Ahmad Tea: Exploration of Home Market and Challenges Abroad

 

Ahmad Tea London Ltd, ranked fifth in the tea globally, is one of the few long-established, family-owned companies with a significant international presence. Euromonitor International’s data show that Ahmad registered shares in over 20 markets in 2013, with a particularly strong presence in the Middle East, Eastern Europe and some African countries. Its relatively wide geographic coverage in these emerging markets makes it a multinational company but it is not a truly global operator compared to first tier conglomerates Unilever, Tata Global Beverages and Associated British Foods. Under Unilever’s mighty leadership, Ahmad Tea’s global status is similar to that of Orimi Trade OOO and Teekanne, relying on concentrated coverage in certain regions while weak in other regions. Ahmad Tea and Orimi, for example, are both absent from North America and Asia Pacific but are strong in Russia. However, Ahmad Tea does not show an urgent need to address its geographical weakness. Any companies, big or small, listed or private, are looking for growth, and stagnancy is sometimes the biggest internal threat, as the marketplace and competitive landscape are changing all the time. Ahmad Tea faces the same environment as everyone else.

This article has two parts; the first assesses the state of play of the company and its potential interest in developed markets. The second part highlights its activities in Russia and Iran to see how Ahmad Tea is performing in its core markets.

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Source: Euromonitor International

English quality with a touch of the Middle East

It is not surprising that analysts ponder the background of Ahmad Tea London Ltd, as the corporate name is an interesting blend of cosmopolitan London and the Middle East. As a UK-based company, its brand is not easily visible in London’s grocery retailers but it is a well-known brand in Russia and Iran, these two markets accounting for over 60% of its global sales in 2013. The company’s founder is reportedly to be of Iranian origin and the family has four generations of tea blending and tasting experience, according to its corporate website. In the late 1970s, the family migrated to the UK and incorporated images of old London on their packaging, to evoke nostalgic attributes – old, traditional, trustworthy – feeding into the Ahmad brand name. This name works well to many consumers in its core Eastern Europe markets as they are looking up to a Western lifestyle and quality.

Globally, Ahmad Tea made significant progress in black standard tea, rising from 20th in 2008 to 13th in 2013. Fruit/herbal tea is also a fast growing category for the company. By the end of 2014, Ahmad Tea’s global sales of tea could exceed US$1 billion if the company continues its growth momentum. First tier tea companies such as Tata Global Beverages Ltd, Associated British Foods, and Unilever will have to pay increasing attention to Ahmad Tea and its agenda of expansion.

Ahmad Tea recently refreshed its website and made it look even more elegant, highlighting its pursuit of quality of fine teas. Little financial information and corporate strategy is revealed, but the feel of the marketing message the company wants to show to the public is that it is inclined to pursue a middle to premium pricing route. Although there is no apparent premiumisation in consumption of tea in many Eastern European markets, some higher income consumers are noticeably trading up to higher value and health and wellness teas (notably green tea) in Russia, according to Euromonitor International’s field research team. This is encouraging news for Ahmad Tea, which is heavily promoting its British and London-based, high-quality image abroad.

Possible exploration of home turf?

Just like other major tea players, Ahmad Tea’s association with a corporate social responsibility (CSR) project or programme is announced and stated and it is part of the Ethical Tea Partnership (ETP). This initiative is important as the company intends to market its tea in Western Europe, as CSR can affect people’s purchasing decision, to some extent. Associated British Foods, Tata Global Beverages Ltd, and Unilever are all linked to certain CSR projects and programmes and actively engage in all sorts of activities. Since the fall of Lehman Brothers, multinational companies have placed considerable emphasis on CSR, in an attempt to create a good image and establish consumer trust and a sense of shared values.

In September 2013, Ahmad Tea was reportedly in talks to market its premium tea to mainstream UK retailers, by leveraging its position in international markets. However, so far Ahmad Tea is not listed in mainstream UK retailers’ online shops. Negotiations to break into the mainstream in the UK may not be plain sailing, as competition for retail space is tense. The UK is a saturated tea market, with many long-established brands including Tetley (Tata Global Beverages), Twinings (Associated British Foods) and PG Tips (Unilever). British tea drinkers are typically loyal to their familiar brands, and there is increasing taste-sophistication evident amongst many consumers. Indeed, there is a premiumisation consumption trend in evidence, where consumers may drink less tea but choose premium alternatives.

Strong growth for a few premium brands, such as Teapigs, reflects this trend and it is encouraging news for high-end players. However, competition in share of throat from other hot beverages is worth mentioning. For example, British consumers are drinking an increasing volume of alternative beverages, such as fresh coffee, which is set to outpace both instant coffee and tea by off-trade volume over 2013-2018.

Besides these underlying challenges and opportunities, there is a need for Ahmad Tea to consider exploring its home market as it has encountered mixed results abroad. If it works well, investment in a developed market may give regular and more predictable returns.

In the next article, Euromonitor International will highlight Ahmad Tea’s marketing activities in its core markets Russia and Iran, and see how it has engaged with local consumers via its promotion as a British brand.