on its products, "We receive fresh raw materials from the forest and fields, dry, and partially process them. Since 2021, we have purchased imported equipment and have been able to separate raw materials into fractions, grind and pack. We have always wanted to create our own product, and not just raw materials for other manufacturers. Therefore, Travka is a new page of our company."
The tea sector also attracts some large local business these days. An example is Biosphere Corporation, the largest manufacturer of household goods in Ukraine, which is owned by a well-known local businessman, Andriy Zdesenko. The company recently announced its plans to become one of the leading local tea manufacturers and to control about 20% of the Ukrainian market.
Due to the declining birth rate in Ukraine, the company decided to sell its diaper business and to expand in the tea market.
"Unfortunately, we predict a significant decrease in the birth rate of our children, so we decided to sell the line for the production of diapers to a friendly competitor, a partner," says Zdesenko. "We have not left the market, but we no longer produce diapers. Instead of diapers, we produce tea."
At the beginning of 2024, Biosphere had already launched its tea under the Graff brand in the local market, planning to continue its development in this area.
The company currently estimates the domestic tea market at about UAH 7 billion (US$169 million), expecting its decline up to UAH 6-6.5 billion already in the coming months. The company sets a goal to control 20% of the market in three years and about 5% by the end of the current year.
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