Tea industry a slow burning candle - CEO, MTI Consulting
CEO, MTI Consulting, Hilmy Cader told an MTI thought-leadership forum
of the local tea industry was not only critical for the forex it earns
but also the largest employer in the country (with over a million people
dependent on the industry for a livelihood).
He said the Sri Lankan tea industry was like a slow burning candle,
burning on three sides. On the demand side, 'power' lies with top global
brands, retailers and food service chains.
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CEO MTI Consulting,
Hilmy CaderCONCRETE |
You need hundreds of millions of dollars to compete with that. 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 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 percent of our exports comes
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 analyses published
in the media, it is inward-centric. We keep talking about auction
prices, when we should also be 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 Hilmy
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 closely associated
with tea) to coffee to iced tea.
Addressing the issue of how the industry can be more responsive to
market needs and surge ahead. Hilmy Cader brought out an interesting
comparison of the apparel industry in Sri Lanka. "If you look at the two
major players (MAS and Brandix, who together are 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'. Maybe the tea industry needs a few
MASs and Brandixs!" he said.
Hilmy Cader made some interesting observations to place the product
in its 'life context'. He said, "The average supermarket has over 1,000
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".
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