Middle East markets are moving away from Ceylon Tea and prefer more aggressively promoted and marketed international brand names, which use cheaper tea of a style of manufacture culturally alien to Arab palates, a concerned tea industry exporter has said.
But Merril J. Fernando, Chairman of Ceylon Tea Services – makers of Dilmah Tea -, noted that despite this weakness Ceylon Tea prices reached the higher ever levels in the year to March 31, 2010.
The company reported post tax profit of Rs 537 million, up from Rs 487.1million in the previous financial year. Sales turnover improved on the previous year by an increase of 11.6%.
Mr Fernando, who turned Sri Lanka’s tea industry upside down from a traditional bulk tea exporter to an increasingly, growing value-added seller, lamented about the weak marketing efforts of the country’s traditional export.
“Pitiful marketing inactivity on the part of our traders and the Sri Lanka Tea Board left the opportunity open for this effective intrusion into exclusive Ceylon tea markets. Our exports to Saudi Arabia, a prolific consumer of Ceylon tea previously, have declined from 11.4 million kilos in the year 2000 to 4.7 million kilos in 2009,” he said in the annual report.
The answer, he argues, is not to follow market leaders with blended tea and CTC manufactured tea, but to re-launch traditional grades of Pure Ceylon tea and market strongly. He cited the case of a very popular Pure Ceylon tea, packed and shipped from Sri Lanka under an importer-owned brand name, which dominated the Saudi Arabian market for several generations.
“Sadly for Sri Lanka, that brand name too is now blended with other origin teas and packed in Saudi Arabia. The Sri Lanka Tea Board invested several million dollars in advertising and promoting that foreign brand while being made aware that it will, sooner or later, become our biggest competitor in that country,” he said.
He said the company was extremely careful and considerate in applying provided incentives strictly towards the benefit of the tea industry and the country.
Dilmah has been rewarding the industry by advertising and promoting Ceylon Tea and helping create a positive impression of Sri Lanka over the past 22 years by investing US$ 8 to 12 million a year especially during the past 12 years.
If 10 other brand names were developed taking advantage of the incentives, Ceylon Tea would have again become a powerful force, he noted.
Mr Fernando said the industry needs a stable policy, direction and expertise if it is to play a significant role in the economy and urged the creation of a Tea Authority with full control over the industry, pursuing an astute 10 year plan. The need to rehabilitate the industry - via replanting, factory development, legislation against rampant abuses by some producers and exporters and to provide an incentive package funded largely by a Cess, targeted towards building fully Sri Lankan owned brand names, is a desperate need now.
The company paid a dividend of Rs. 30 per share for the year up from the previous year’s all time high payment by 20%.
The board comprised the Chairman, Deputy Chairman/CEO, four Executive Directors and two-Non Executives. The report said during the year total remuneration of the Executive Directors amounted to Rs. 57.4 million (earlier Rs 46.8 million) and Non ExecutiveDirectors amounted to Rs. 600,000 (earlier Rs. 182,500).
The directors are Merrill J. Fernando – Chairman, Himendra S. Ranaweera - Deputy Chairman/ CEO, Malik J. Fernando – Director/Operations, Dilhan C. Fernando – Director/Marketing, Ms.. Minette Perera – Director/ Finance, Roshan Tissaaratchy – Director/ Sales, and non executive directors: Rajan Asirwatham and G. E. Chitty.