Hole in the teacup

By Cheranka Mendis

Sri Lanka’s 2012 tea production dropped marginally by 0.3%, while competing for its place in the global tea market amidst stiff competition from other countries as well as new and emerging trends.

Sri Lanka Tea Board Chairperson Janaki Kuruppu yesterday evening revealed the latest “hot, hot” data to the industry at the MTI Tea Strategy Forum held at Hilton Residencies, which discussed whether global forces are threatening the local tea industry.

Kuruppu attributed the drop to the weather patterns that existed throughout last year.

Citing China, India and Kenya as our main competition markets, she noted that the industry must look at itself from an outside-in perspective and strategise to face the future successfully.

With the Government coming up with a medium term plan with a set of KPIs to increase yield, value addition, etc., the industry was urged to come up with solutions to increase its market presence by branding, promoting, differentiating, and coming up with a truly niche product that could compete against the new and emerging threats from other countries. The industry is also anticipating the launch of a global campaign this year to promote ‘Ceylon Tea’ in both existing and emerging markets.

Having lost the likes of the UK, a country that was accustomed to the taste of Ceylon Tea, in the face of new and cheaper options, the country today depends on Russia, the UAE, Iran, Syria, and Turkey, narrowing our global share to a region rather than covering a wider global base.

“The charts look fine but we must also take a closer look through a magnifying glass. We have had a steady growth in production until the drop,” she said.  Kuruppu noted that the country has focused its attention on the low growns and ignored the high grown teas, for which the country previously gained fame. While the trend worldwide is for CTC and green tea, Sri Lanka is still concentrating mainly on orthodox, with only 2% and 5% respectively of CTC and green tea.

“Our production share in the world has dropped from being among the 20% in the 1960s, to 9% in 1985.”

Kuruppu said: “Exports growth has been fluctuating YoY. Compound Average Growth Rate (CAGR) for the past seven years have been 0.2% from the world export growth. Kenya and China have overtaken us. This is our competition.”

From the tea export earnings of Rs. 160 billion last year, the country is expecting and estimated Rs. 380 billion this year, she noted. This would mean a 9.5% increase in rupees terms while the value drops in terms of dollars.

The annual average Colombo auction prices have shown favourable results on rupee terms as well. “Average auction prices in many of the auction centres are still fetching good prices. Colombo auction still gets the highest tea prices in the world. We are doing something right we just need to protect it and sustain it. We cannot put forward a bad image or bad stories about quality issues, standards, etc.”

Kuruppu spoke of supply chain segmentation, partnerships forged between factory owners and exporters on business terms, looking at a out-grower model to curtail some of the issues that has come up for the industry. Among some of the key issues at present are the high cost involved, small holder sustainability, adulteration and quality issues and the need for more marketing, branding and promotion of Ceylon Tea.

“This is still Sri Lanka’s best known product. We can do a lot more. You as the industry must come up with suggestions and solutions we as the Government will do our best to act as a regulator.”