“ Tea industry is like a candle burning on three sides”: MTI

Tuesday, 29 May 2012 01:59 - - {{hitsCtrl.values.hits}}

Addressing a MTI thought leadership forum, CEO Hilmy Cader turned his attention on the local tea industry, which he noted is not only critical for the Forex it earns, also being the largest employer in the country (with over a million people dependent on the industry for livelihood)

He said the Sri Lankan tea industry is like a slow burning candle on three sides and went on elaborate further.

On the demand side, the ‘power’ lies with the top global brands, retailers and food service chains. You need hundreds of millions of dollars to compete. The industry is far too fragmented to ‘afford’ the ‘entry fees’!
On the supply side, we have no choice but to produce and sell 300 million plus kilos a year. With the prices we get for the raw material, we can barely pay the wages (to support the low standards of living of hundreds of thousands of people) and provide a return for the capital invested, let alone re-planting century old bushes!
Almost 75% of our exports come from 10 countries in the Middle East and Greater Russian region. This includes: Iran, Iraq and Libya! The more sophisticated a market gets, the less single origin Ceylon Tea they use (baring a very few niche examples) When asked to describe how the industry is responding, he quoted Albert Einstein, “Insanity is doing the same thing over and over again and expecting different results.”

“If you look at the focus of the industry and the analytics widely published in the media, it is very inward-centric. We keep talking about auction prices, when we should also talking about retail shelf prices. We keep talking about our own shipments when we should be talking about market share of our competitors. For instance, what is the share of Ceylon Tea in the major UK super market chains? (you will be shocked by the decimal points!),” said Cader.

He also noted that, while we are focused on tea as a product, there is significant competition coming from outside the ‘traditional tea cup’ – ranging from Roiboos (the South African herb that is becoming closely associated with tea) to Coffee to Iced Tea

Addressing the issue of how the industry can be more responsive to the market needs and surge ahead, Cader brings in an interesting comparison of the Apparel industry in Sri Lanka.

“If you look at the two major players (MAS & Brandix, who together is much bigger than the entire tea industry!), they were built by those with hardly any apparel experience and they did so in less than 20 years. Most of the people in the tea industry have limited experience outside the ‘traditional tea cup’ May be the tea industry needs a few MASs and Brandixs!” said the CEO of MTI Consulting

In conclusion, he made some interesting observations to place the product tea in its ‘life context’. He went on to say, “The average supermarket has over 1000 product lines and the average consumer uses over a 100 product lines in a day. Tea is just one of them and needs to fit into the ‘life’ of the retailer and the consumer.”