2012, a challenging year for tea exports

by Lalin FERNANDOPULLE

2012 could be a very challenging year for the tea exports industry due to the crisis in the Middle East and the European economy still not fully recovered said Heladiv Group Chairman and Immediate Past President National Chamber of Exporters, Rohan Fernando. It is also predicted that the Russian economy will be affected due to the European financial situation.

Therefore, the industry will have to look at new markets and not be limited only to the traditional markets for expanding.

Tea brokers said that tea exporters will face stiff competition this year from countries such as Vietnam which is offering tea at a cheaper price. Despite growing competition, Sri Lanka retains its reputations in the global market for exporting quality tea. Lanka Commodity Brokers Ltd. sources said many tea exporting countries in the region are offering cheaper prices due to the low cost of production.

Sri Lankan tea prices are up due to the high cost of production. The tea industry faced a tough time last year due to the turbulence in the Gulf, Middle East and North Africa, the depreciation of the Russian as well as other former Soviet Union currencies, the sanctions on Iran and the strong local Rupee contributed to this negative result.

Incidentally, other major tea producing countries such as Kenya with a 30 percent depreciation of their currency, India with 15 percent, Bangladesh with 10 percent, Malawi with 12 percent and Vietnam with 9 percent have supported exports.

Experts said that the depreciation of the rupee will help tea exports to be competitive and boost revenue.

Fernando said :The current crisis in the tea plantations arising out of the inordinate wages without being linked to productivity will also add pressure on the quality of teas that will be available in the Colombo tea auction.

The highly debated scheme for tea exports will come under the microscope as there are several views on this and the traditionalists insisting on zero tea imports for value addition and re-export.

Hence, 2012 is going to be a very challenging year but as in the past, there will be many options for the tea industry to think out of the box and make inroads into some of the sectors based on tea as a beverage, healthcare and pharmaceutical.

Fernando said the challenges we foresee are primarily on worldwide supply and demand and the prices related to supply and demand with the world tea export industry being liberalised and Sri Lanka perhaps being the only tea producing country with a totally controlled tea import / export industry, the exporters will be faced with supply difficulties due to consumers demanding quality and taste in relation to value. This I believe is going to be the single biggest challenge for the tea export industry in 2012.

Heladiv Tea first started experimenting into tea extraction in 2000, we realised the potential in this sector in terms of variety, multiple value addition, abundant availability of raw material and sectors other than hot beverages to grow into.

"Our ten year research and development programme finally materialised in setting up the first ever pilot tea extraction plant to produce multiple products out of BM Fanning's which is even now considered as a tea waste.

Our experiments reveled that BM Fanning's when hygienically and appropriately handled could produce a large volume of tea properties and much more than what the standard made tea generates", Fernando said.

"The pilot plant thus started at a cost of over $ 1.5 million is now being upgraded to a commercial scale factory, producing several tea based products.

We are already marketing ready to drink iced tea in a range of flavours blended with Ceylon Green Tea and Ceylon Black Tea in the local and foreign markets.