Tea Exporters Association AGM 2018: ‘Thinking out of the box’ to herald golden era for tea industry

The Tea Exporters Association held their Annual General Meeting under the apt theme ‘Thinking out of the box’, at the Oak Room of the Cinnamon Grand in Colombo last week.

The vibrant event was held under the patronage of Prime Minister Ranil Wickremesinghe, who graced the occasion as the Chief Guest. Plantation and Industries Minister Navin Dissanayake also attended as the Guest of Honour. A large number of dignitaries and luminaries of the industry were present at the event, ushering new hopes for the revival of this industry.

Sri Lanka is the fourth largest tea producer and third largest tea exporter in the world. However, a number of factors have caused the industry to become sluggish in recent years. Adverse weather, the unavailability of effective weedicide, high prices of Ceylon Tea at the Colombo Auction, a decline in tea quality in addition to the US sanctions imposed on some of the Middle Eastern countries and Russia – who are the major buyers of Ceylon Tea – are some of the key factors causing a considerable impact on the industry’s growth.

According to recent reports, tea production experienced a dip in 2018 as the production from January to July 2018 recorded 182.2 million kg in comparison to 182.4 million kg, recorded over the same period in 2017.  

Tea exports too have been sluggish over the last few years, where the first seven months of 2018 recorded 162.7 million kg in comparison to 165.3 million kg over the same period of the previous year. Nevertheless, as a major contributor to the national economy, the tea industry’s revenue showed slight positive results in the first seven months of 2018, recording a revenue of Rs. 134 billion, reporting a Rs. 2 billion increase from the previous year. 

In order to draw attention to these matters, this year’s Annual General Meeting of the Tea Exporters Association was held under the theme ‘Thinking out of the box’. The objective was to create a unique platform to convene the industry’s key stakeholders under one roof, to exchange intellectual views and devise an innovative, pragmatic and strategic solution to address these issues. 

Elaborating on the importance of supporting the tea industry, Prime Minister Ranil Wickremesinghe noted: “Our economy has expanded towards the non-tradable sector. Since 2015, we’ve been trying to restructure the economy and return to the tradable sector. We need to treat our plantation industry and its exports as tradable goods. At present, you’re working in a labour shortage economy, which demands more productivity per person. We have to promote Sri Lankan brands, but promoting alone is not sufficient. You also have to see how you can make the industry more competitive and modernised.”

The Prime Minister also reiterated taking steps to revive the tea industry through a medium- and long-term approach. He added: “The tea industry should consider how to maximise its production, just as much as to maximise its prices. The Government will step in and offer more funding and support - whether you’re a smallholder or large planter.”

Plantation and Industries Minister Navin Dissanayake, addressed the gathering, focussed on the pressing issues of the industry. Minister Dissanayake said: “I have advised the tea board to be very strict with tea producers who sully the pure Ceylon Tea brand. In fact, six months ago we raided 60 factories suspected of mixing sugar with tea. We have taken steps to reduce corporate tax for bulk tea from 28% to 14%, for 2018-19. The promotion levy will be down by 50% from 2019, dropping from Rs. 3.50 to Rs. 1.75 a kilogram. We will be allocating a total of Rs. 1 billion for brand promotion for Ceylon Tea exporters. In addition, we hope to spend Rs. 3.5 billion on the global campaign, expected to be on track by November.”

The Minister also underscored that any fall in the price of tea would have a tremendous social impact. He further noted: “At present, we are working on a 100 million dollar loan from Japan’s Mitsubishi Bank to modernise tea factories with green energy. ADB too has offered another 100 million dollar loan for the upgrade and we are confident that within the next 7-8 months we can access this fund. It’s crucial we have chief funding available for us to upgrade and fuse this industry with technology. And I believe tea exporters will join hands with us in this venture.” Addressing the gathering, Tea Exporters Association Chairman Jayantha Karunaratne stated: “This is one of the most difficult times for the tea industry. Ten years ago, Sri Lanka used to supply 8% of the world`s tea production but now it has declined to 5.4%. Our major markets - Russia, Iran and Turkey - are under tremendous pressure due to sanctions or currency issues. And this has significantly dropped their buying power.”

“Automation of the Colombo Tea Auction will lead to higher efficiency and a reduction of cost. We need to continue our promotion and marketing campaigns for Ceylon Tea and Sri Lankan brands and look for avenues for increasing our premium tea exports and providing tea at affordable prices for the economy segment. We have selected ‘Out of the box thinking’ as our theme today. We need to make certain changes to our traditional strategies to be more competitive in the global market. So ‘Out of the box’ is the theme and challenge for all tea sectors,” Karunaratne said. Chief Growth Officer and MAS Apparel Board Member Nathan Sivagananathan, who delivered the keynote address, said: “Sri Lanka celebrated its 150th anniversary in the tea industry. We now place the question of whether the industry will survive another 150 years. World tea consumption has grown at an average of 4.5% a year in the last decade. However, tea production in Sri Lanka is stagnant. We are not truly capitalising on the rising global demand for tea - a 70 billion dollar industry being driven by growth in the value-added segments.” Sivagananathan further explained that the tea industry was also facing competition even from countries like Bangladesh and those within Africa. 

“Tea imported to Britain in 2016 was only 3% from Sri Lanka, but 47% was imported from Kenya. A major issue common to both the tea and apparel industries was low productivity and a labour shortage. The second challenge is the undiversified export market, as we are depending on Russia and the Middle East – which are both facing a crisis. People in the tea industry have made ad hoc policy changes. It’s vital that all policy on the major export sectors are kept the same.”

Established with the motive of promoting and protecting the common interests of members who are engaged in exporting tea, the Tea Exporters Association has played a pivotal role in making Ceylon Tea synonymous with the world’s finest tea. 

The association has also been instrumental in popularising Ceylon Tea throughout the globe, while strategically positioning it amongst global market leaders. The association said it strongly believes that timely and effective intervention by relevant policymakers and the concerted efforts of all stakeholders could no doubt provide a timely solution to boost the industry.

Pix by Upul Abayasekara