This Moat Is Filled with Tea

05/13/2013 7:00 am EST


Unilever has relaunched its tea brand Lipton across the Arabian Gulf, after patenting a process designed to make a better brew, which should give a nice boost to the company, writes Gillian Duncan of The National.

Unilever (UL) claims to have an almost 70% market share in the region between Lipton and Brooke Bond, meaning two out of three cups of tea drunk here will be a company brand.

That market share means a lot in a region where tea is literally consumed more than water in some places, a critical staple on the level of wheat and rice.

Lipton's Dubai tea factory, which has increased production sixfold since it started in 1998 and primarily serves the GCC, is currently the company's second-biggest globally. It is on course to overtake the No. 1 producer, a Unilever plant in the UK, within a couple of years.

But tea is not the only category that Unilever dominates in the region. "In 75% of our turnover, we are the market leaders. In the last six years, we have been growing in double digits, despite the Arab Spring, despite the financial meltdown," said Sanjiv Mehta, the chairman of Unilever in North Africa and the Middle East.

However, there is still room for the company to grow its market share, even in tea. Only 40% of the volume is in tea bags at the moment. The rest is of the loose variety. Unilever's job is to convert people from packet tea to bags, said Mehta.

And other opportunities exist in categories such as toothpaste, he added. "If everyone were to brush their teeth twice a day, a simple expectation, the size of the toothpaste market would be seven times bigger than what it is today," he said.

"It is not just about affordability. It is about habits and practices. The needs and wants across the world are very similar, but the habits, practices, and attitudes are very different."

Lipton is pioneering a new production process that squeezes the juice out of the tea leaves to produce a natural tea essence, which is added back in before the drying stage is complete.

"The result is a smoother and fresher-tasting cup of tea with no bitterness," said Seryal Olcay, a senior research and development manager with Unilever. Tests locally proved customers preferred the taste of the new Lipton tea, she said.

"For a brand to remain a market leader, to remain contemporary, you have to remain in sync with the evolving pace of the consumers. And we listen to our consumers," said Mehta.

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