The call by a foreign businessman for Ceylon Tea to be marketed as a premium, upscale brand echoed across a Colombo hotel ballroom last week. That however was nothing new and in essence is a plea that has gone on well over two decades, led by Merril J. Fernando, Sri Lanka’s top tea entrepreneur who carved [...]

The Sunday Times Sri Lanka

Warning bells for a 150-year old product – Comment


The call by a foreign businessman for Ceylon Tea to be marketed as a premium, upscale brand echoed across a Colombo hotel ballroom last week. That however was nothing new and in essence is a plea that has gone on well over two decades, led by Merril J. Fernando, Sri Lanka’s top tea entrepreneur who carved out an exclusive Ceylon Tea brand across the world through Dilmah Tea.

While Calamandar Group Singapore Chairman Roman Scott’s comments as guest speaker at the AGM of the Tea Exporters Association on Ceylon Tea going upmarket struck a chord among many invitees at the event as a business opportunity lost, the call coming from a fresh face in the sector should stimulate interest, discussion and a carry-forward of Merril’s campaign for an undiluted Ceylon Tea brand.

Sri Lanka must move out of the mass market syndrome, produce premium brands at higher prices, secure more foreign exchange and with higher prices spur the creation of a new production model. While the industry prepares to celebrate a landmark event in 2016 – 150 years of tea in Sri Lanka (then Ceylon) -, it is confronted with daunting problems of rising costs, an unattractive labour force and accumulating debt. The shift to Pure Ceylon Tea from blended Ceylon Tea, marketed by the biggest labels in the world, could be the way forward and needs to be addressed by the Prime Minister, the Plantations Minister, the Tea Board and the industry as a very critical economic issue.

Over the past few months Regional Plantation Companies, represented by the Planters Association (PA), have been valiantly trying to sell a productivity-linked plan against the wage-linked tea model to workers via powerful unions. Even if the workers are willing to accept this model (probably the only solution towards getting out of the red) the unions are not buying into the deal (fearing among other issues that they could lose their clout). Hence the to-and-fro confrontation drags on.

The period of elections has also led to protracted negotiations this year over the renewal of a 2-year collective agreement between unions and plantations which should have been finalized in mid 2015. Raising these concerns, PA Chairman Roshan Rajadurai told the association’s AGM last week that under the present wages model pluckers in Sri Lanka average only 18 kg per hour whereas their counterparts in India and Kenya pick 30 kg and 48 kg per hour, respectively. A productivity linked model built on part wages-part productivity will help workers earn more and that “it is senseless for the labour unions to oppose this move”.

Apart from rising wages against low tea prices, the industry has also seen demand sharply drop from West East with oil prices sliding (higher oil prices means more money for West Asian residents) and Russia, the country’s two main markets, where the rouble has tumbled.

Calamandar’s Scot says oil prices are unlikely to pick up in the next five years in West Asia and that the tea market is unlikely to grow, another reason why the shift to upscale markets should be vigorously addressed. He is placing his bets on Ceylon Tea attracting higher prices in markets like the US, UK and Germany, which must be coupled with attractive promotion campaigns and imaginative packaging.

Another winner in today’s world of ethical marketing is for right messages on tea labels reflecting care and concern for the worker (fair trade concept) and proper quality, health and safety standards in the field-to-shelf process. Tea has slipped a few places as the country’s biggest exporter and is now behind garments, migrant remittances and being swiftly challenged by tourism which has made great strides since the end of the conflict in 2009.

However unlike any other sector, tea is more than a brand. It is more than just a factory floor, more than just hitting the hammer to signal a pricing deal at the Colombo auction. It’s an industry that is steeped in history, culture, heritage, it’s about people and a 150-year old labour force (which unfortunately doesn’t attract labour as it once did) and a boon to eco tourism if the cards are played right.
While there is a vibrant debate about the viability of agriculture particularly rice, tea and rubber are still more important to the economy (not entirely in terms of revenue earners) than garments and tourism which have large import costs.

The effectiveness of running a coordinated campaign at overseas trade fairs and road-shows to promote key exports, tourism and also investment (putting all the eggs in one basket in this instance) needs to be seriously considered given the budget constraints that Sri Lanka faces at the moment to be running separate overseas promotion campaigns.

Attempts to bring all these sectors together in the past few years have not succeeded not only due to weak and poorly-thought strategies but also owing to ego trips by some officials who are more concerned about their own image than the country’s development.

Fresh efforts steered by senior business professionals under the direction of the Prime Minister are underway to prepare a master plan for a joint marketing campaign of all these sectors. This team should also consult professionals and officials in all the connected sectors in an all-sides-have-spoken approach to prepare a right-fit strategy. In plantations, diversification that plantation companies were encouraged to undertake when the estates were first privatized in the 1990s must be revisited with proper state facilitation. Political interference has thwarted any efforts by plantations to develop new products and make this sector viable. This issue also needs serious review by the Government.

A strategic marketing campaign that would also incentivise companies to produce Pure Ceylon Tea brands, a new tea production model and freedom to diversify to make estates economically sound, would be the best news possible for the sector’s historic150th anniversary.

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