We have moved into a beverages company, says Ketepa MD

Kenya Tea Packers (Ketepa) had been the main player in the tea packing sub-sector for years. Its position at the top, however, has been threatened by the entry of many more enterprises, thanks to market liberalisation in the 90s. But Ketepa is not ready to be dethroned, said managing director, Collins Cheruiyot, and is diversifying its product offerings to retain its position, as well as transforming itself into a beverages, not just tea, company.

Someone from Ghana has said Ghanaians no longer find Kenyan tea in their supermarkets. Has there been a withdrawal from some markets?

We have not had an official presence in Ghana, Nigeria or any other West African countries. One of the challenges has been the logistics of getting our tea into West Africa. It was becoming very expensive because of the shipping route, which is quite long. But we are going there, and one of the drivers behind this is Kenya Airways’ recent launch of a cargo airplane that is giving us a competitive price.

What may have happened in Ghana is that deliveries made by private traders fizzled out over freight costs.

Besides West Africa, which other markets are you looking at?

Ketepa, though domiciled in the local market, is increasingly looking at exports as an area of growth. The per capita consumption of tea in this country is very low at just about 0.5 kilogrammes per person per year when compared to some of the target markets we are looking at.

What we are focusing on at the moment are Arab-speaking nations because tea is their preferred beverage. The population of Egypt, for example, is about 90 million, with a per capita consumption of 1.1 kilogrammes per year. You are looking at about 100 billion kilos of tea per year. Sudan also has a per capita consumption of about 0.7 kilos and a population of about 40 million. Saudi Arabia is also another market we are looking at.

Another very important market for us is the United States, which has been growing progressively over the last 10 or so years, driven by a large Kenyan diaspora.

Ketepa is diversifying into beverages like bottled water and iced tea, are there other product lines in the pipeline?

Ketepa has been known as a tea company for decades. But since the liberalisation of the tea industry in the mid-90s, competition has increased, with players fighting for a very small local market. Despite the country producing about 400 million kilos of tea a year, we only consume 25 million kilos of this.

Therefore, Ketepa has taken the strategic direction of looking at itself as more of a beverage solutions company. This is why we have diversified into water and iced tea, and are looking at other cold beverages we can bring on board. We will also be focusing on increasing our flavoured range of teas, and speciality teas, which include green, white and purple teas.

What are the challenges you face in local and global markets?

Tea is not doing badly in the global market. In terms of consumption, the volumes are growing.

In the local market, one of the major challenges you will find is that dealing with 100 per cent Kenyan tea, which is what Ketepa does, is expensive by comparison with other teas in the region. So when you are competing with some of the emerging packers who may not necessarily be focused on supporting Kenyan tea value addition 100 per cent, you end up with price differentials in what is offered.

The other issue that has cropped up after liberalisation is that primary producers — who process green leaves into black tea — have also ventured into tea packing and are able offload their brands at a much lower cost than full value-addition processors like us. The market, which is in the first place not growing, is beginning to be diminished.

We have been trying to look at ways of bringing the cost of local tea down and have been lobbying the Government to reduce the VAT charged on it. If tea is considered a food component, then we would expect its VAT to either be zero rated — which is what we have proposed — or at the very least exempt. If prices come down, we can spur tea consumption in the local market.

The other challenge has to do with insecurity in some areas. It is not very easy for us to deliver our products to some parts of North Eastern, so sometimes we have to wait for organised convoys with security officers to reach these markets.

But I think the global stage is big enough for all tea players to participate. Ketepa’s biggest challenge in some foreign markets has to do with tariffs, which is why in a number of exports, we are looking at Comesa countries where the tariffs are favourable.

Further, a lot of countries outside the Arab-speaking ones are not aware of the superior quality of Kenyan tea. Tea players need to educate such markets on our tea, which is grown without pesticides and insecticides. Basically, among tea-growing nations, Kenyan tea is the safest.

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