Divesting Tea Gardens Signals Change in Strategy for Lipton

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Kericho Tea Estate and surrounding tea lands.

The tea industry has recently witnessed a significant strategic shift. In a move to realign its operations, Rotterdam-based Lipton Tea and Infusions announced the sale of its East African estates in May. This divestment included all its properties in Kenya, Rwanda, and Tanzania, which Sri Lanka-based Browns Group Investments acquired. As part of the agreement, Browns committed to meeting quality standards and implementing social and environmental protections by 2025, becoming Lipton’s primary supplier in return.

Lipton will shift to blending, packing, and selling tea. Lipton CEO Nathalie Roos told Bloomberg, “We are really shifting from volume to quality of tea.”

The acquisition propels Browns Investments to the elite league of global tea producers, boosting mainly black tea production to 87 million kilos annually.

Browns, owned by Sri Lankan holding company LOLC Holdings, will add 11 Kenya tea plantations, eight tea factories in Western Kenya, and 100% of Lipton’s Rwanda and Tanzania tea plantations and factories to its portfolio of 49 Sri Lankan tea gardens.

Browns’ Sri Lankan estates span 40,000 hectares and produce 43 million kilos of tea annually. Last May, Browns acquired nine tea farms in Kericho and Bomet, owned by James Finlay Kenya. The 10,300-hectare parcel included 5,200 hectares under tea.

Browns agreed to adopt new standards across all its estates worldwide.

After the sale closes, Brown's total acreage under tea will be nearly 89,000 hectares or about 220,000 acres. Kenya will become the company’s biggest holding. In 2023, Kenya exported 523 million kilos of tea. Tanzania exports a fraction of that but intends to increase production to 60 million kilos by 2025.

Terms of the sales and purchase agreement were not disclosed. 

Lipton, which employs 17,000 worldwide, purchased its first tea estate in 1890. During the past century, the brand established vertical supply chains in several geographies, managing every aspect of the business from leaf to cup. Gardens currently account for 15% of Lipton’s annual turnover of $1.9 billion, most of which is generated by its 36 storied brands, including Brooke Bond Red Label, Lipton Yellow Label, PG Tips, Red Rose, and Salada, as well as modern tea brands Laojee (Sri Lanka), T2 (Australia), TAZO (USA) and Pukka (UK).

Lipton’s Kenya tea properties date back to 1914, when Calcutta-based Brooke Bond director Tom Rutter, on safari, recognized the Rift Valley as ideal for tea growing. He opened a sales office in 1922, acquired 400 hectares to plant tea in Limuru, and then built the Mabroukie Tea Factory. Between 1920 and 1939, Brooke Bond controlled all critical stages of Kenyan tea production, marketing, and distribution. When Unilever acquired Brooke Bond in 1984, the venture became Unilever Tea Kenya, the largest private sector employer in Kenya, with 20,000 workers by the mid-2000s. Unilever invested in expanding production at Kericho and 19 tea estates and eight factories, earning Rainforest Certification in 2007 and producing an average of 32 million kgs of tea annually, generating Ksh 5.5 billion in foreign currency in 2008.

The parties assigned 15% of the shares of the lead Kenyan operating company to a Community Welfare Trust. This trust benefits workers residing in Kericho and Bomet counties and ensures an annual dividend. While the exact details of the transaction were not disclosed, a joint press release revealed that an initial endowment of Sh 1 billion will be transferred to the trust. Browns acquired 98.6% of Lipton Teas and Infusions, Kenya Plc, and 52% of Limura Tea Plc (owned partly by Lipton Kenya).

Lipton CEO Roos said, “Today, we are unlocking major investments in East Africa's tea region and raising standards for how those wonderful leaves are grown and harvested.” 

Roos said proceeds from the long-term partnership with Browns Investments will fund progress in farmer training and climate change mitigation initiatives.

Kamantha Amarasekera, Chief Executive of Browns Investments, expressed his anticipation for the collaborative efforts with Lipton and local partners, emphasizing the shared goal of fostering a sustainable, responsible, and prosperous future for all. This mutual commitment to growth and sustainability is a promising sign for the tea industry. 

Roos said, “By working together, we will raise tea quality globally and create value for all, including local farming communities and consumers.”