Critical difference between price and value

Price is arbitrary, value is fundamental. Price is a market driven construct, imposed by supply and demand, marketing, information and misinformation, wholly disconnected from the notion of value. Value is the sum of the livelihoods and welfare of workers, soils, food security and safety, health and wellness of consumers, the socio-economic development of producer nations and the basis of genuinely fair and ethical trade

Since tea was first discovered, camellia sinensis has been revered for its value as a medicine, as a beverage, as the taste of nature. From Lao Tzu’s proclamation of tea as the elixir of life to the perfect alignment of fine tea with Gen Z’ers and their desire for flavour exploration, natural wellness, and authenticity, there is no herb that so perfectly matches evolving lifestyle preferences. How then can this most valuable herb – more relevant to humanity today than ever before – suffer the paradox of an existential crisis?

Following its genesis in China, tea grew as a by-product of a vicious and exploitative enterprise that we know as colonialism. By the 1960s – that catastrophic phase and its ancillaries, including the brutality of the East India Company, had ended. Yet, that extractive form of capitalism persists, albeit in the hands of different actors. 

Central to this contradiction is the mistaken assumption that price and value are equal. They are not. Price is arbitrary, value is fundamental. Price is a market driven construct, imposed by supply and demand, marketing, information and misinformation, wholly disconnected from the notion of value. Value is the sum of the livelihoods and welfare of workers, soils, food security and safety, health and wellness of consumers, the socio-economic development of producer nations and the basis of genuinely fair and ethical trade. 

Capitalism superseded colonialism, businesses – mostly foreign entities and global corporations – now in the role of determining the economic prospects of the independent producer nations. Canadian Law Professor Joel Bakan wrote in his book ‘The Corporation’, published in 2004, on the problem with capitalism. He said, “We have a global theology without morality, without a Bible.” And that’s dangerous, he warns – “We’re not going to be able to exist in a global context if we are the bastards of our business.”

That’s one perspective. In ‘The Wealth of Nations,’ in 1776, Adam Smith’s theory – the foundation of capitalist economic theory – presumed that individual enterprise would deliver general benefit, acknowledging that no society could flourish, where the majority of people lived in poverty. 

The overriding trend in tea

Since the falsehood perpetrated in the Global Financial Crisis of 2008, that tea should be sold on everyday low price, that has been the overriding trend in tea. Producers are struggling for survival in a category that boasts the second most popular beverage in the world; EDLP and its highly profitable proponents assume the role and function of colonists.

When prices are low, quality is hard, challenging even for the most passionate amongst producers, innovation becomes nearly impossible. In 2003 the former CEO of Boeing is said to have instructed his team to develop a plane for less than 40% of what the 777 had cost to develop, and built for less than 60% of the 777. The result was the 737 MAX, an aircraft whose sensors malfunctioned causing the deaths of 346 people. 

Cost cutting in tea may not appear to deliver such a catastrophic cost to human life, but it does. The progressively lower quality and massively compromised benefit for producers fuels half price, Black Friday and Buy One Get One Free offers, promoted by a façade of value – images of lush tea gardens, the promise of great taste and goodness. That corrosive discounting still carries offshore margins that are the stuff of dreams for producers, and it is clear therefore that it is the producer that pays the price.

The consequences of this are evident today – rapidly diminishing shelf space, compression of speciality and mainstream tea, an absence of the richness of terroir – a feature in tea that is the strength of flourishing wine, coffee, chocolate, olive oil categories. We see an increasingly undifferentiated offering that is less tea, more herb, and subjugation of sophistication, diversity, quality and the potential in tea to commoditisation. 

Tea is an affordable luxury with a rich heritage and a richer relevance to modern lifestyles. In that reality, discounts are the refuge of the unimaginative. Worse, deep discounts are the genesis of a cancer that spreads, eventually consuming its host as evidenced in the recent history of tea.

That’s the bad news, but now for the good stuff. We are blessed with a herb that was born as a medicine and evolved into a beverage. It has potent benefits for human health, from cognitive to cardiovascular health, alleviating stress and more in an unassuming herb that also delivers diversity as complex as nature herself. There is ample evidence that in the 10-12,000 teas we are blessed to experience each week on our island. 

The magic in that is the richness of diversity of teas from Dimbula, Uva, Sabaragamuwa, Kandy and more. The sophistication is the dramatic difference that sunshine, rainfall, winds and soil have in transforming each continually. The definition of luxury today is irrevocably changed – no more material, now defined by nature, delivered more consciously and ethically – and tea is so very luxurious – and valuable.

Consumers are more concerned about health and wellness than ever before, from baby boomers to Generation Z. They love adventure, value nature and natural experiences. Tea is abundant in natural diversity, plant based taste and goodness, promoting healthy aging, adding excitement to the no-lo beverage trend, enhancing mood, immunity and complementing lifestyle in a way that no other beverage can.

Consumer is on our side

The consumer is on our side. Between 60 and 80% of consumers are estimated to value sustainability. A similar number value ethics and the lives of the less fortunate and are prepared to pay a fair price for what they consume. They are demonstrating on the streets of Europe and the USA for that right.

As growers, we are on the frontlines of climate action, inequality, gender and most SDGs. The decision we make can determine whether future generations have the same food security, ecosystem services and welfare that you are privileged to have in 2024. We want to do what is right, but the right and valuable path costs more than the one that price demands of us. Fair wages, access to education, productive soils, great tasting tea, a sustainable, resilient and reliable industry are the responsibility of consumers, retailers, brands, traders and producers equally. 

For the global tea industry to survive we need to rebuild the foundations of our great industry, discard extractive, colonial principles, and adopt a new deal that involves consumers, retailers, brands, traders and producers in a collaborative effort focused on quality, worker welfare, climate action, innovation and sustainability.

My father – Teamaker Merrill J. Fernando – envisaged business as a matter of human service. His lower middle class, rural parents could not afford for him an education beyond what was then known as a Senior School certificate. That was a blessing as the most significant influence on his business philosophy was his mother, who taught him that our humanity – kindness – always takes precedence over every action and interaction, business or personal. The strength and resilience of our business today is that philosophy which endears consumers, benefits workers, the wider community, supports innovation and development as we strive to fulfil his promise of making the world a better tea.

We can all do that – for the sake of our industry, we must all do that; acknowledge the pre-eminence of value over price, rebuild a sustainable tea industry on a foundation of taste, wellness, welfare of workers, climate resilience, and produce more equitable and vibrant industry – delivering value to consumers in a diverse, delicious, healthy and flourishing tea category.

(The writer is the Chairman of Dilmah Tea. Dilhan also nurtures his father’s pledge to make business a matter of human service through the work of the MJF Charitable Foundation and Dilmah Conservation. Dilhan currently chairs the Biodiversity Sri Lanka Platform and United Nations Global Compact in Sri Lanka, a corporate sustainability initiative by the UN.)