Value added exports: Mixed reactions to tea imports

By Lalin FERNANDOPULLE

The import of tea for value added exports will help the tea industry to gain a competitive edge and boost the image of Pure Ceylon Tea, said Tea Exporters Association ( TEA) Chairman, Niraj De Mel opposing the views of certain exporters who are vehemently against the move to set up a tea hub in country which would destroy the tea industry.

De Mel said that the Association has no intention whatsoever of destroying the tea industry in Sri Lanka from which our members, as stakeholders earn a livelihood.

He said that TEA is supportive and endorses the views expressed that this industry which has weathered many storms through the past 140 years should be safe guarded..The TEA fully supports the assertion of Dr. P.B. Jayasundera, Secretary, Treasury that Pure Ceylon Tea is protected at all costs.

“Sadly, however newspaper articles have projected the Tea Exporters Association, a body comprising exclusively of tea exporting companies which account for about 83 percent of Sri Lanka’s tea export volume and value as adverse to the tea industry.

The member companies play a vital and vibrant role turning the wheels of this great industry. The TEA helps the producer segment in no small measure to turn their crop to cash.The Association takes umbrage at the manner in which these articles have belittled the contribution of this important stakeholder in the tea value chain”, De Mel said.

A number of articles has appeared in the local newspapers over the past one month attacking the TEA proposal to the Tea Council culminating with the statement at the Dilmah Conference early this week. The TEA views these as one-sided arguments.

MJF Group Director Operations, Malik J Fernando said that if the TEA proposal goes through, it will be the nail in the coffin of the ailing but high potential Ceylon Tea industry. Hundred percent of the producers, companies and smallholders vehemently object to the traders proposal. Two major members of the Exporters Association, Stassen and Mabroc, have already objected to the proposal and more would follow.

Many who support the proposal are bulk traders who add no value to Ceylon tea or “trading” brands. Van Rees, a Dutch company, is one such bulk trader and their MD is the Chairman of the Tea Exporters Association.“Ceylon Tea is a symbol of this country, having been promoted and protected since the 1920s. It is like French Champagne in a consumer perception. Would champagne-makers even dream of importing cheaper grapes to 'compete'? Other countries guard their iconic products zealously.

It is the premium image and price of Ceylon tea that supports the livelihoods of 2.5 million Sri Lankans.If Sri Lanka becomes a 'tea from anywhere' supplier, there would be an irretrievable loss to Ceylon tea despite assurances of protection.

As it is, the Tea Board is unable to police existing rules which many consider as mere guidelines.

There is no going back to Pure Ceylon Tea when the duty free cheaper tea import policy fails and is reversed later, as some policy makers may think.

Despite the awareness, consumers don’t have easy access to Ceylon Tea, as foreign brands don’t like Ceylon tea’s high cost. 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. 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,” Fernando said. He queried who will market [as opposed to trade] Sri Lankan Tea if Sri Lankans’ won’t? Certainly not the international brands. Most have phased Ceylon tea out and others 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] “Those who cannot learn from history are doomed to repeat it.

If Sri Lankan firms need to import lower cost tea to address the 'severe price disadvantage' with Ceylon Tea, as the TEA claim in their August 2011 proposal to the Tea Council, such teas imported will be well below the cost of production in Sri Lanka, which is about $3.50.

Growers will soon be on the streets or be forced to combine and create their own brands to avoid destruction.

The TEA stated “expansion in support services such as banking, shipping and packaging”wouldn’t quite compensate”,Fernando said.

De Mel said that no definite decision has been taken with regard to the way forward on this sensitive subject.

The Minister of Plantation Industries in consultation with the Government will arrive at a decision to study the pros and cons of the said proposal.

The TEA is confident that such an initiative will not tarnish the image of Ceylon tea but on the contrary ensure sustained demand for Ceylon Tea.

The decision to pursue a study on this course of action was necessitated as the sustainability of the Sri Lankan tea industry is uncertain in spite of highest prices paid for Ceylon tea.

The proposal envisaged would also have a spin off effect of employment to a large segment of the country’s populous.

If this is not carried out, the value addition and sustainability of approx 300 Mkgs of Ceylon tea will have to depend on the 12 percent of Sri Lankan-owned pure Ceylon brands and the balance 88 percent at the mercy of offshore blenders multi origin branded products who have access to the expanding supply universe, e.g. Vietnam, Uganda, Tanzania, Burundi, Iran and Argentina, in addition to India, Kenya, Indonesia and Malawi.

This study which has been going on since 2002 was developed,taking into consideration the ever-changing challenges faced by Sri Lanka’s tea marketers in the global market place.