Tea industry:

Offering a superior product, can catch the market

The tea industry must use the current global and local economic upheaval to shape in a new industry model based on a niche strategy for the country and correct the current anomalies even if it is painful, said Chairman of the Tea Cluster Ministry of Industry and Commerce Rohantha Athukorala .He was addressing the 75th Diamond Jubilee celebrations of the Ceylon Planters Society.

He said that even though this design is coming into form is by default, than by design, lets accept it as long as we can make Ceylon Tea competitive again.

The tea industry in the recent past has been under severe pressure from a demand perspective due to the political uprising in the Middle East and the lower demand pull in the Russian market being some of the reasons for declining auction prices.

"From a commanding Rs. 400 per kilogram of tea in the early part of 2011, prices have reached an average of around Rs. 350 which has taken the industry to the wire on sustainability.

The global economic embargo on Iran further catapulted the situation by putting pressure from a cash flow end," Athukorala said.

From a Supply chain perspective, the recent wage rate hike has made the average cost of production range from Rs. 375-450 according to the latest research studies done by the Tea Research Institute which clearly illustrates a financial trap that the industry has got into which needs immediate attention as at the end of the day, the tea industry is a mainstay crop and is globally recognised.

Athukorala said given the fallout in the Eurozone and the declining purchasing power in the key tea consuming countries, one can forecast that the trading situation can only become tougher in the short-term, Athukorala said.

Hence, rather than getting into an analysis mode from a negative perspective, a better option would be to re-look at the industry.

A probable shape of the tea industry can be to ruthlessly focus on increasing the quality of the tea, even if you have to take a hit on production volumes.

Maybe focusing on two leaves and a bud ethos can be considered by the industry so that a superior product can be offered globally, Athukorala said. But, he accepted that this can increase the cost of production in the short term but commanding a higher price in the medium to long-term if supported with a strong marketing campaign.

Athukorala said an aggressive marketing campaign on the theme of 'Ceylon Tea' must be activated immediately so that the proposition of the high quality Ceylon Tea can be registered globally which will be part of the new tea industry model.

The good news is that this is already at the stage of implementation and the industry must be commended, he said. It's a best practice that other industries can learn from Athukorala who is a member of the Tea Board Marketing and promotional committee, said.

"I guess on a 3.9 billion metric ton global production annually, when a country is producing a mere 0.3 bn metric tonnes niche marketing is the only way out," he said.

But for such move to really work, the current anomaly on wages must be corrected with policy support. If not, the private sector cannot come in with stringent business strategies on the quality model."