Linking people, places and products in tea business

Dr N Yogaratnam

The Sri Lanka Tea Board recently launched, the new logo of Sri Lanka's Ozone friendly Ceylon Tea together with Ceylon Tea name as well as agro-climatic regional names and logos as certification marks under geographical indicators to protect and add value to premium Ceylon Tea on a global scale, a process that was initiated in 2008.

It may therefore be useful to look at some of the certification processes that are relevant to the tea industry, although some plantations are already in this game.

Similar to any corporate policy and implementation procedure, certification systems may vary significantly. Some may require that the entire production process be monitored while others might only focus on a specific stage of production. A few examples are discussed here.

Certification

Consumers are increasingly concerned about their health, the country of origin and the quality of the products they consume. At the same time, producers are equally concerned about protecting and adding value to their products.

There are also important technical regulations and import requirements of the United States of America, the European Union, Japan and other countries from the Asia-Pacific region. They are compulsory for exporters or producers who want to sell their products into these markets.

Voluntary standards are not compulsory. Growers, exporters and other companies can decide whether or not to comply with them, and accept the economic consequences of their actions.

There are three ways of verifying that a standard is met. In the first case, a company may decide to adopt the standard and appoint some of its employees to verify that all its departments comply with it. This is called first-party verification.

In the second case, a company may demand that its suppliers meet the standard and control itself that they do so. This is second-party verification. Finally, a company may require that its suppliers meet the standard and request an independent organization that is not involved in the business relationship to control the compliance of the suppliers. This is third-party verification, also called certification. Therefore, by definition, the certification activity should always be done by an independent third party. Ideally, the organization that has set the standard should not carry out the certification operations itself. Rather, it should authorize ("designate") competent independent certification bodies to do this work after checking their capabilities.

A certificate is a written guarantee by an independent certification agency that the production process or the product complies with certain standards. These standards can focus on environmental issues (such as soil conservation, water protection, pesticide use, or waste management), or social issues (such as producer income, workers' rights, occupational health and safety) or on other aspects of production like food safety.

Certification brings opportunities to producers such as market access, protection of local resources, improvement of workers' health and living conditions of rural communities. It may also ensure consumer health.

Why certification?

Certification is used to demonstrate that a product has been produced in a certain way or has certain characteristics complying with a standard. It is mainly used when the producer and the consumer are not in direct contact, for instance in the international market where the consumer cannot easily verify that the product was produced in the manner described by the producer.

Certification can help differentiate the product from other products, which can be helpful to promote the product in the market. Certification can also help improve market access, and in some cases, result in higher producer prices.

In large import markets such as Japan, the United States of America and the European Union, there is a booming market for products certified against certain private standards. Products certified as organic, or fair-trade, for example, tend to fetch higher prices than equivalent non-certified products.

These countries import significant quantities of organic products from Asian countries, for example organic tea from the People's Republic of China and India, organic coffee from Timor Leste, organic and fair-trade bananas from the Philippines and organic vegetables from the People's Republic of China and Thailand. However, Asian exporters should not overlook the regional market. Indeed, with the development of large cities, the emergence of an urban middle-class and the growth of supermarkets in Asian countries, national markets for quality products are growing strongly..

Intrinsic food and beverage quality

In recent years a number of voluntary private certification programmes have arisen to highlight specific characteristics of foods and beverages that are not directly related to their physical, chemical or biological properties. Instead, these programmes focus on cultural or geographical features. Linking People, Places and Products.

A Geographical Indication (GI) is a name or sign issued by the WTO and used on certain products which corresponds to a specific geographical location or origin, for example a town, region, or country.

The use of a GI may act as a certification that the product possesses certain qualities or enjoys a certain reputation due to its geographical origin.

Therefore, origin-based products show specific quality attributes linked to the geographical places where they are produced and, over time, build a reputation by a Geographical Indication that identifies them.

These differentiated products have the opportunity to meet a specific and remunerating demand and the potential to be part of a sustainable quality virtuous circle based on their promotion and preservation of local resources.

This potential lies within their specific quality, which is a result of a unique combination of natural resources (climatic conditions, soil characteristics, local plant varieties, breeds, etc.) and local skills, historical, cultural practices as well as traditional knowledge in producing and processing the products. They reflect a unique combination of local natural resources and cultural ones (traditions, know-how and skills, some of which are transmitted through generations) in a given territory, linking the product, the people and the place.

Seal of Quality

A geographical indication (GI) is a private voluntary standard that has been registered by a producers' group eg Sri Lanka Tea Board or a local government authority through the national administration in charge of intellectual property. GIs are a seal of quality which helps to promote know-how, tradition, diversity and quality for raw produce and processed foods. GIs differentiate the product signalling distinctive specific quality characteristics that are essentially attributable to its origin, as the product comes from a determined geographic area.

Generally these characteristics are already recognized to some extent by consumers at local, national or even international level. GIs confer legal protection of the geographically related product name and prevent the unauthorized use of the geographical indication on labels of products from other regions. It is thus seen as an appropriate marketing tool for regional and international trade of characteristic local products. Examples of already existing Asian GIs include Binh Thuan Dragon Fruit and Phu Quoc Fish Sauce from Viet Nam, Doi Tung Coffee from Thailand, and Longjing Tea from China. Many Asian countries have agricultural and food products which could benefit from GI protection and promotion as for example Darjeeling Tea from India or Bali Coffee from Indonesia.

