What you need to know:
- Unilever’s parent company announced in July that it will be divesting from its tea business, and will only retain its India and Indonesia operations, where sales of the flagship Lipton Tea have picked up.
- When Unilever first announced the early retirement scheme in 2018, KPAWU asked workers to disregard it, arguing that it was a raw deal.
The jobs of more than 60,000 Unilever Tea Kenya Limited workers are in limbo as the company rethinks its tea business following huge losses, with insiders intimating that the firm could scale down its operations in Kenya in the coming months.
The firm has been running a voluntary early retirement scheme for its workers since 2018, and this month told the Kenya Agricultural and Plantation Workers Union (KPAWU) that it intends to retain normal operations for at least one year before making a final decision on its tea business.
While workers in its local arm are being assured that the company is here to stay, the story is different in the parent firm’s communication to investors. Unilever’s parent company announced in July that it will be divesting from its tea business, and will only retain its India and Indonesia operations, where sales of the flagship Lipton Tea have picked up.
“In January Unilever announced a strategic review of its global tea business, which includes leading brands such as Lipton, Brooke Bond and PG Tips. This review has assessed a full range of options. We will retain the tea businesses in India and Indonesia and the partnership interests in the ready-to-drink tea joint ventures,” the firm said while releasing its half-year results on July 23.
It has not yet revealed its plans with its Kenya operations to shareholders, who have endured five years without receiving dividends owing to losses. Its voluntary early retirement scheme sparked off a vicious war with KPAWU, which says the British-Dutch conglomerate is using the back door to beat a court-ordered pay rise.
The Saturday Nation could not establish the number of employees who have so far taken up the retirement option, but sources within the company said “thousands” have opted to leave despite being asked by their union to stay on.
The High Court in 2016 ordered tea companies to give their workers a 30 per cent pay rise, and KPAWU now claims that Unilever’s strategy change is aimed at getting rid of eligible employees and replacing them with a cheaper labour force. The company, on the other hand, holds that its parent firm is setting up a new firm to manage its tea business across the world, a move that may throw Unilever’s workers in limbo for over a year.
Ms Sylvia-ten Den, Unilever Kenya Tea Limited managing director, has already written to the workers’ lobby to inform it that the company is changing its operation model. She says Unilever will form a new company to manage its global tea business, and that the form and shape of the new entity will be decided at the end of next year. She assures that until then operations will proceed as normal.
“I would like to inform you that following the strategic tea review, Unilever had decided that the best future for the tea brands is to create a separate global tea company to run the business. The new company will sell the tea brands around the world and will be supplied by the East African plantations,” notes Ms Den in the letter to KPAWU.
“Unilever has not decided on the form that new company will take... the decision will be made by the end of the year 2021. Once we know the form we will apprise you accordingly.”
When Unilever first announced the early retirement scheme in 2018, KPAWU asked workers to disregard it, arguing that it was a raw deal. Under the scheme, workers would get one month’s salary in lieu of notice, a severance pay of 23 days’ salary for every year worked, compensation for any leave days not taken, and one-way bus fare.
Mr Belsoi said the move to start another company was just another way to cover up third malpractices, and that the more than 1,750 local shareholders owning about three per cent of the company have not earned dividends for the last three years because “Unilever keeps declaring false losses”.
“The company is involved in a lot of unethical business practices; transferring revenues to party companies to avoid paying us,” said Mr Belsoi.
He listed five party companies of Unilever as Cargill International and Unilever Pacific Private Limited which they sell their tea to, and Unilever Financial Accounting Capital A and Capital G of Switzerland, through which they get annual loans “because they have hidden their revenues”.
Mr Belsoi said the stakeholders were never notified about the impending changes. “I normally attend all the Annual General Meetings (AGMs) and nothing of the sort was discussed. For this year, they have not sent a notice of AGM. We expected the meeting to happen around April-May like last year. Before, we used to do it in December,” he said.
“I want to tell them that we are the stakeholders and they have to tell us what they are doing about our shares. Why can’t they declare dividends or profits?” he posed.
But, despite Mr Belsoi’s cries and doubts, business appears not to have been good for the company.In its annual report for 2019, the London-based conglomerate reported a 38.4 per cent slump in profits to $6.5 billion (Sh704 billion) after a disappointing fourth quarter.
While releasing the report in January, the firm’s Chief Executive Officer Alan Jope said it was reviewing its global tea business, including Lipton and PG Tips, after sales of black tea dipped in the developed world, with consumers preferring lap up fruit and herbal teas. Six months later, the verdict was that the firm exits almost all tea operations save for India and Indonesia. Unilever Kenya’s communication to KPAWU, however, indicates that the firm could still plant tea in Kenya, but for sale in India and Indonesia only.
The parent firm has also been slowly divesting from Kenya, most recently in 2017 when it sold the Blue Band brand to US venture capitalists KKR. Some of its other products include detergent Omo, Dove and Lifebuoy antibacterial soaps, yeast spread Marmite, Hellmann’s mayonnaise and Lipton and Pure Leaf teas.
The history of Kenya’s tea industry is intertwined with that of the multinational firm, and also the colonial British. History has it that Tom Rutter of Brooke came to Kenya for a hunting expedition and realised that the conditions in Kericho were favourable for growing tea, just as they were in India. Brooke Bond, then trading as Kenya Tea Company, established a vast tea farm in Kericho in 1925. The company was later bought by Unilever.
The farm covers over 8,700 hectares, although the size has been questioned by leaders who claim that the company undervalued the acreage in order to pay less annual rent for the prime estate. The National Land Commission has ordered a revaluation in that respect.