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Tea is the third largest agricultural industry in the country and most importantly it is our second largest foreign exchange earner. Sri Lanka's tea industry represents 1.2 percent of the GDP and employs approximately one million people.

Sri Lanka commands about 10 percent of the global tea production. We are the largest single tea exporter with 21 percent market share. The country competes in the orthodox tea industry as the leading producer with 32 percent market share. Last year's tea export earnings were US $682 million.

In comparison to other producer-supplying nations Sri Lanka is the industry leader in terms of prices, marketing and value addition. Despite these facts the local tea industry is subject to volatility and long term price pressures.

The Sectoral Task Force for the Tea Industry set up by the Ministry of Enterprise Development, Industrial Policy and Investment promotion submitted recommendations on future marketing/promotion and production strategies recently.

The Chairman of the Task Force Mahen Dayananda said that the industry must build on its historic strengths to develop brands, strengthen marketing alliances and move closer to end consumers in its target markets to become more competitive.

"From a global standpoint we have the highest relative cost of production. Our average yields stand below India and Kenya. Our tea industry is subjected to declining real prices and commodity-like price swings. Multiple sellers compete on the basis of price in the same market. About 10 percent of tea export value are tea bags or instant tea and five percent of value added exports are Sri Lanka owned brands. Our major markets are in former Soviet Union, Eastern Europe and the Middle East.

Sri Lanka should be mindful of new entrants into the market such as Indonesia and Vietnam offering relatively cheaper alternatives. The recent manufacturing trends in competitor countries have been converting from CTC to orthodox manufacture. The local tea industry should also face the challenges of regional service centres offering `one-stop' solutions and the emerging trade agreements and WTO compliance," Dayananda said.

With regard to marketing and promotion the Task Force has proposed to incentivise brand ownership and product development. Launching Ceylon 'Tea Houses', private sector orientation in the Sri Lanka Tea Board and Tea Research Institute, establishing a 'Tea Intelligence Centre' have been identified as other important areas. The Task Force also proposed joint promotion with the Sri Lanka Tourist Board and Sri Lankan Airlines.

With regard to production the Task Force has found that it is important to explore avenues for low-cost L-T funding and to develop a productivity based wage structure.

Incentivising research and development, technology upgrading and modernisation, seizing opportunities for diversification in plantation, encouraging quality improvement and certification and ensuring consistent supply of high quality green leaf are among the other factors. Dayananda said that Sri Lanka had long since explored the possibility of expanding Colombo as a regional service provider or a tea hub, importing teas of other origins and adding value before re-exporting.

"But the industry has not been able to make the most of our advantages because the industry is positioned by others rather than positioning itself. Our tea industry has little capacity for monitoring consumer trends in the most lucrative markets.

It is also slow in innovation, upgrading, adding value and moving closer to consumers. Very few Sri Lankan owned brands have been launched overseas because even where exporters own a brand, they rely heavily on overseas distributors," Dayananda said.(CK)

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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