'New markets vital, to sustain growth in tea industry'

By Sanjeevi Jayasuriya

The improved performance recorded by Ceylon Tea Brokers (CTB) during 2012 on a year-on-year (Y-O-Y) basis is commendable considering the volatility in the global tea market. Ceylon Tea Brokers, Executive Director Waruna de Silva spoke to Sunday Observer Business on the industry's growth opportunities amidst a challenging external environment.

Q. What are the expectations of the company for 2013?

A. We hope to grow our market share further, thereby, handling a bigger volume of tea which would directly result in a higher bottom line since most of the costs are fixed.

Industrywise, Sri Lanka's tea production has reduced by1.3 million kg (year to date), compared to the corresponding period of the previous year. However, the devaluation of the rupee helps Sri Lankan teas to fetch a higher rupee value. Therefore, we expect the market to be strong for the rest of the year with lower tea production witnessed locally and globally, 17 million kg (year to date), compared to the corresponding period of the previous year.

The improved performance of the company during the last financial year, compared with the corresponding period the previous year is encouraging. This is significant, given that the country produced less tea, which was sold at lower prices.

While this had a direct correlationship to the earnings, we were able to sustain our business model and move forward, in line with the corporate objective of 'Consolidation through Professionalism'.

The approach of the Ceylon Tea Brokers has proved to be a successful endeavour, based on the feedback received from the industry, clients and the regulators. Along with consolidation, the company has also recorded a moderate growth with the Ceylon Tea Brokers market share based on the volume of tea sold increasing from 8.77 percent to 9.15 percent, for the last financial year. We hope to increase the market share by strengthening our relations and focused initiatives.

Q. Has the adverse global economy impacted on the company?

A. The adverse global economy has not had a severe effect on the company this year since most of our export regions are basically the Middle Eastern countries and CIS countries where tea is an intrinsic drink. The devaluation also helped us gain higher prices and therefore gain a higher brokerage. However, globally you would see that Sri Lanka's market share has come down in Egypt, Pakistan and UK, due to the import of tea from cheaper sources, rather than high priced quality tea. It is likely that a percentage of consumers may move to cheaper teas due to adverse economic conditions.

However, we should also note that during the last financial year, the demand at the auctions was adversely influenced due to the uncertainties in the Middle East, which is a stronghold for 'Ceylon Tea'.

Q. Any plans to increase growth, performance and investment?

A. Ceylon Tea Brokers has increased its market share and profit Y-O-Y due to better performances. The company hopes to invest in IT personnel and infrastructure to improve services to our clients. The company hopes to improve its existing processors to boost efficiency.

Q. As an industry what are the constraints the company faces?

A. Since a large portion of the exports are to the Middle East, the unrest in these regions presents a challenge to realise the full potential of the market. Further challenges include adverse weather conditions locally and globally which has decreased production. These are a few external challenges the company faces and it is beyond our control.

The increased cost of production and increased competition from the other tea growing nations also pose growing challenges to the industry.

Q. What strategies does the company intend to deploy to overcome industry difficulties?

A. The solution to the industry's difficulties should come from policy makers and stakeholders in the industry. However, steps are being taken to solve this at national level. To face global challenges, we will continue to grow our business through strong customer relations and sound professional values.

As an industry, it is necessary that Sri Lanka finds new markets other than the traditional export markets. This will enable the Sri Lankan tea industry to sustain its growth despite global challenges.

Q. What are your plans for the future?

A. Cost consolidation, providing clients with unprecedented services and increased quality of tea produced would help increase prices, thereby increasing the bottom line.

Ceylon Tea Brokers will also continue its signature event, the 'Golden Cup Awards', where it recognises excellence in tea production. The awards aims at rewarding those who have achieved superior results during the year, while motivating others to improve quality and value.

This initiative has also helped to strengthen ties with tea producers. More individual owners of factories prefer us to broker for the marketing of their teas. The growth in our profit has been good and we hope to keep up the momentum by further cost consolidation.