Business Daily (Nairobi)
Abbysinia Lati
18 May 2008
On the usually bustling Koinange Street in Nairobi, Chai House towers like a solid testimony of the power of the tea industry. On the ground floor is a splendid tea cafe, The T-Spot, that has marked the battle lines in the race of the tea cup.
A lane away on Loita Street is Sasini House, which not only houses the headquarters of a tea and coffee company, but a new tea and coffee restaurant.
Both houses are at war for the tea market and so are others out to add premium to their produce as the international market weathers the dollar fluctuation storm.
In April, the Kenya Tea Development Agency (KTDA) opened the T-Spot Restaurant, which is to street-test its entry into the beverage market. To back it up, its subsidiary Kenya Tea Packers (Ketepa) launched the first cold tea drink, Safari Ice Tea, in the local market.
Of late, the export of Kenyan tea to traditional buyer countries such as Pakistan has shrunk by 18 per cent, which is forcing local companies to turn to the home ground for survival.
"A company has to be innovative to be part of this fast changing market, from what is inside the package to the outside. The packaging has to be of good quality too," says Edwin Bii, the sales and marketing manager of Sasini Ltd.
Mr Bii says the new vibrancy in the sector is about integrating the business to bring another aspect about the company and to increase shareholder value.
At the newly refurbished National Museums of Kenya headquarters in Nairobi's Museum Hill is a new coffee and tea outlet operated by Sasini as part of its diversification programme.
"When a company does this, it is addressing people's needs," says Mr Bii
Sasini's core business has been in exporting coffee and tea from farms it owns, while being a retailer in the local and regional market. Besides selling branded tea in Kenya, the company hopes to take the African coffee drink to London and Dubai.
Although tea has been commercially grown in Kenya since the 1920s - and in small portions since 1903 - it has yet to be fully exploited and little value addition is done.
Back in 1996, Flora Mutahi of Melvin Marsh International, tired of seeing the same black tea on the shelves all the time, decided to add value to local tea. She started her own tea packing company filling the vacuum and adding excitement in the local tea market. It worked.
In her office in the Nairobi's Industrial Area, the powerful aroma of spices filters and wafts into the corridors.
This smell is one that has changed the tastes of people; a sign the value addition is bringing a new life to the once business she was tired of.
As the pioneer of the local flavoured tea, Ms Mutahi is constantly recreating and introducing teas with only natural fresh spices.
Today, Melvin's Tea remains a case study of an experiment gone right. "I have to keep abreast with the customer and keep moving with them," she says, sounding upbeat about emerging success on a mission to satisfy the market.
As the Kenyan consumer gets stronger in demanding the best and high quality from companies, the consumer market is moving fast too and that is why the tea producers are entering the market slowly.
As the tea growers struggle to add and interest locals into taking more tea it is becoming a cut throat competition that has thrown into place all ideas into the arena.
Although Kenya is a tea growing country, its supermarket shelves still spot tea brands from other countries. This is a testimony the market is there is need to improve consumer choice.
That is how KTDA feels about it newest baby, the T-Spot which is entirely run by a restaurant consultant management, Blanco's Holdings, which they hope to go regional, then international. It offers all the teas grown in the country and experiments with it; from cookies made from tea to tea mochas.
"It is a unique way of looking at tea. Tea is key," says Charles Mbui, general manager - sales and marketing.
But are the tea sector's new plans just reacting to the global crisis of surplus and unstable dollar? The companies admit these two concerns are part of the reason for the new interest in the local market.
Mr Bii says the global surplus in tea production and the strengthening shilling are eating into profit margins especially those of Sasini and KTDA.
"The fluctuations in the revenue flows make it a challenge to come up with a business plan," he says.
Tea production at the farm level has increased the cost of production in recent times.
In the tea farms, the picking is still highly manual and the trade unions want a wage increment every year.
Efforts to introduce tea picking machines have been marred by protests from the unions and the tea pickers themselves; meaning that most farms cannot mechanise to cut costs.
The annual consumption per person is 400g compared to the UK where average consumption is 2kg. "We are saying that if you are taking two cups; take four cups," says Mbui.
Apart from trying to capture the market, Sasini says it is testing its products in a market it knows and using it as a springboard.
The company is coming up with brands that it can control and get a premium from. As Mr Bii says, it is the brand before the tea. It is flexible because it builds identity. Looking at Jani, the premium teas from KTDA are meant to cater for the upmarket shoppers.
It is about market diversification and, as Mr Mbui points out, the market is on the driver's seat and not the companies any more. The company has three flavoured teas, namely ginger, masala and lemon in the market.
The Kenyan market is diverse, but in the social class the middle class is bigger.
However, the youth have a huge influence when it comes to a company's target market, yet they are mostly unemployed. And the wealth gap is widening.
Bright future
"It is a challenge and an opportunity at the same time. You need to be fast to grab the opportunity," says Mr Bii.
For a company, he adds, to succeed in this market it has to remain focused on its vision and clear on the concept.
Diversifying means investing in research and huge set up costs. But there is also the competition from a different product, away from the tea industry- the soft drinks.
Having realised the threat from this end, tea companies have been pushing the health agenda of tea to excite more consumption.
Ms Mutahi says: "We need to add glamour and youth to advertisements, which are still done in the same old way instead of injecting freshness into products."
Mr Mbui is optimistic: "There is a lot of future in value-addition. It about creating demand and growing with it."
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