Global tea producers continue to leave Russia and its market because of the ongoing Russia-Ukraine war, the ever-tightening sanctions, and pressure from the West and around the world.
The latest in such list is the German tea manufacturer Milford. The Laurens Spethmann Holding company transferred 100 percent of the subsidiary of the Milford business to Russian management, the company's general director in Russia, Ilya Bulanov.
According to Russian BFM media outlet, the company has been operating in Russia since 1996. It is one of the largest producers of tea bags in Europe, and it includes the tea brands Milford and Pages, as well as the sweeteners Milford and Huxol. Since 2015, part of the Milford tea range has been produced in Russia.
This is already the second exodus of a major player from the Russian market. Earlier, the same move was announced by ekaterra. Its brands will disappear from the Russian market by the end of the year. The company said that the current situation does not allow it to develop its business steadily.
In Russia, ekaterra was represented by the brands Lipton, Brook Bond and Saito, which were produced at the tea-packing factory in St. Petersburg. Production is planned to stop by the end of 2022, then the sale and distribution of products will stop.
In the meantime, representatives of the Russian tea business community believe the current situation remains under control.
Ramaz Chanturia, general director of the Russian Association of Coffee and Tea Producers, said that the regional tea market has been rebuilding over the past six months and the exodus of Western brands will not bring problems.
“There are some difficulties with the implementation of business processes logistics and some financial issues in Russia at present,” said Chanturia. “As for companies, leaving Russia, the Milford brand, despite its fame, does not represent any value in the Russian market. The market is in a period of restructuring; now, we have to prepay for supplies due to the serious risks in supplier countries. Accordingly, there are certain financial difficulties in this regard because all companies and market operators have to increase the volume of allocated money reserves.
“There is also a restructuring of logistics routes, as instead of European channels; now, many companies are beginning to rebuild their routes through the Far East, through the Iranian corridor, the Mediterranean, the Black Sea,” continued Chanturia. “The volumes of tea production and tea supplies to the Russian market are fully in line with the existing demand, that is, there are no hints even of a shortage.”
Chanturia noted that dozens of companies operate on the Russian market. “This is a very competitive market,” he said. “Russian companies are leading the domestic market, leading on a scale that is inaccessible to any of the outgoing trends.”
According to Chanturia, some of the local market leaders/brands are Greenfield, Tess, Curtis, Richard, Akbar and Ahmad Tea.
In the meantime, representatives of Russian retail chains say that the combined share of leaving brands did not exceed 4.5 percent, so retailers will be able to find alternative suppliers for the freed volumes. Among them may be Ahmad Tea or Orimi Group of Companies (brands Greenfield, Tess, Jardin.
Analysts believe that local companies are the main producers and suppliers of tea products to the domestic market. While in addition to them, there is a possibility that companies from India, China and Sri Lanka will also be able to occupy a vacant niche, per experts.
The exodus of Western producers should not lead to an increase in the cost of tea products in Russia. According to NielsenIQ, tea sales in retail chains in the first half of the year in physical terms decreased by 6.1 percent compared to the same period last year. At the same time, in monetary terms, on the contrary, they increased by 9.7 percent. According to earlier reports of Russian media, tea producers have raised prices by 30 to 60 percent since February, citing increased logistics and packaging costs.
World Tea News contributor Eugene Gerden is an international freelance writer, specializing in the global tea and coffee industries.
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