Storm in a tea cup
* Tea industry facing turbulence:
* Disruption in traditional markets:
The tea industry is undergoing a turbulent time due to the disruption
in most of the traditional Ceylon Tea consuming countries, Chairman, Tea
Exporters Association, Rohan Fernando said.
Around 65 percent of our exports go directly and indirectly to
sanctioned or high risk markets such as Russia, Syria, Iran, Iraq and
“These countries have been our traditional large-scale buyers, who
have developed a preference for Ceylon Orthodox Tea. We cannot ignore
this fast growing segment on the basis of risk. The global economic
crisis has further suppressed the buying power of consumers even in
developed Western countries and the African continent,” Fernando said.
Overall, credit sale is the norm in the global marketing platform.
However, the exception is the Far East comprising Japan, China, Korea,
Singapore and Hong Kong. These countries, which are stable and have a
lower risk contribute less than 20 percent to our export revenue.
Fernando said that Sri Lanka having enjoyed nearly four years of good
prices for Ceylon Tea has reached its peak in competition for tea as a
commodity with other tea producing nations.
A noteworthy change in this scenario is Kenyan Tea which surpassed
Ceylon Tea prices for the first time in about three years. Despite much
statistical data on bulk exports, value-added exports and branded
exports, the truth is that nearly 60% of our exports are in bulk form
either as industrial blend components or convenient easy to carry 10 kg
“Of the 40 percent value-added tea exported, a good portion is
manufactured for brand owners in other countries leaving approximately
15% to 20% of our exports in real term value-addition under indigenous
brands,” Fernando said.
On the positive side, Sri Lanka has established itself as a reliable
exporter of consumer-ready products fulfilling a multitude of needs on
ethical, hygienic, food safety and diversified tea products.
This is due to the local tea exporting companies investing large sums
of money in modern packaging equipment and quality control systems.
Another positive note is the change at the Sri Lanka Tea Board and
the Ministry of Plantations recognising the urgent need for deployment
of promotion and marketing funds (accumulated up to approximately Rs. 5
billion) for genuine marketing and promotional related campaigns as
opposed to wasteful and non-productive expenses.
Although, this move is four years late, there still remains hope
among the exporters that the positive attitude by the Sri Lanka Tea
Board will bear fruit in the near future. The Russian crisis is a direct
result of indirect sanctions imposed on Russia’s oil revenue which has
created a big dent in tea export revenue for Sri Lanka.
However, the Ruble which plummeted from 33 for a US dollar to 80 last
year has now stabilised at around 50 for a US dollar giving some hope
for resurgence in the Russian economy.
It is hoped that the Iran-US talks on nuclear disarmament, will relax
some of the sanctions imposed on that country to facilitate free
movement of non-sanctioned goods particularly tea for direct
“The Sri Lanka tea industry or Ceylon Tea has weathered many
difficult periods during its 150-year history. What we are facing today
is another period of market instability or peaking of the ‘commodity
curve’ which we hope will stabilise sooner than expected,” Fernando
said. It is also important to note that many Governments have given
step-motherly treatment to tea exporters, classifying them as
traditional exporters and sometimes even labelling them as a cartel,
without taking them into confidence for a mutually beneficial economic
It is still possible to look at a model that could develop the
industry to reach US$ 5 billion by 2020 subject to having the political
will to take long-term decisions which may not be popular. The tea
industry has survived over 150 years providing a silent service to the
nation in keeping the State coffers primed and providing a magnitude of
social service and looking after infrastructure in the plantation areas.
This is the industry which has the best potential to be the model for a
successful agriculture-based economy.