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John Davison is c.e.o. ekaterra tea, a former division of Unilever acquired for $5.1 billion by CVC Capital Partners.
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Ekaterra tea c.e.o. John Davison (center) with chief marketing officer Aparna Sundaresh (left) and Zbigniew Lewicki, ekaterra's chief of R&D and sustainability. The photo was taken during the COP26 climate summit at the Willow Tea Rooms Glasgow, Scotland. Photo courtesy ekaterra tea.
Two decades of tea company acquisitions failed to offset frustratingly sluggish growth that convinced Unilever executives to jettison its tea portfolio despite a dependable €2 billion (US$2.3 billion) annual turnover. This year saw a private equity buying spree in Britain, causing unease about potential job losses and debt and leading analysts to ask if new private equity owners CVC Capital will cull ekaterra tea's 34 brands when the $5.1 billion sale closes next spring?
"I'm much more of a grower than a cutter," ekaterra tea c.e.o. John Davison told STiR. He explained that at his last job his biggest challenge was initiating and managing "a bit of a turnaround" at Zuellig Pharma, a $13 billion pharmaceutical distribution company employing 13,000 workers in 12 Asian countries. "If I'm honest, the company was struggling a little bit… to fix that we had to invest quite heavily and drive a turnaround strategy, which is all about growth. In that instance beginning in 2014 we doubled the size of the company over a five-year period, got double-digit growth [10.7%] back on track and doubled profits."
Lipton Tea was just a few years short of its centennial when acquired by Unilever in 1984. Ten years later, Unilever merged with Brooke Bond (PG Tips) and in 1996 acquired Lyons to become the largest tea company in the world. In the past decade, beginning in 2013, Unilever spent a combined $500 million acquiring Australian tea retailer T2 ($57 million), TAZO ($384 million), and Pukka ($30 million).
Unilever decided to retain its Indonesian, Indian and Nepal operations and a joint venture with PepsiCo headquartered in the US, but ekaterra will soon own the top tea brands in 58 markets. Vertically integrated, ekaterra's tea business will support the livelihood of a million people in 21 countries on four continents working on company-owned or supplier tea estates — the current supplier list (updated in September 2020), names 125 gardens per page and runs 38 pages.
Davison, who lives in Singapore, will relocate to Europe after Christmas. Davison is a graduate of Cambridge University and Harvard Business School. He began his career with UK retailer Marks & Spencer before joining McKenzie & Co. as an engagement manager in 1991. He was global head of strategy at Diageo in 1995 during the Guinness merger and a regional president at Danone for 11 years beginning in 2003.
Unilever was a major sponsor of the Glasgow Climate Change Summit (COP26). During the event, Davison pledged to make ekaterra net-zero by 2030. He expressed strong support for sourcing and producing sustainable tea and cited progress during the nine months since he was hired to lead ekaterra through the carve-out. Commitments include sourcing 100% sustainable tea by 2023, switching the entire line to plant-based tea bags, and recyclable or reusable packaging materials by 2025, with a pledge to reduce greenhouse gases by 80% by 2030.
STiR observed that during the Glasgow Summit, ekaterra sent a clear message that sustainable tea at a large scale is doable, leading us to ask: Do you intend ekaterra to be an ethically mindful tea company? Or an ethical firm that sells tea?
"That's a trick question," replied Davison, with good humor. "I think you can be ethically mindful and kind of watch from the sidelines, right? I think ekaterra needs to get into the game and drive the rules of the game. I don't mean that in a threatening way, I think part of the reason we wanted to step out at COP26 was to make that point, which is that the status quo ̶ having a nice program to share with your customers, partners, and consumers ̶ probably isn't enough at this stage."
"If we don't get beyond that, towards driving real change, and not just change inside of our business system, but industry-wide, as well as with consumers, in 10 years time we'll be really panicking about what we can do to reverse things that are probably irreversible by that stage," he said."
We need to get beyond watching and following. We need to get into the game and lead. We have the technologies discussed by the Ethical Tea Partnership, and a bunch of new technologies that are in development that were mentioned at COP26."
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We need to deploy that technology as soon as possible into pilots, which we're doing,” said Davidson. “And as soon as we get them into the pilot, we need to get them into action on our own tea estates and as soon as possible thereafter, broaden that to the entire supply base. And as soon as possible thereafter, the entire supply base of the industry. If there are technologies that can help other players, you know, I think we need to make them available. There's no point in jealously guarding a technology that you deploy to 5% of the tea crop of the world if 50% of the tea in the entire world is at risk."
Changing weather patterns and regional hotspots are unfavorable to growers, he acknowledged. Davison said, "we need to develop proper resilience in climatic challenging circumstances, which as you know, are becoming more and more difficult, already affecting crop yields."
"We should help our tea farmers manage much more productively much more resiliently in the face of real dramatic climate change. And that can only be a good thing, not only for ourselves, but for them and for the industry. And that's something we're going to work very hard to deliver," he said.
"So, in that sense I think the answer to your question is that we need to be both an ethical company, as well as a tea company acting ethically. Unilever already set us on a wonderful course. It's a great company. I think in many respects, we're sorry to be leaving, and they are sorry to be losing us. But at the same time, it is for the best reasons to give us this chance to drive a leadership that I think would be difficult to do inside such a large multinational," he said.