Business Times

Importing tea is akin to French wine makers importing cheaper grapes

If this absurd proposal goes through, it will be the nail in the coffin of the ailing but high potential Ceylon tea industry. 100% of the producers, companies and smallholders, vehemently object to the traders’ proposal.

Two major members of the exporters association, Stassen and Mabroc, have already recorded their objections to the proposal and more will follow. Many who support the proposal are bulk traders who anyway add no value to Ceylon tea or ‘trading’ brands including Van Rees, a Dutch company, whose Managing Director is the Chairman of the Exporters Association.

Ceylon Tea is a symbol of this country, having been promoted and protected since the 1920s. It is like French Champagne in consumer perception. Would Champagne makers even dream of importing cheaper grapes to ‘compete’? Other countries guard their iconic products zealously. It is the premium image and price of Ceylon tea that supports livelihoods for 2.5 million Sri Lankans.

If Sri Lanka becomes a "tea from anywhere" supplier, Ceylon Tea would be irretrievably lost despite assurances of protection. As it is, the Tea Board is unable to police the existing rules which many consider as mere guidelines. There is no going back to Pure Ceylon Tea when the duty free cheaper tea import policy fails and is reversed later, as some policy makers may think.

Despite high awareness, consumers don’t have easy access to Ceylon Tea, as foreign brands don’t like Ceylon Tea’s high cost. So why don’t more Sri Lankan exporters create their own upmarket brands and market high cost, high quality Ceylon Tea instead of packing foreign brands or selling their brands on price? That is critical to ensure the prosperity of the Ceylon Tea industry. It takes time but one needs to make a start and stay the course.

Who will market [as opposed to trade] Sri Lankan tea if Sri Lankans’ won’t? Certainly not the international brands. Most have phased out Ceylon Tea and others will soon follow. We have been "losing" foreign brands and markets regularly for the past 50 years from Lipton onwards despite a Tea Board tasked with “development of the tea industry in Sri Lanka and promotion of Sri Lanka Tea (Ceylon Tea) globally.” [Tea Board Law of 1975]

Those who cannot learn from history are doomed to repeat it. If Sri Lankan firms need to import lower cost tea to address the ‘severe price disadvantage’ with Ceylon tea, as the TEA claim in their August 2011 proposal to the Tea Council, such teas imported will be well below the cost of production in Sri Lanka, which is about $3.50.

The growers will soon be on the streets or be forced to combine and create their own brands to avoid destruction. The TEA stated “expansion in support services such as banking, shipping and packaging” wouldn’t quite compensate.

Those who want to compete in the cheap tea segment should be encouraged to go abroad, as French champagne houses have done in India. They can then also avoid import duties on teas packed in Sri Lanka. The socio-economic impact of some traders moving offshore is negligible and would ensure protection for Ceylon Tea.

(The writer is a disgruntled industry veteran who is involved in the tea sector as a smallholder)

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