To register a new GI, producers must define a code of practice for the production and transformation processes, which they commit to comply with. This is meant to characterize the unique specificity of the product which will allow local producers to associate their product with the geographical name.

Finally, a third party must inspect and certify the quality of the production and transformation processes on behalf of the government, which is the final guarantor of the quality of the product.

Once registered, producers and manufacturers who are located in the geographic area and who meet the code of practice can use the GI label created by the originator of the product and protected by the government.

Darjeeling Tea

The quality, reputation and characteristics of Darjeeling tea are essentially attributable to its geographical origin, it possesses a flavour and quality which sets it apart from other teas, giving it the stature of a fine vintage wine.

As a result it has won the patronage and recognition of discerning consumers worldwide for more than a century. Any member of the trade or public in ordering or purchasing Darjeeling tea will expect the tea to be the tea cultivated, grown and produced in the defined region of the District of Darjeeling and to have the special characteristics associated with such tea.

Ceylon Tea

Sri Lanka Tea Board (SLTB) ceremonially launched the new logo for Ozone-Friendly Ceylon Tea together and Agro-climatic regional names and logos as Certification Marks under Geographical Indication, to protect and add value to premium Ceylon Tea.

SLTB has taken action to protect 'Ceylon Tea and seven major regional tea growing area names as Certification Marks under Geographical Indications of the Trade Related Aspects of Intellectual Property Rights (TRIPS) with World Trade Organization (WTO) backing. It is believed that this exercise will greatly enhance the value of Ceylon Tea and other specialty teas produced in the seven agro-climatic tea growing regions.

Environmental Certification

Organic agriculture is a production method which manages the plantation and its environment as a single system. It utilizes both traditional and scientific knowledge to enhance the health of the agro-ecosystem in which the plantation operates. Organic farms rely on the use of local natural resources and the management of the ecosystem rather than external agricultural inputs such as mineral fertilizers and agrochemicals. Organic agriculture therefore rejects synthetic chemicals and genetically modified inputs. It promotes sustainable traditional farming practices that maintain soil fertility.

There are specific requirements for most organically certified crops as well as livestock, fish farming, bee keeping, forestry and the harvesting of wild products.

Organic standards require that there is a conversion period (or time that a farm has to use organic production methods before it can be certified, usually 2 to 3 years).

How to get certified?

Standards for organic farming have mainly been developed by private certification bodies but a number of Asian countries also have national organic standards and regulations (e.g. Japan, the People's Republic of China, Malaysia, the Republic of Korea, Thailand). In addition, there are private initiatives that promote organic farming (e.g. the Green Net/Earth Net Foundation in Thailand). The European Union, the United States of America and Japan all have national regulations on the labelling of organic products and if producers want to export their products to these countries, they must meet these regulations..

Organic agriculture may represent an interesting opportunity for many producers in Asia especially for those who presently do not use a lot of agrochemical products. For example, the People's Republic of China exports organic tea worldwide and organic vegetables to Japan, India exports organic tea, the Philippines exports organic bananas and mangoes and Timor Leste exports organic coffee. Once the plantation is certified, selling organic products might improve the quality of life and income of producers. Producers shift to organic agriculture for a variety of reasons. Some feel that the use of agrochemicals is bad for their health and the environment, while other producers are attracted by the generally higher prices and the rapidly growing market for many organic products in recent years.

Fair-trade is based on the fair remuneration of producers. Buyers that commit to fair-trade must pay a minimum price to producers as well as a premium called fair-trade premium. This premium should enable producers to support themselves and to invest in community development. In return, producers that commit to fair-trade must comply with labour rights, environmental and social requirements.

Standard setting and certification are under the control of the Fairtrade Labelling Organizations International (FLO). This organization is the worldwide umbrella organization of 20 national non-governmental organizations in Europe, America, Asia and Oceania. Other institutions unrelated to FLO are also setting up fair-trade standards.

Various Asian producer groups benefit from exports of fair-trade products. For example, the Philippines exports fair-trade bananas and sugar to Japan, Thailand exports fair-trade rice, Indonesia fair-trade coffee, India and Sri Lanka fair-trade vanilla, etc.

To obtain certification, producer associations must function in a democratic manner. There are also rules on how the fair-trade premium has to be spent and requirements for the protection of the environment.

A producer association or a plantation can benefit from fair-trade certification since certified products normally receive higher and more stable prices. The price paid to producers is determined by production costs. It takes into consideration any additional costs that might arise from meeting the fair-trade requirements, such as providing living wages for workers. In general, the fair trade premium is meant to provide some resources to the community to improve the living conditions of its members.

A key constraint in the fair trade system is that a group of producers can only get certified if FLO finds that there is a market for their fair-trade-labelled products. In order to enter the fair-trade system, a necessary first step is to ask FLO and other fair-trade importers for information regarding market opportunities for their products. Another constraint is that when a producer association or a plantation has been certified there is no guarantee that the whole production will be sold and marketed as "fair-trade".

In conclusion, despite the few weak components in tea business in the country, the tea trade is still highly profitable due to smart marketing, fierce competition, and product innovation, at least for the successful market players.