Supermarkets for tea workers

A few years ago, most people feared the garment industry would crash with the end to garment quotas since Sri Lanka was always perceived as a producer of mass-market products at the lower end of the scale.

What happened? Instead the reverse has virtually taken place. While some factories have closed down, the bigger ones – especially those in the high-end range like Brandix, MAS Holdings or Hirdaramani’s – have not only gained in momentum but also expanded overseas. In fact, Brandix and MAS are launching new garment parks in India, showing that Sri Lanka not only has highly advanced skills in garment-making but also pumping in huge investments overseas. These two companies are well recognised abroad and in time would achieve much higher goals apart from Colombo being the ‘Bra capital of the world’.

Then take tourism. Legendary singers Paul McCartney of the Beatles and Paul Simon from the successful duo ‘Simon & Garfunkel’ stayed at luxurious resorts in Sri Lanka in absolute privacy, paying sky-high rates and enjoying every minute of the silence, privacy and no-attention grabbing moments with fans. Simon and his family even walked around a tea estate, spent a few minutes at a railway station and had a walk in the park, unrecognised. Try doing that in Europe or the Caribbean Islands? Many others have spent a fortune looking for the ideal holiday destination and found Sri Lanka much to their liking, despite the internal troubles here. Sri Lanka is quietly progressing from a mass market destination to a high-end location because this is where the big bucks are and it causes less damage to the environment while most of these high-spenders are looking for unconventional ways of spending a holiday, like for example visiting a village and having a simple meal with a family!

For years, Sri Lanka traversed the route of the mass market in most sectors to earn valuable foreign exchange but with countries like India and China being able to produce goods at a fraction of Sri Lanka’s cost, this road is gradually full of potholes as the garment industry and tourism shows. Some 100,000 high-spending tourists for example are equal in value terms or even more than half a million low-end tourists.

It is in this context that we hope this week’s special report on the tea industry and its future would raise the bar of the debate on where the tea industry should be heading in the next half century.

Ceylon Tea started off as a standalone product primarily due to the efforts of pioneers like Sir Thomas Lipton and other British veterans who dominated the industry more than 100 years ago with the first teas being planted. Gradually as the market expanded and new producing countries came into the picture, competition grew and a combination of blended teas and single origin teas took over consumer tastes.

This is where the problem lies. While blended teas grew in global market share terms, the quantum of single origin teas – particularly Pure Ceylon Tea – shrank primarily because multinationals like Liptons and Unilever flooded the market with multi origin products.

The recent International Tea Convention in Colombo raised the all-important issue of ‘Sustainability’. Our reports gives a range of views and what is clearly coming out as a consensus viewpoint – and this is not a new view - is that everyone agrees that the future lies in a Pure Ceylon Tea, a single origin tea product of Sri Lanka. The question is how do we get there?

Single origin tea marketers like Dilmah argue that now is the time for a combined industry effort towards achieving this objective. Most of the others in the industry however disagree saying it has to be gradual process and requires a massive investment which neither the industry nor the state has at the moment.

Dilmah says they are successful because they believed in the product and bravely took on the multinationals (Dilmah is the top selling tea brand in Australia). Others however attribute this success to a lot of financial support from the Tea Board. Apart from this to-and-fro argument, Dilmah’s Marketing Director Dilhan Fernando raises a valid point - the industry is losing sight of its strength of producing the best tea in the world but getting trapped in a rat race of price competition. “The entire industry has lost sight of our strengths, like for instance, our heritage. We have been known for over a century for producing the best tea in the world. So why are we trying to sell cheap?” says Fernando.

Valid point. On the other hand, this following view is also equally valid - it is impractical nor tenable to market exclusively 100% single-origin tea in value added form, as the international consumer has developed a palate for multi-origin products and Sri Lanka must compete in this sector of the market, if it wishes to remain competitive and grow.

One meeting point in the industry would be to achieve 50 percent exports of Pure Ceylon Tea and the balance in blended or bulk form with a timeframe for implementation. There is no doubt that at the current rate of progress, the estate population is unlikely to achieve a higher quality of life. Every cent extra in wages is negotiated on the basis of the cost of living. What about having a disposable income, a better quality of life or some money to be set aside as pension income like all of us do? This hard working population also deserves better like supermarkets on estates or owning motor vehicles. The only way forward to raise these standards is by raising the bar for Ceylon Tea and getting a higher price for a product that already costs much more than other mass-market producers. We hope our series on tea this week would trigger a fresh round of discussions on the future of Ceylon Tea and provide some balanced and rational options for the long term survival of the industry. Who will bell the cat?