black&white #18: What does a corporate cup of tea really cost?

3 min steep

You might have seen in the news that Unilever is selling off its tea division (known as ekaterra) to the highest bidder. ekaterra includes some of the world’s best known tea names, including PG Tips, Lipton, and Lyons – as well as more ‘premium’ brands like Pukka and T2. This comes after a fall in tea sales, which some (including Unilever’s Chief Exec Alan Jope) have suggested is due to a decline in traditional tea drinkers as younger consumers prefer coffee, herbals and other alternatives like kombucha. While this may have some legitimacy (and yes, we embrace high grade herbals too), could it also be because tea drinkers are becoming more in tune to the ethical and sustainable issues around tea production?

Already, there have been questions in the mainstream media as to how the sale of ekaterra will affect ongoing issues of human rights, fair pay and plantation conditions within the Unilever business – in particular, a review of claims by the Kenyan arm of the business that it failed to adequately help tea plantation workers who fell victim to a spate of ethnic violence in 2007. So now there’s the risk that the corporate chatter will drown out the voices of affected workers.

The sale of ekaterra and questions of human rights protection highlight the precarious nature of vertically integrated business, meaning when the supply chain of a particular product, like tea, is integrated and owned by one company with control of the entire production process, from farm to fork, from tea leaf to tea cup. This was the model envisioned by the entrepreneur Sir Thomas Lipton, after he acquired his first tea estate in Ceylon, Sri Lanka. He sought to bring tea to the masses, “direct from the tea garden to the tea pot”. 

Vertical integration differs from horizontal integration, whereby companies buy up competing or related businesses (much like Unilever did with many of its tea brands).

Vertical integration isn’t necessarily bad. It can bring greater efficiency, high quality assurance and low costs to the consumer, but it can also lead to extreme market concentration and the squeezing out of independent, specialist businesses up and down the supply chain. Big tea corps have, for the most part, retained the vertically integrated model envisioned by Lipton, owning tea-growing estates, customer-facing tea brands and everything in between. But what are the implications for the growers? They are both the most important and least powerful part of the supply chain and often suffer poor working conditions and low pay as corporations determinedly bring a low-cost product to market. As we have said many times before, cheap tea often comes at a terrible price. 

These multi-billion dollar tea companies have a duty to the farmers, pickers and processors who make their business possible and profitable. Many of these companies are members of the Ethical Tea Partnership (ETP), an industry initiative that seeks to create a “fairer, better, more sustainable tea industry for workers, farmers and the environment”. There’s an understanding that things need to improve and progress has been made in some areas, but for all the great work done by the ETP, it is a voluntary, not-for-profit organisation with limited reach and clout.