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Sustainable Tea at Unilever Case Study

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Updated: Jul 2nd, 2019

Introduction

Market differentiation remains as one of the most reliable ways through which businesses gain market share leadership and outwit their competitors. Sustainability programmes and plans play a critical role in ensuring that brands regain and maintain their market positions against competition onslaught.

One company that has applied sustainability programme in its efforts to maintain its market leadership position is Unilever Plc. A world’s top consumer goods manufacturer, ranging from home care merchandise, food products, to personal care goods, Unilever introduced a ‘Sustainable Living Plan’ that intended to achieve a number of strategic goals.

Firstly, it targeted improving consumers’ well-being and health, limiting the environmental impacts of its activities, as well as sustainably sourcing its entire agricultural raw materials by the year 2020. One area of focus that was of particular interest to the company was its tea product line.

Although it registered positive results in some international markets, the sustainable tea program encountered challenges in other markets. This paper seeks to discuss in detail Unilever’s ‘Sustainable Living Plan’, putting more emphasis on its sustainable tea program.

Unilever global tea market

Unilever sells its processed tea in more than 180 countries worldwide. The tea is sold under different brand names, with Lipton Tea being the company’s largest brand. The brand records an annual sales figure of about €3.5 billion, making it the world’s leading tea brand in terms of sales. Other additional brand names through which the company markets its tea include Lyons in Ireland and PG tips, mainly for the United Kingdom market.

India, Pakistan, Poland, and Russia also form part of Unilever’s extended international tea market. Lipton’s closest competitor in the global tea market is Tetley Tea, manufactured and marketed by Tata Beverages. However, the global market share enjoyed by Lipton is three times that of Tetley (Henderson & Nellemann 2011, p. 3).

Unilever sold about 350,000 tons of its processed tea in the year 2010. The tea was mainly sourced from external suppliers whose contribution was in the tune of 90%. The suppliers comprise of independent farmers and small-scale traders.

The remainder was obtained from company owned estates located in the East African regions, including its Kericho flagship estate in Kenya and another in Tanzania. In general, the global market is unique in terms of their preferred tastes. This makes specific international markets only reliant on supply sourced from particular countries.

The sustainable tea plan and its constructs

Established good practice guidelines in agriculture were first introduced in Unilever in 1998. These guidelines mainly focused on sustainable farming practices and targeted major crops processed by the company, such as tea, tomatoes, and palm oil. External suppliers were expected to meet specific standards before the company could purchase their produce.

The sustainability geared towards 10 important indicators that touched on the environment, society, and the economy. These included social and environmental management system, ecosystem conservation, wildlife protection, as well as water conservation, and fair treatment and improved conditions of working for the workers.

Other principles included occupational health and safety, community relations, integrated crop management, and soil management and conservation. To emphasize further on the importance of sustainable agriculture practices, the plan also incorporated integrated waste management. Unilever did not impose these practices on its suppliers, but rather opted to share with them, as well as with the public.

According to Michiel Leijnse, Unilever’s global brand director, the sustainable tea plan had its intentions on transforming the industry. There was the looming danger of the company failing to get the right quantity and quality of the tea that they required (Henderson & Nellemann 2011, p. 5).

Certification – The Rainforest Alliance

As part of the plans on sustainability, Unilever involved the Rainforest Alliance as its partner in the programme. The latter is the Sustainable Agriculture Network (SAN) founding member. In particular, the Rainforest Alliance’s partnership was sought because it was inclined towards market-based premiums as the prefect way of creating change.

Additionally, the Rainforest’s record of accomplishment was good, having won consumer recognition from past campaigns. However, the fact that the company had neither had previous experience dealing with tea nor the African continent was of critical concern for Unilever. Africa is where Unilever has one of its most successful tea estates throughout the world.

The certification process required that the whole production area meet the standards. Obtaining and maintaining of the certification required farms to meet at least 50% of each principle’s applicable criteria. Additionally, the farms were expected to meet a minimum of 80% of the entire set of applicable criterion.

Certification costs for independent farmers ranged between €3,000 and €4,500 depending on the size of the farm. Unilever chose to buy certified tea at a cost by paying a premium price. It also paid a participation fee to Rainforest Alliance to bear the frog logo of the certifying company on its pack. The rollout of the global certification education cost about €200,000 annually as Unilever assigned people to develop and deploy farmer training.

This was in combination with the certifying company Rainforest Alliance. Because certification of tea had never been witnessed before, meeting the targets that Unilever and Rainforest Alliance had set for the year 2010 was challenging. The company owned tea estates in Kenya and Tanzania became viable options if targeted results were to be met.

Equally, the large-scale tea suppliers became the target for initial certification plans. For the long-term plans, Unilever had to set focus in working with the entire supply chain, including the smaller and less organized ones. The challenge, however, lay in the fact that these kinds of suppliers spread across different countries, have their own agricultural practices, and receive varying government support.

The pioneer certification process

Unilever owns a 13,000-hectare tea estate in Kenya’s Kericho area. This area of land has been under tea plantation since 1928. The certification process began by leaving tea bush pruning to rot on the field instead of having them removed for other secondary use as cattle food or firewood. This practice maximized the soil fertility and helped in retaining water.

The use of fertilizer was carefully managed, bearing in mind its potential threat to the quality of soil. Drying of the tea was done using wood obtained from eucalyptus forests plant grown on the perimeter fence of the estate. Use of pesticides and agrochemicals on the Kericho tea estates was minimized mainly because of the area’s favourable climate.

Natural predators also inhabit the land surrounding the estate, making the use of pesticides not necessarily on a large scale. Unilever shifted focus on the well-being and general health of its 16,000 members of staff and their dependants. The workers’ earnings more than doubled compared to their earlier fixed sum compensation on every kilogramme of tealeaves picked.

The workers had free access to company health care and housing, in addition to free education for the workers’ children at Unilever owned schools. The estate achieved high yields because of the application of the sustainable tea production programme, with each hectare of land producing between 3.5 and 4 tons.

Compared to India’s production of between 2 to 3 tons an hectare, the case of Kericho’s estates was far much better. Estates in Tanzania equally applied the same practices, improving in production yields up to 3 tons per hectare. Production in other parts of the country stood at below 2 hectares per ton (Henderson & Nellemann 2011, p. 8).

Extending the program to cover the entire supply chain

With Unilever’s East African estates accounting for about a third of the company’s total tea requirement, the partnership with Rainforest Alliance registered immense success. The involvement of the Kenyan government through the Kenya Tea Development Agency (KTDA) supplemented Unilever’s efforts on sustainability.

Equally, a Dutch Sustainable Initiative known as IDH helped the programme achieve greater success by training field trainers. The KTDA alone accounted for up to 62% of the country’s total production through its 59 factories. Unilever purchased 40% of KTDA’s total production in 2011.

Training of lead farmers by the company in conjunction with the KTDA and Rainforest Alliance increased awareness, including on the premiums paid on certified tea. Although some changes were easily applied, including convincing farmers to leave cut crop in the farms to rot rather than burning.

However, some changes involved expensive practices, such as the use of expensive protective gear for the farmers while spraying the farms. KTDA helped in supporting the programme by setting up a micro-credit scheme that provided financial support to the farmers. With the introduction and implementation of additional sustainable practices, the total yields improved between 5% and 15%. The quality of the tea produced also improved.

Promoting the sustainable message to the consumers

For Unilever to transform the success of sustainable tea into sales, the company’s commitment moved into informing the market its benefits. The varied tea brands under the company’s larger tea portfolio became a challenge to these plans. Although the ethical position of a brand pleases a majority of users, the idea of ‘green’ brands was difficult to sell.

Unilever, instead, looked at the whole idea of sustainability as an innovative marketing message targeting the consumers. Other Unilever tea brands in Western Europe and Australia benefited from an extensive certification programme launched after the East African pioneer programme. The brands included Lipton Yellow Label, Lyons, as well as PG tips.

In the U.K., Unilever’s tea market that represents about 10% of the entire production of the firm was represented by the PG tips brand. The biggest competitor of Unilever tea, Tetley Tea, shared the market almost on equal proportions with PG tips. The market lacked interest to purchase the green products at an added cost.

Unilever spent €12 million to market the new product in 2008, although it took between 12 and 18 months to tackle mental barriers and pass the message to consumers. The company found challenges in selecting the most appropriate message that would resonate with the consumers thinking while marketing the product.

The message selected, ‘do your bit: put the kettle on’ highlighted the optimistic action that buyers could take through their drinking of the PG tips. The campaigned saw PG tips emerge as the leader in the market, beating the strong competition by Tetley Tea.

In particular, PG tip’s market share increased by 1.8 points with the purchase repeat rate increasing to 49% from 44%. The total overall sales of the brand improved by 6% with research attributing the rise to consumers’ changed perceptions. PG tips successfully marketed as an ethical product and the market positively responded to the efforts.

Australia

The sustainable tea campaign in Australia began in the year 2009. Lipton was Unilever’s leading tea brand in the market, with its total share accounting for about a quarter of the entire sales. Bushell, the other of Unilever’s brand had a market share of about 13%.

The marketing phrase read, ‘Make a Better Choice with Lipton, the world’s first Rainforest Alliance certified Tea.’ The marketing campaign cost €1.1 million covering print, television and public relations. Additionally, Unilever adopted in-store promotions to increase awareness further. Premium charge on certified tea served as a barrier to consumption and the company eliminated it.

Sales performance increased by 11%, with Lipton brand’s market share improving by 158 basis points. The average purchase value rose to €3.23 from €3.11. Despite the success in sales performance, the Lipton brand failed to improve in as far as perceptions on quality is involved.

Italy

Unilever tea enjoyed a 12% market share in Italy in 2010. The certification programme cost €3 million and involved awareness creation programmes on television, online, press, packaging up-dates, and in-store promotions. The marketing message adopted read, ‘your small cup can make a big difference’.

With the campaigns first launched in 2008, the Lipton sales increased by 10.5%, with its market share also increasing by more than 2 percentage points. The buyer base increased, with the younger consumers mostly from the upmarket segment being attracted to the certified product (Henderson & Nellemann 2011, p. 12).

France

France posed a great disappointment to the sustainable tea programme by Unilever. Lipton’s market share stood at 37% in 2010, with private label brands being the main competitor at between 30% and 40% market share. With a more diversified portfolio, the tea products under Lipton numbered at least 40. The certification message initially was only associated to the black tea product Lipton Yellow Label.

This represented only a paltry one fifth of the sales. Campaigns initially focused on public relations to educate the retailers. It also involved journalists and key opinion leaders. The marketing message, ‘your tea can make a difference’ appeared in print advertisements and strategically in cooking and travel magazines. Female users over 50 years old remained the primary market focus of the campaigns.

Research findings indicated little success in French consumers’ likelihood to buy certified tea containing Rainforest Alliance seal. However, the company changed stance later on and changed the packaging. Consumers failed to associate the new sales on packaging with any quality certification. Failure to associate Lipton with Rainforest Alliance on the part of the consumers played a big role in the negative results that were recorded by the brand.

The USA

Unilever launched its campaigns in 2009, mainly focusing on the green tea line. Overall, Lipton’s market share was the second largest. Initial research by Unilever indicated 80% likelihood to buy eco-ethical products, although additional cost could not be justified easily.

The only market size willing to forfeit a premium was a paltry 5%. The marketing message adopted read, ‘Your Small Cup Can Make a Big Difference’ and appeared on print, TV, and online content. Sponsored trips to the company’s Kericho estate in Kenya formed part of the marketing campaigns.

Challenges to the certified product campaigns

Sourcing certified tea from India posed a great challenge as the country’s many suppliers were of small scale. Training the small-scale producers was a challenge because of the numbers involved. Additionally, unlike the Kenyan situation where the government supports tea programmes through the KTDA, the Indian government does not participate in such activities.

The Rainforest Alliance’s principles on certification, which involved an age limit on employment at age 15, did not tally with the practice in India. The country’s laws allow for 14 year olds to be employed as labour in the farms. The Paraquat pesticide use in India is also widely practiced, which is against Rainforest Alliance’s principle on reducing toxic substances.

Although the sustainable plan is intended to be applied across the board, there are challenges on other products that are not marketed directly to the consumers. Palm oil, for instance, is used as a raw material for processing other finished products. Introducing quality and certification plan for such commodities is a big challenge to the firm (Henderson & Nellemann 2011, p. 17).

Conclusion

Sustainable Living Plan is a marketing programme introduced by Unilever to enhance the performance of its agricultural based products in the market. The programme aims to employ practices that not only aim at improving on productivity, but also the quality of products.

The company’s tea products portfolio has particularly seen efforts employed to improve on performance. To enhance the results of sustainability, Unilever collaborated with a certifying company, Rainforest Alliance, a founder member of the Sustainable Agriculture Network.

This decision was arrived at mainly because Unilever’s sustainability plan involved similar principles as those of the certifier. These principles include social and environmental management system, wildlife protection, ecosystem conservation, water conservation, as well as occupational health and safety measures.

Other principles include integrated waste management, integrated crop management, community relations, and fair treatment of the workers. The certification plan was the first one of its kind and encountered several challenges. There were no previous existing standards and Unilever had to begin the implementation on its company-owned estates in East Africa, in Kenya and Tanzania.

The rollout plan involved leaving cut tea bushes on the farm to rot rather than using as cattle feed and firewood. Lead farmers were chosen and trained on how to implement the programme on their colleagues. Employees had their remuneration improved more than two-folds while working conditions were also improved.

Health, education, and housing facilities for the workers and their families were introduced free of charge. In Europe, elaborate marketing campaigns were also initiated with mixed results for the company. In the UK, Italy, Australia, and the USA, the brand registered positive results as sales increased.

However, the market was not willing to pay a premium for the certified tea. In France, marketing campaigns failed to achieve any positive results. Despite expensive marketing campaigns introduced by the company, convincing the market to link certification to quality did not succeed.

List of References

Henderson, RM & Nellemann, F 2011, Sustainable tea at Unilever, Harvard Business School Publishing, Bolton, MA.

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