Prompted by a decline in sales since last year’s sale of Unilever’s Kenya tea properties, Cargill exits the Mombasa auction.
Cargill Kenya, Ltd., the largest buyer at the Mombasa auction, has ceased trading tea after 40 years.
The company purchases approximately 60,000 metric tons annually, which gives it a 15- 20% market share at the weekly auction. Cargill’s annual trade value ranges from $180 to $210 million.
The Eastleigh Voice writes, “Cargill’s exit is expected to create downward pressure on tea prices, potentially reducing farmers’ incomes at a time when they were hoping for improvement through ongoing sector reforms.” Other major players in the auction, including Global Tea Commodities, Chai Trading Company, and LAB International, may see changes in market dynamics following Cargill's exit. According to Agriss News, Cargill’s clients include Van Rees, Mitchell Cotts, and KTDA-Chai Trading, all of which have transitioned to other service providers.
Cargill’s sales volume declined in the past year following the sale of Unilever’s Kenya tea properties to Lipton Teas & Infusions. Cargill also manages six Mombasa warehouses with a combined capacity of 20,000 metric tons, employing 40 workers. There are 82 trading companies active in the Mombasa Tea Auction.
In the past 12 months, buyers at the Mombasa auction rejected more than 100 million kilos of tea on offer, leading to an unprecedented surplus of bulk black tea. Kenya has since suspended a $2.40 per kilo minimum reserve price for buyers and formed a task force to clear factory warehouses of staling tea.
Cargill, one of the world’s largest traders, has extensive trade contracts for wheat, maize, barley, and soybeans grown in East Africa. An internal Cargill memo, reported by Food Business Africa, disclosed that the tea business “lacked clear synergies” with Cargill’s other agricultural and trading divisions, prompting the decision to divest.
Tea operations were initially developed to support Unilever’s tea holdings. However, according to the memo, the business is no longer a strategic fit following Unilever’s sale.
During the past year, Cargill Chairman and CEO Brian Sikes has consolidated the company’s operational units globally in response to declining commodity prices. He announced last May, “Our recent performance and emerging market trends underscore the urgent need for change.”
Cargill is the largest privately held company in the US, with an annual turnover of $160 billion for the fiscal year ending May 2024, a decrease from the previous year’s $177 billion.
Cargill’s Kenya operation is the company’s oldest footprint on the African continent. The tea trading operation was founded in 1948 by the Ralli Brothers, who initially traded cotton. Cargill acquired Ralli in 1984, and the tea operations were integrated into the company’s Agricultural Supply Chain (CASC) Enterprise in the Europe, Middle East and Africa (EMEA) region.
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