Tea duties may harm Wissotzky's Russian rebirth

Wissotzky, formed in Russia 150 years ago, said it planned to grab one of the leading positions in the Russian pre-packaged tea market and is aiming for a five per cent market share within three years.

The firm plans to appeal to Russian tastes by launching a new line of black tea and general manager Ronny Weinstein said all of Wissotzky's tea varieties would be positioned as premium products, competing directly with the big players in the sector, including Twinings, market leader Ahmad and Pickwick.

"Russian customers appreciate quality and that is why I consider that a company which pays a lot of attention to quality has a good chance of succeeding on the Russian market,"​ said Weinstein.

Last year, the premium tea segment accounted for 28 per cent of a market producing 150,000 tons of tea annually, up from 23 per cent in 2003, according to market analysts ACNielsen.

However, Wissotzky may find it difficult to compete in its old domestic market before carrying out plans to begin manufacture inside the country. Import duties, designed to protect domestic producers, were 20 per cent on packaged tea and five per cent on unprocessed tea at the end of 2004.

The high tariffs were even said to be a sticking point between the Russian and Indian governments during Russian President Vladimir Putin's recent visit to India, fuelling speculation in press reports over whether or not Russia would consider lowering the duties.

Even so, Wissotzky plans to spend $10 million on marketing its brands, including green, fruit, fagotted and ice tea varieties, during the next three years.

And the campaign will begin outside the usual territory of the big cities, with Wissotzky preferring to covet the regions first. It is hard to predict how this strategy might play out: on one hand the company will face less competition from the big players, but then premium tea consumption is also lower in more rural areas due to lower incomes.

Accordingly, Wissotzky has chosen the relatively rich area of Novosibirsk as its first port of call, before moving out into Rostov, Ufa, Voronej, Ecaterinburg and Crasnodar.

The firm may have a good marketing pull by emphasising its heritage and patriotic roots.

The Wissotzky Tea Association was created in Russia in 1849, and within a couple of years the company became one of the biggest suppliers and wholesalers in Russia Empire. It later became the official supplier to the Emperor's Court.

The company began by purchasing tea in China, but then developed its own plantations in India and Ceylon to service its tea factories in Russia, Ukraine and Poland, which then eventually started to sell tea beyond the boundaries of the Russian Empire.

After the revolution, Wissotzky, the only Russian tea company to continue its business, moved to London. In 1936, a branch was created in Israel, where the firm's main office and factories are now situated.

The company still purchases tea from Ceylon, Kenya, India and China in order to sells its premium products in the US, Canada, France, Cyprus, South Africa and Israel.