Economy

Outgoing TEA Chief makes final call for ‘tea hub’

10 Sep 2012 - {{hitsCtrl.values.hits}}

Outgoing Chairman of the Tea Exporters Association (TEA), Niraj De Mel, made a final appeal to tea industry stakeholders and policy makers, in defense of the ‘tea hub’ concept, at the recently concluded TEA Annual General Meeting.

De Mel noted that during the past few years consumer patterns have changed significantly from leaf brewed tea to tea bags, iced-tea bottles and other valueadded products.

“Look at the tea bag consumption in what was predominantly an orthodox tea drinking market like the Middle East in the last five years in addition to the changes taking place in Russia. We need to come away all the rhetoric and face reality, we need to remember that there is a consumer out there who wants a cup of tea but can’t afford it at a premium and more importantly, and is also looking for convenience,” he said.

De Mel stated that there was a misconception amongst Lankan tea manufactures that since they produce the best, they must get a premium for their teas.

“It is time we came to terms with the fact that consumer tea drinking habits have changed over the years and more rapidly in the last decade,” De Mel stressed.

“Today, demand is concentrated both locally and globally at the lower end of the scale. The time has come to tailormake what the consumer wants, and to do this we need to take stock of our strengths, accept our weaknesses. There is a perception that there will always be takers for what Sri Lanka produces but how sure can we be that Ceylon tea can survive in the light of further changes in the tea drinking habits?” he asked.

Noting that a depreciated rupee against the dollar had resulted in a period when Ceylon tea was available to international buyers at more competitive prices. De Mel took aim at the feasibility of marketing Pure Ceylon Tea at a premium.

“One positive effect of the depreciation, albeit briefly, was the return of Egypt and Pakistan to the market; countries thought to have left Sri Lanka for good. The reason for their return was that Ceylon tea was cheaper than Kenyan tea at the time as a result of the depreciation. The current global shortage made Ceylon tea more expensive.

So, countries have now left the market again. However, this clearly endorses the fact that cheaper does not necessarily mean lower quality,” De Mel said. He further stated that the TEA would also continue to submit proposals aimed at ensuring the longterm sustainability of the tea industry in Sri Lanka.

“I wish to emphasize that the survival of the members of the TEA, to a large extent, depends on the sustainability of the Sri Lankan tea industry. Therefore as a responsible stakeholder the TEA will continue to put forward proposals that have the potential to bring long term benefits to the industry.”

“Tea exporters serve as an interface with the international tea market and as such, we are best equipped to advise the country as to how it should gear itself to the many challenges and changes taking place in the international market; not those who have suddenly got a fresh infusion of patriotism and know nothing about tea and marketing.” De Mel stated. The debate over converting Sri Lanka into a tea blending hub resurfaced when the TEA submitted a proposal to cabinet recommending the encouragement of importation of cheaper tea from producing nations like Kenya, for the purposes of blending with Ceylon Tea with a view to increasing exports at cheaper prices, thereby achieving the Export Development Board’s target of a US$ 5 billion in tea export earnings. Proponents of the tea hub concept pointed to the fact that since blending of Sri Lankan produced tea with cheaper varieties already occurs subsequent to exports only to be sold as ‘Pure Ceylon Tea’, the local industry would be better served by taking control of the process domestically thereby boosting export volumes and earnings.

Meanwhile, opponents of the concept, amongst them, Secretary to the Treasury, Dr PB Jayasundara, criticized the proposal as being dangerous to the value-perception of Pure Ceylon Tea, instead advocating a more focused marketing campaign to drive demand for Sri Lanka tea higher in both established and untapped markets.

“On average, we sell our tea at approximately US$ 4.50 per kilo but this is not right. We have to work towards increasing our prices into the range of US$ 15 per kilo and not on average but in absolute terms.”

“A threefold price increase will mean that the industry will have to get more skilled labour, draft collective agreements or have no agreements at all or maybe the industry needs to develop on a different model all together. However, it cannot be done by importing tea,” Dr.Jayasundara had stated.

He further recommended that exporters’ focus on finding new markets whilst generating higher valueaddition across the domestic supply chain.

Addressing such proposals, De Mel said: “Long before we were told of the need to perform value addition and seek new markets. We have been doing so, because as exporters, that is a key part of our job. New markets cannot be found overnight.”

De Mel also touched on the issue of tea production which has been in decline due to a variety of factors including an urgent need for replanting in order to replace dwindling yields from the country’s aging crops. He went on to state that in the backdrop of supply side pressures, the tea hub concept would be a pragmatic method towards achieving sufficient export volumes and thereby regain much of Sri Lanka’s lost global market share.

Economy

Outgoing TEA Chief makes final call for ‘tea hub’

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