Sri Lanka’s Browns becomes world’s biggest tea exporter in deal with Lipton
Daily FT: Lipton Teas and Infusions has announced it has agreed terms of a partnership which will result in the transfer of its tea estates in Kenya, Rwanda, and Tanzania to Browns Investments alongside an agreement that all tea sold by Browns worldwide will be grown and harvested to a new set of standards covering quality, social and environmental protections.
This long-term partnership will make Browns the world’s leading tea exporter – around 87 million kilograms each year as well as one of the largest suppliers to the world’s largest tea company, LIPTON Teas and Infusions. By working together, the two companies will raise tea quality globally and accelerate the application of responsible farming methods across the industry to drive sustainable growth. Browns will invest in its estates in Kenya and Sri Lanka to meet the new standards by 2025, as well as in the creation of additional skilled employment opportunities in Kenya.
Terms of the transaction, which is subject to standard regulatory clearances, are not disclosed.
Browns separately in a filing to the Colombo Stock Exchange said subsidiary B Commodities ME FZE incorporated in the United Arab Emirates has entered into a Sales and Purchase Agreement (SPA) with Ekaterra Holdco UK Ltd., Ekaterra Group Holdings BV incorporated in Netherlands to acquire the controlling stake of four companies for a consideration to be calculated at completion in accordance with the provisions of the SPA.
The companies are Lipton Teas and Infusion Kenya Plc (98.56%) which produces 33 million kilos on an extent of 14,100 hectares; Lipton Tea Plc, Kenya (51.99%) which produces 3 million kilos on 282 hectares; Lipton Teas and Infusion Tanzania Ltd., (100%) which produces 9.4 million kilos on 28,572 hectares and Lipton Teas and Infusion Rwanda (100%) producing 2.6 million kilos on 816 hectares.
This is Brown’s second overseas acquisition following the purchase of James Finaly (Kenya) Ltd last year.
In line with Lipton Teas and Infusions’ vision of creating value for all, the proceeds or the transaction will be reinvested into the East Africa region to drive local and industry-wide progress in relevant areas such as skills development and climate change mitigation.
The Government of Kenya has supported the companies in identifying opportunities for local communities to benefit from the partnership and future growth of the industry.
Shares totalling 15% of the main Kenyan operating company will be offered to the communities of Kericho and Bomet, where the estates are situated, at a substantial discount to create accessible communal equity and mutually aligned economic participation.
Lipton Teas and Infusions and Browns are also jointly creating a Community Welfare Trust with an initial one billion Kenyan shillings dedicated to helping address other needs at local and neighbouring communities.
Lipton Teas and Infusions CEO Nathalie Roos said: “Browns is the preferred partner with credibility, capabilities and scale, to work with us to raise standards in the whole tea industry. The team’s commitment to sustainability and community development aligns with our own. Together, we are setting a new precedent for transforming the global tea market – one cup at a time.”
OSL take:
Sri Lanka’s tea industry is on a growth path with locally produced tea products seeing an increase in its market share in the global market. Locally produced tea prices have also seen a steady growth in the local and export markets. Sri Lanka’s existing trade agreements and trade concessions as well as the new trade ties with more countries have helped boost Sri Lanka’s exports sector including tea exports. Tea is among the key food crops exported by Sri Lanka for decades. Local authorities are working towards tea produced in Sri Lanka regaining the top slot enjoyed by Ceylon Tea in the global market in the past. Local authorities while introducing incentive schemes to attract more businesses/investments to the tea industry have also supported the industry through promotional campaigns in foreign markets while encouraging local businesses in the tea industry to expand and diversify their product portfolios. It is in such a backdrop that Sri Lanka’s Browns Group has secured a key purchase agreements with the leading global tea company – Lipton – for tea produced in Africa. However, it is only a matter of time that Sri Lanka’s Browns Group would also secure a similar market for locally produced teas. It is evident that Sri Lanka’s tea industry is on a steady growth path and the growing opportunities would provide lucrative business/investment opportunities for foreign businesses/investors.