Tea exporters must strive for larger global share

Research shows that the majority of successful Sri Lankan business houses have been launched by local visionaries who had the courage to take calculated risks and most importantly a majority of those start-ups had plantations and tea as the foundation, Chairman, Tea Exporters Association (TEA) Rohan Fernando told the 15th Annual General Meeting of the Association at the Cinnamon Grand last week.

Plantations Industry Minister Mahinda Samarasinghe was the chief guest.

Excerpts from the speech.

"The Tea Exporters Association (TEA) will not make use of the forum to complain or ask for concessions, but to showcase what our tea exporters are capable of when it comes to nation building.

However, there is one nagging worry haunting all our members. That is, on the deployment of the promotional and marketing levy deducted from tea export revenue since 2011. It is not an exaggeration to state that every rupee collected from the exporters as P and M levy goes out as a cost to the exporter and is not even tax deductible.

Courage

Hence our only aim is to ensure the scheme you proposed recently for allocation of funds which was agreed upon by all stakeholders, is implemented promptly. On this assurance I am sure our membership will remain patient and with much hope of taking Sri Lanka to the top of the global tea market as the number one supplier of branded products.

It is no secret that the delay in launching the global marketing campaign will have a great impact on the plantations as the demand for value based quality tea could shift to other origins and supply hubs.

The theme we selected for this year's AGM is 'Tea, the spirit of entrepreneurship'. If you define the word entrepreneur, it is someone who organises, manages, and assumes the risks of a business or enterprise.

Research shows that a majority of successful Sri Lankan business houses have been started by local visionaries who had the courage to take calculated risks and most importantly a majority of those start-ups had plantations and tea as the foundation.

It is also a fact that almost all tea export companies in Sri Lanka are tightly controlled, family businesses. Hence, the spirit of entrepreneurship is entrenched among our members.

During the turn of the 18th century, when the vast coffee estates in Colonial Ceylon faced devastation, the bankers in London panicked and wanted an exit from the plantation companies.

That's when young Thomas J. Lipton saw the enormous potential in a failed crop economy and boarded a steamship to Colombo to gain first hand experience of the potential he imagined. Somewhere around 1890 he purchased his first estates under the Downall Group in Haputale and branded Lipton tea as 'direct from the tea garden to the tea pot'.

The entrepreneur spirit of Thomas Lipton saw the potential in branding Ceylon tea and made a fortune out of it and the legacy continues.

Around the time when Lipton was harnessing the potential he stumbled upon in Ceylon, an Indian gentleman from the south of India ventured out to Burma in search of greener pastures.

The gentleman in this story is none other than our keynote speaker's great grandfather A. M. Murrugappan, who went on to build a successful business in Burma, Singapore and Ceylon and founded the Murrugappa group in 1900.

Today after four generations, the Murrugappa group is a multinational business powerhouse with an annual turnover of US $ 4 billion and ranked as the 16th largest business conglomerate in India.

The only difference in the two stories is Lipton has since passed on and the business he built was bought by the Unilever group whereas the Murrugappa group has remained a strong family-owned business.

Rosy picture

At almost all AGMs in the recent past it has been customary to submit a long list of complaints in the hope the top government officials or the subject Minister will give a sympathetic hearing and effect the changes prayed for or deliver the goodies.

In response, the top bureaucrats paint a rosy picture of the economy and elaborate on the generosity of the government in doling out concessions and diplomatically reprimand the association for neglecting the vast business potential the government has consciously created.

In deference to most others, the tea exporters have never gone to the government with a begging bowl and in fact have not received any concessions or for that matter recognition for their efforts in building global brands. It is in the interests of the Government in power to take us in to confidence.

As an organisation representing over 85% of the total tea revenue of this country we can mobilise positive energies among our members.

During the most difficult of times before 2009, we as one unit stood strong with the government and extended our fullest support in numerous ways.

If a productive dialogue is established we the tea exporters can certainly assist the government in their revenue targets.

Today, tea exporters are strong enough to stand on their own and have ventured into even difficult territories to sell their products taking extraordinary risks. This is at a time when most markets are in political or economic turmoil.

The resilience of our exporters and the spirit of entrepreneurship they possess have made the tea export companies look outwards and explore other avenues of business with tea as the nucleus.

In 2010, when the Export Development Board (EDB) launched the vision for Sri Lanka we were confident in stating that tea exports will target to reach an annual turnover of US $ 5 billion by 2020.

It was treated with the same lukewarm response as the one billion target we projected to cross several years ago. But today, the policy makers are confident of the possibility of US $ 5 billion. The potential of our members if properly harnessed is much more than the figure we are aiming at.

The industry we are engaged in, for reasons known to some is clustered as the tea industry without giving any credence to its evolution over the years as tea plantations and tea exports.

It probably shows the way the policy makers look at us, perhaps as a traditional industry with not much contribution expected of it.

A vast number of our exporters are now setting up operations in centralised locations close to the large markets and this will certainly boost the value of these companies and accrue strong brand value like the way some of the multinational companies have progressed.

By the turn of this decade more local companies will become multinationals and it will be a pride to our nation to witness some of our tea brands being recognised through international stock options.

Magic brew

Tea companies have started to diversify while maintaining its core tea business. Hence, the power of the tea economy should also be viewed from a different perspective with their diversified strengths. Today, it is evident that tea has provided the springboard for several high value segments to branch out.

Tea based beverages which were made popular by multinational companies are now being developed in Sri Lanka.

The largest beverage manufacturer of soft drinks in Sri Lanka, recently introduced a line of tea drinks which will bring to light another dimension of this magic brew.

Tea tourism has taken shape giving a boost to create wealth at the plantation level.

The health aspect of tea is now a well established fact and several curative products from tea are already in the market and before long the range will expand even to capture spas and health resorts.

If Research and Development is recognised as an essential part of innovation, tea will be the first industry to benefit and double its potential within a short period.

Our earnest appeal to the policy makers is to look at tea from a different perspective. It is an accepted fact that the vast numbers of tea farmers need State assistance and any government in office will not shirk this responsibility.

Tea exporters must strive to go after a larger global share which is growing year-on-year surpassing most other human essentials.

I have provided you with thought provoking options to discuss with your cabinet colleagues the power of the magic brew to boost the national economy, several folds.

You may want this subject discussed at breakfast but I will not flout protocol and you are one of our strong pillars on which we can lean on."