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Selling Tea from Africa to Africans

Friday March 17, 2017
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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.

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2 comments

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  1. Sheila March 19, 2017, 03:12 AM
    Great article....clearly defining the rise of Africa
  2. Charles Dey March 18, 2017, 07:27 AM

    If I could (hopefully) plant a seed in someone's mind:

    Particularly where Africa is concerned, 3rd and 4th party logistics providers (3/4PLs) are well placed to light a fire of radical, constructive change. This concept focuses on profitably shifting to developing or reviving primary industries where there is potential which for various reasons is not being fully realised.

    3/4PLs currently add value to the businesses of buyers and sellers of goods by ensuring that their goods are moved from supplier to buyer at the right place, right time and at a viable cost. As such this is a derivative industry which traditionally relies on the existence of buyers and sellers in local and international markets in order to provide their services. In other words 3rd and 4th party logistics providers rely on the presence of established supply chains before they can offer their services. This is where out of the box thinking is indicated.

    Let's use the Kenyan cut flower industry as a case study. It started growing in the 1970’s. The country’s horticultural sector currently ranks as one of the economy's fastest growing industries, the third largest foreign exchange earner after tourism and tea, a trend that saw the industry rise to approximately 40% of export earnings over the past ten years with export volumes reaching 220,000 tonnes in 2014. Imagine what that has done for the Kenyan logistics industry. An important factor in the success of any project involving agriculture is the realisation that, relatively speaking, farming is the easy part: what is important is total control of the supply chain from the time the crop is harvested until it is sold to the consumer. This is where the opportunity presents itself: due to various factors there is a surplus of arable land throughout Africa where those who own that land are unable, through a lack of resources and business expertise, to produce crops which are marketable. By partnering with such landowners the 3/4PL is able to use his network of local and overseas contacts to establish markets for products which could be produced by the farm owners in question and then establish viable businesses along that supply chain in order to serve the markets which have been established. In developing such projects a key factor in ensuring their sustainability is training: the development not only of the means of production (the farm and the downstream processing facilities) but also the competence to manage those supply chains. 

    Does this seem to be a viable proposition?

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