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ASCM Insights

Selling Tea from Africa to Africans

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Next to water, tea is the most widely consumed beverage in the world, according to the Tea Association of the USA. Another fun fact: People have been drinking tea for 5,000 years. Fast forward to today, and Kenya has become the world’s top tea-exporting nation. However, its people haven’t been able to enjoy the best of its export. Instead, they have been left with the tea dust and residue. One company, Gold Crown Beverages, is hoping to change that, The Wall Street Journal reports.

Although Kenya exports about 400,000 tons of tea, it keeps only 5 percent of this. In contrast, Gold Crown “is selling premium black and herbal teas, made by Kenyans for Kenyans, at roughly half the price of foreign competitors,” Matina Stevis writes. The company’s tea sales in Kenya have almost tripled since 2012—coming in at about $9 million in 2016.

Unlike its competitors in the tea market, Gold Crown does not export all its raw materials and import the resulting processed goods, which draws a sharp contrast to many other African companies. For example, Stevis points to cocoa producers in Ivory Coast and Ghana who have not produced a competitive brand of African-made chocolate. Likewise, Nigerian and Angolan oil producers have failed to refine and process petroleum products. As such, Gold Crown is a pioneer in the domestic African market and works to meet the product interests of its community.

“Kenyans have been developing a taste for upmarket hot beverages,” Stevis writes. In Africa, there are expanding opportunities to reach a newly-minted middle class. Euromonitor, a market-research company, reports that tea sales in Kenya were $118.6 million in 2015, up from $70 million in 2010. Plus, the sales of premium, more expensive teas nearly doubled in that same period.

When they first started Gold Crown in 2003, Managing Director Fahim Ahmed and his brother expected they would buy tea and sell it to the rest of the world. Soon into their venture, however, they saw the opportunity to sell their tea at home. “While we have brilliant tea here, what you found on the shelves was terribly packaged and we thought, well, we’re here so why not do something about it?” Ahmed says.

Gold Crown‘s operating model still relies on international sales—with 80 percent of its revenue generated elsewhere. For example, shoppers can visit Harrods and buy Gold Crown tea packaged in engraved tin boxes especially for the U.K. department store.

Stevis explains that operating and selling in Kenya presents challenges. First, the Kenyan economy still is mostly agricultural and rural. Next, the government confiscated land Gold Crown bought to build a bigger factory, and the company hasn’t been paid for it yet. Add to that the new machinery Gold Crown bought for its new factory that now sits idle in its old factory.

Despite challenges, the owners remain determined to continue producing tea for Africans and other consumers around the world.

Kenyans now reaching for a cup

Let’s consider the second definition of value added from the APICS Dictionary, 15th edition: “In current manufacturing terms, the actual increase of utility from the viewpoint of the customer as a part is transformed from raw material to finished inventory; the contribution made by an operation or a plant to the final usefulness and value of the product, as seen by the customer … ”

Although the African continent is rich in raw materials, many of its companies just now are grasping the concept of adding value. The founders of Gold Crown spotted their market opportunity—in the growing middle class—but also the risk—one large reason they continue to sell tea abroad as well as in Kenya.

Supply chain professionals need to challenge themselves to think about how Africa is affecting or will soon affect their businesses. As APICS leaders identified the organization’s strategic framework, called The Rise, the rise of Africa emerged as one of its eight factors. For one, many government heads in Africa are inspired by the growth of China and India and are seeking economic advancement in their own countries. Additionally, Africa boasts a large number of working-age people who present opportunities as employees as well as consumers. Learn more about this and other factors of The Rise at bit.ly/APICSRise or in APICS magazine at apics.org/magazine.

About the Author

Abe Eshkenazi, CSCP, CPA, CAE CEO, ASCM

Abe Eshkenazi is chief executive officer of the Association for Supply Chain Management (ASCM), the largest organization for supply chain and the global pacesetter of organizational transformation, talent development and supply chain innovation. During his tenure, ASCM has significantly expanded its services to corporations, individuals and communities. Its revenue has more than doubled, and the association successfully completed three mergers in response to both heightened industry awareness and the vast and ongoing global impact driven by supply chains. Previously, Eshkenazi was the managing director of the Operations Consulting Group of American Express Tax and Business Services. He may be contacted through ascm.org.

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