New kids on the block set the UAE tea business brewing

Competition in the UAE tea market is intensifying as a number of new companies and brands enter the fray. The newcomers are challenging the dominance of Lipton brand and are following in the footsteps of successful newcomer Alokozay. Alokozay set out to break Lipton's near-monopoly by launching special offers and promotions. "The tea market in the UAE has been dominated by Lipton for several decades and the brand accounts for 80 per cent of local sales," said an industry source. "After Alokozay entered the market at least eight new companies and brands, including Good Morning Tea, Golden Tea, Neltea, High Tea, East Tea, Lovely Tea, Tasty Tea and Golden Leaf, have started to offer packets at highly discounted rates. Most of these companies are selling tea at less than the rate charged by the established manufacturers such as Lipton and Tata Tea." Packets of Good Morning Tea, which was launched by MCG General Trading, part of the Carim Group, are available at up to Dh2.5 less than the corresponding Lipton brands and other market players are following the same strategy. Several trading firms and business groups have diversified into tea as they believe the food industry is immune to the effects of the economic downturn. As part of their initial offers the new brands are offering consumers gold coins, mobile phones, dhow dinner trips, mugs, T-shirts, air tickets and other gifts. A source from one of the new companies said: "The annual demand for tea in the UAE is estimated to be above 55,000 tonnes and the market is controlled mainly by Lipton. Our target is to get a market share of at least one per cent within a year. Most of the new players are keen to get a minor market share. "We are targeting a Dh12 million turnover within two years," the source said. Other new small tea companies echo this view as the main factor that determines profitability is the volume of business. The entry of new companies has coincided with sharp fall in demand from the catering sector. "Sales to the catering market have been affected because some labour camps have closed and the cafeteria business is down. RP Sudheer, Sales and Marketing Manager, Pearl and Waters and a consultant to one of the new companies, said five new tea brands have entered the UAE market in the last year alone. "Tea is consumed heavily in the region and annual consumption has been growing at between six to seven per cent," he said. "The market has been dominated by Lipton, but as the market is growing the entry of new players will not affect the market leader much. However, the market is witnessing more promotions and price competition, especially in the loose tea segment used mainly by the catering industry." A source who previously worked for Alokozay said some of the new brands were compromising on quality to offer lower prices. "The new entrants are attracted by the long-term potential and wish to reduce the impact of the downturn as the food industry is immune to recession. The new companies are mainly active in the 5kg category of the loose tea market and when other sectors are facing problems they see a good opportunity in the brew market." Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .