Cargill exits Kenyan tea market amid strategic shift, industry challenges
KENYA – Cargill Kenya Limited, the largest buyer at the Mombasa Tea Auction, has announced its decision to exit Kenya’s tea market to focus on its core operations in wheat, maize, barley, and soybean origination and trading.
The decision marks the end of a long-standing presence in the tea sector, which began in 1948 when Ralli Brothers established a cotton business in East Africa
Cargill acquired Ralli Brothers in 1984, integrating the tea operations into its Agricultural Supply Chain (CASC) Enterprise in the Europe, Middle East & Africa (EMEA) region.
Cargill Kenya is the company’s oldest footprint on the African continent.
Cargill’s Mombasa tea business has played a significant role in the industry, facilitating auction purchases, blending, and exporting teas to major global markets
Currently, it holds a 15-20 percent market share at the weekly auction, purchasing approximately 60,000 metric tonnes of tea annually, valued at US$180-210 million.
The operation also manages six warehouses with a combined capacity of 20,000 square meters and handles over 110,000 metric tonnes of tea annually.
However, an internal memo disclosed that the tea business lacks clear synergies with Cargill’s agriculture and trading divisions, prompting the decision to divest.
According to Agriss News, industry insiders revealed that key clients, including Mitchell Cotts, Van Rees, and KTDA-Chai Trading, have already transitioned to other service providers.
The memo further noted that the tea operations were initially developed to support Unilever’s tea sector, but following Unilever’s divestment, the business is no longer a strategic fit.
Cargill’s decision aligns with its broader reorganization strategy, which aims to consolidate its operational units and address economic pressures from declining commodity prices and tighter margins in crop processing.
Brian Sykes, Cargill’s CEO, stated, “Our recent performance and emerging market trends underscore the urgent need for change.”
The company plans to optimize capital investments and reduce costs to adapt to these market conditions.
Cargill’s departure from the tea sector comes as Kenya’s tea industry grapples with mounting challenges, including unsold inventory at the Mombasa auction, which has reached an estimated 100 million kilograms.
In response, the Kenyan government has established a task force to investigate these issues. The task force will assess the impact of the minimum reserve price, delayed payments, warehousing conditions, and the quality and shelf life of unsold teas.
Additionally, it will examine disparities in tea prices between the East and West of the Rift and the influence of private factories and tea blenders on pricing and trade dynamics.
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