ISSN: 1391 - 0531
Sunday December 23, 2007
Vol. 42 - No 30
Financial Times  

Future of Sri Lankan tea is in value addition

By Dr. Sarath Ranaweera, Managing Director, Bio Foods (Pvt) Ltd

Tea being one of the major export earnings of our country, needs a strategic review in order to assure a sustainable growth of the export sector in Sri Lanka. The cost of tea production in Sri Lanka is ever increasing whilst buyer pressure for lower prices remains unchanged.

On the other hand, until higher yielding clones are introduced along with low energy consuming technology into our production system, the tea industry will have to maintain a higher cost of production when compared to that of other tea producing countries.

Time has come to scrutinize the present and the future situation in the Sri Lankan tea industry and to launch a medium term strategic plan to maintain a healthy and sustainable growth in the tea industry, to maintain higher end markets at profitable levels.

In addition to conventional tea production which caters mainly to the standard industrial tea sector, the percentage of value addition has to be gradually increased to make an impact. It is important that value addition is coupled with other strong consumer requirements and expectations such as environment protection and bio diversity maintenance of eco systems towards combating global warming, offering social responsibility to the workers and beneficial health to consumers, convenience and sensory satisfaction, etc.

Value addition can be done initially by changing the primary production procedures. Production methods of Organic & Bio Dynamic add value to made tea, as a bulk product. The basic value addition as a result of converting conventional teas to organic teas, is about 100% against 2.5 % for conventional teas.

Demand for organic products is ever growing mainly due to health concerns of consumers in the developed importing countries.
The import of organic green tea has increased annually by 5% in value and 8% by volume in EU. However the major percentage (more than 70%) of Sri Lankan teas moves towards CIS & Middle East sectors and the organic trend is still not very prominent in those sectors.

Changing the marketing pattern and strategies to other sectors such as the European, North American, Canadian and Japanese sectors will result in minimizing the high risk of market domination by CIS & the Middle East and enjoying higher revenues from tea exports in healthy and secure Western markets, mainly in value added form.

Fair trade logo
Conventional or organic teas can be promoted using fair trade (FT) logo after fair trade inspection & certification granted by FLO Cert. of Germany, with the relevant ID Number. This also can be used as a marketing tool and to penetrate some selected markets with less competition. When the tea is sold under fair trade logo, a fair trade premium of 0.5 USD/kg for fannings grades and 1.0 USD/kg for broken and leafy grades is sent directly to the primary beneficiaries of the fair trade system such as worker joint body of plantation or small producer organization.

A well-known big player, Marks & Spencer UK has converted all its tea lines to fair trade teas since March 2006. There is a general upward trend for FT teas in Switzerland (4%), Germany (2.5%), France (2%) in European countries and a clear indication of significant demand is shown in the Canadian market since recently.

82 producer organizations in 13 countries had sold 2,614 tons of FT teas in 2005 and it has gone up to 3886 tons of FT teas in 2006 showing a 48% increase. In order to match the growing demand, sales value of FT teas in the French market has gone up by 5% reaching the volume of 278 tons of FT teas.

Tea in consumer packs
Packing tea into tea bags in many forms has become very popular because of convenience and it can be considered as an effective form of value addition. Selection of environmentally friendly packing materials which are bio-degradable, recyclable and re-usable, has become a favourable factor. However great care must be taken to select materials with non permeable barrier properties to moisture and flavour, that maintain the quality standards and the freshness of tea for a desirable longer shop shelf and consumption period.

Flavouring of tea using natural mixtures of spices, herbs & extracts in liquid or granulate form has become very popular in most of the market segments of specially teas. Strong artificial flavours are also used widely to flavour conventional teas without any significant health risk since the percentage of artificial flavour used is very small.

RTD (Ready To Drink) Teas
RTD tea has positive and negatives factors in export market. Percentage of tea in RTD is very small and therefore higher volumes of water have to be exported. When cost of transport becomes a limiting factor, the demand for RTD produced in a developing country situated far away from the importing country will fade away. However if RDT can substitute popular carbonated drinks in the market based on awareness of the beneficial heath factors, the RTD will soon become a popular market product.

Quality requirements
Assurance of quality is a form of value addition to tea, which guarantees production quality & safety standards to consumers. Monitoring such procedures in tea production when forced to be adhered to with food hygiene and other quality parameters, afford assurance of food safety to consumers in the developed countries.

EU customers are looking for reliable suppliers who can supply them on a regular basis, at a good price with consistency in quality. Developing country exporters must therefore be able to supply at a constant level of quality and according to agreed specifications.

Another factor is the traceability of origin that makes it possible to track and trace the product throughout the production chain. This entails heavy registration, monitoring and controlled processes.

Although not a direct and obligatory standard for producers of good ingredients, exporters must be aware of the fact that, in the field of processed food, ISO 9000 is strongly increasing in importance in Europe. Of great importance also is the Hazard Analysis Critical Control Point (HACCP) system, applicable to companies that process, treat, pack, transport distribute of trade foodstuffs. Based on the EU directive 93/43/EC, it also applies to foreign suppliers since January 2006. Hygiene requirements based on an HACCP system are also legally binding for products from outside the EU.

This is now leading to a combined system certification that leads to ISO 22000.

Farmers (primary producers) are not obliged to implement and certify for HACCP system, although they are encouraged to do so with good agricultural practices. (CBI publication May 2007)

However, HACCP & ISO 9000 will become a necessity in the future since tea has been announced as a food commodity since 1995. Having systems such as GMP, GAP and TQM in place, tea has better demand and competitive advantage in the world market, until it becomes a regulatory requirement. These quality standards will also help to penetrate the tea market in Japan without any regulatory barriers stipulated on quality requirements. A strong foundation should be laid by Sri Lanka Tea Board to support and to guide tea producers in Sri Lanka to reach the needy quality requirements, by introducing Ceylon Quality Certificate (CQC), for the long term sustainability of our tea industry.

Quality of Sri Lankan tea must cover the limited levels of non-allowed substances in food. Sooner or later countries in the European Commission including Russia will follow MRL (Maximum Residue Limits) and other food regulations stipulated by EU. This trend will be followed by other tea importing countries soon. Therefore application of chemicals on tea plantations and on small farms has to be done with special care.

Innovative technologies are most essential than ever to introduce new type of teas for the special niche markets. There is a greater demand for such teas. Consumers select alternative teas such as Rooibos, Honeybos and other herbal teas that do not have the presence of caffeine.

Consumers are becoming more and more health conscious and that message has to be understood as a sure sign for future direction. Price is no barrier for exclusive and innovative teas in the global specialty tea market.

Value addition along with satisfying future quality requirements have become good future investment for tea companies and will be the key factor for accessing the ever growing special and higher segment of the rich tea consuming world.

(The writer is Sri Lanka’s biggest exporter of organic tea).


Top to the page

Reproduction of articles permitted when used without any alterations to contents and the source.
© Copyright 2007 | Wijeya Newspapers Ltd.Colombo. Sri Lanka. All Rights Reserved.