Global Tea Brands Reduce Presence in Russia, Provide Opportunity for Local Tea Players

Dutch tea and coffee company JDE Peet's, which owns the coffee brands Jacobs, L'Or, Tassimo and Douwe Egberts, has confirmed it will stop selling foreign tea brands on the Russian market before the end of the year. Only local brands will be presented in Russia. The company announced this in its financial report for the first half of 2023.

JDE Peet’s also lowered its profit target for the year due to uncertainty amid a switch to local brands in the Russian market.

CEO Fabien Simon commented, in a statement on JDE Peet’s half-year results for 2023: “In the first half of 2023, we initiated the transition from a multi-channel organization in Europe to a local portfolio in Russia. In parallel, we will expand our reach to our global consumers with plans to acquire the Marat coffee and tea platform in Brazil and the launch of L'OR Barista in the U.S.”

Simon added that JDE Peet’s is not going to leave Russia completely. He noted that the company's work on the Russian market does not contradict with the sanctions. According to him, the Russian division of the company employs more than 900 people.

Since the beginning of the Russian and Ukraine war, JDE Peet’s has sought to ensure that business in Russia develops independently. Thus, the company did not authorize investments in the expansion of production and stopped investments in advertising and promotion of its global brands.

Earlier this year, the company told Russian media that they intend to continue to provide customers and consumers in Russia through a local representative office. “Further strengthening of localization, including the portfolio of brands, will best meet demand,” said a company representative in March, in an interview with the Russian Kommersant business paper.

In the meantime, Russian analysts believe the company has taken the right decision amid the current conditions of doing business in Russia. Alexey Popovichev, executive director of Rusbrand, the Russian association of trademarks, said that the abandonment of the umbrella brand is unlikely to reduce the recognition of JDE Peet’s products in Russia, but will allow the company to continue developing local business, reducing the associated risks for the head office.

Analysts also believe that amid the exodus of global brands from the Russian market and reduction of their presence, the level of competition in the local tea market will be significantly tightened, as many leading local players have announced their plans to fill vacant niches.

One such company is the Rostov-based Tradeberry, one of the leading producers of food and soft drinks in Southern Russia, which recently announced its plans to expand into the domestic tea market by the production launch of a new line of black tea. The planned output is not disclosed, while the volume of investments at the initial stage may reach US$5 million. This will be one of the largest productions of tea in Southern Russia, while most of future output will be supplied to domestic market.

The company hopes for a stable demand for its newly launched tea despite a new wave of growth of tea prices in Russia at present, caused by the ruble (Russian currency) devaluation. So far, some leading Russian tea producers have announced their plans to increase prices for their range by five to 10 percent already in the coming weeks, explaining the move by the increase of raw materials’ prices and the growth of other costs.

For example, May company, one of Russia’s largest tea producers (with the main brands of Maisky, Lisma, Curtis, Richard) have warned retailers about an increase in selling prices from September 1. They will grow by six to nine percent.

According to the company, this measure was explained by the high volatility of the ruble exchange rate, which led to an increase in the cost of importing raw materials. As an official spokesman of the company has also added, these segments of the food market are most dependent on imports of raw materials, which are also becoming more expensive due to a drop of tea harvest.

World Tea News contributing writer Eugene Gerden is an international freelance journalist, specializing in the global tea and coffee industries.

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