Tea in South Africa

PROSPECTS

Ongoing rising prices and poor harvests impact demand for largest tea categories

Retail volume sales of tea continued to decline in 2019, while current value sales recorded strong growth due to rising unit prices, particularly for local tea variety rooibos under other tea. This was due to ongoing unstable weather conditions which continued to impact local production of the latter with a drought in the Western Cape reducing availability of raw materials.

More affluent consumers support demand for niche tea types with health positioning

Health and wellness factors are supporting demand for smaller speciality teas in South Africa, including fruit/herbal tea and green tea, which both recorded strong retail volume growth in 2019, despite their higher than average unit prices. This is because they are more likely to be purchased by higher-income consumers for whom price is not such as important criteria in their purchasing decisions, particularly if they perceive a product to offer them specific value in terms of functionality.

Niche tea types likely to see further flavour innovation and increasing accessibility in terms of pricing

Product innovation and increasing competition should also help support for alternative tea types in South Africa moving forward. While some producers will continue to explore and develop various flavours or functionality into their tea brands to capitalise on the health trend, other such as Tetley, locally distributed by Joekels Tea Packers (Pty) Ltd, will continue to gain ground by targeting lower-income consumers with more affordable prices, given green tea’s higher than average unit price.

COMPETITIVE LANDSCAPE

National Brands retains leadership of tea but private label places pressure on competitors

The competitive landscape of tea remained fairly consolidated in 2019, led convincingly by National Brands Ltd and its wide product portfolio including Five Roses and Freshpak. However, its competitors experienced a shift in share as second-ranked Unilever South Africa Foods (Pty) Ltd and smaller players came under increasing pressure from private label lines, offering affordable alternatives to price-sensitive consumers during the unstable economy and rising unit prices of tea due to imports and inflation.

Increasing frequency of strong discounts to counter falling volume sales

Increasing pressure from private label and its affordable tea forced branded players to offer regular strong price reductions in an attempt to retain customers. This strategy was driven by Unilever, which offers well-known global brands including Lipton Yellow Label and used to offer 10-15% discounts to promote its products.

Joekels Tea Packers continues to gain ground with affordable options

In an increasingly competitive environment, Joekels Tea Packers (Pty) Ltd continued to gain value share in 2019, supported by its affordable brands Laager which continued to gain ground in other tea, particularly as leading brand Freshpak Rooibos moved past the ZAR50 mark. In addition, the player has been locally distributing Tetley within green tea since 2017.

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