Dilmah’s Malik responds to Willie Weerasekera’s Pure Ceylon Tea or Tea hub?

The writer speaks sense when he says “the million-dollar question is therefore much more than ‘Ceylon Tea’ or ‘tea hub’ – It is: How do we formulate a sustainable competitive future for the Sri Lanka tea industry?”

The tea industry has no strategy. There is little linkage between tea producers and exporters. Everything is reactive like the current tea import story. Meantime we run out of markets. 60% of teas are exported to just five countries. Ceylon Tea and Sri Lankan brands are virtually absent in sophisticated markets.

I disagree that emulating the global brands and the blended tea route may be worth considering. Following the strategies of highly efficient, volume driven global brands like Lipton is disastrous. There will always be someone cheaper. Trying to emulate their strategy will end in pain and loss for a high cost tea growing country.

Global brands have no allegiance to a country. We grow Ceylon Tea and exporters have a duty to market it. Surely we should optimise marketing of what we grow before trying to market other origin tea? Only 12% of our tea is exported in Sri Lankan brands.

Lipton started out as a Pure Ceylon Tea, touting the benefits of single origin, as did many others but then became a blended tea, purely to sell cheaper and go mass market. Blending is not a virtue in wine, where single vineyard wines are preferred. Coffees are increasingly origin denominated, after having emerged from the Nescafe blended phase.

A marketing strategy has to complement the product you have. A high cost, high quality product like Ceylon Tea needs a strategy poles apart from Lipton and Tetley. If using multi-origin tea, what point of difference would Sri Lankan exporters promote? Do we have the financial muscle to promote like Lipton et al?

We need to be the Ceylon Porsche to the Lipton Toyota. Niche. Either be high end, niche or low cost, mass market. There is a marketing saying “death in the middle” Sri Lankan can no longer be the cheapest place to make anything. So a muddling, middling multi-origin “hub” will merely oxygenate some traders for a few more years and quickly asphyxiate Ceylon tea producers.

The writer also says this “is not a decision that must be taken without in-depth study and documented proposals on either side of the debate in a transparent manner.”

“In-depth study and documented proposals” is precisely what is not happening. There has been an almighty rush to get this proposal pushed through without proper discussion.

The import lobby has been backroom lobbying for the past five years or so and had this issue not been deliberately brought into the open recently in the national interest, it could well have gone through under the radar. It is a small group of traders who want this. They know their proposal will not pass muster if properly scrutinised.

The Tea Board claims to have appointed a committee and is studying proposals. The industry is not aware of such a committee. Having stated that proposals are being studied, the Tea Board goes on record stating why the import proposal is a good one!

This happens every five years or so. Some traders/exporters come under price pressure as Ceylon Tea prices rise and their customers threaten to pull the business. The benefits of imports are soon touted. MJF/Dilmah has documented clear objections [along the same lines we object on now] from as far back as the 1980’s, before the Dilmah brand was born.

Hasn’t Sri Lanka been a tea hub since the early 1980s? By far the largest value adding/packaging centre in the tea growing countries? Hub meaning a place where all ingredients are in place – in this case we have good tea, packaging material suppliers, reasonable logistics, engineering expertise etc. There is no intrinsic requirement for imported tea in order to be a hub. As Dr. Jayasundera said, “in tea, everything is here,” unlike apparel where we need to import raw materials.

The writer is correct in saying the image of Ceylon Tea is waning in many markets. This is because we have always relied on foreign brands to sell our tea. These brands don’t like Ceylon tea’s high cost. Most have phased Ceylon tea out and the remaining few will soon follow.

We have been “losing” foreign brands and markets regularly for the past 50 years from Lipton onwards despite a Tea Board tasked with “development of the tea industry in Sri Lanka and promotion of Sri Lanka Tea (Ceylon Tea) globally.” [Tea Board Law of 1975]. Ironically the Director, Tea Promotion [presumably Ceylon Tea Promotion] at the Tea Board is one of the foremost advocates of cheaper tea importation.

So why don’t more Sri Lankan exporters create their own upmarket brands and market high cost, high quality Ceylon Tea instead of packing foreign brands or selling their brands on price? That is critical to ensure the prosperity of the Ceylon tea industry. It takes time but one needs to make a start and stay the course. Who will market [as opposed to trade] Sri Lankan Tea if Sri Lankans’ won’t?

Having failed to build Sri Lankan brands by exploiting the quality image of Ceylon tea, it is illogical and wishful thinking to build Sri Lankan brands with cheap tea. That will only cause irreparable harm to the image of Ceylon tea. It is ironic that when we are just about to launch the $50 million Ceylon tea global promotion campaign, stressing its unique attributes and the importance of Sri Lanka/origin packed products signified by the Lion Logo as a guarantee of the world’s finest tea, some want to reposition Sri Lanka as a multi-origin tea hub!

Sri Lanka is not a trading centre such as Dubai and Rotterdam. Sri Lanka is a major tea-growing nation, proudly producing the finest tea on earth, albeit traded and not marketed.

Those exporters who believe their future is in multi-origin teas should be encouraged to set up plants to blend with foreign teas in Dubai or in Russia [which will also save the 20% import duty] without the coveted “blend of Ceylon and other teas, packed in Sri Lanka” moniker. A tea packaging plant is automated and provides limited employment, so the investment loss to the country would be far less than the impact on Ceylon tea if imports were allowed.

This is in line with T.E.A member and Chairman of HVA Rohan Fernando’s encouragement to Sri Lankan firms to “become multinationals in the tea industry” for which production in more than one location is essential.

The key reason we lose markets is due to the fact that we remain suppliers of raw material – bulk tea or private label. We don’t have any say in the brands, which have no allegiance to origin and always seek economies. We need to start dealing with consumers and not “buyers”.

If the billions of rupees we invested in advertising and promoting foreign owned brands for seven or eight decades were spent on building Sri Lankan owned brands, and if we resolve to become premium brand builders, Ceylon tea would come roaring back [as it has in select markets where the proper strategies have been followed].