Tea Industry Divided Over Importing Tea For Blending

• “Will Destroy The Industry” Dilmah Boss

By Dinouk Colombage

Sri Lanka’s globally recognised tea industry has been hit by a major controversy with the industry divided over a proposal by the Tea Exporters Association to import cheap tea for blending with local tea.
Merrill Fernando, former chairman of the Tea Council of Sri Lanka and founder of Dilmah Tea, strongly opposed this move claiming it would result in a loss of sales and the eventual downfall of the industry.
In a letter addressed to Fernando, the then Chairman of the Tea Council, in August 2011, Niraj de Mel, Acting Chairman of the Tea Exporters Association, outlined the proposal to import cheaper tea to Sri Lanka.
De Mel, in his letter, said that if Sri Lanka wishes to push forward with its tea industry they must place a greater emphasis on bulk rather than value. He explained that Sri Lanka’s main markets, Russia, Dubai, Iran and the Ukraine, are packing the tea themselves, and it would be better for Sri Lanka to increase the export levels of tea.
De Mel further argued in his letter that countries such as Dubai are now seeing an increased number of tea packers in their country. He said that this poses two risks to Sri Lanka; it will offer the tea market an alternative to Sri Lankan tea as well as attracting the clientele away from packing in SriLanka. He stated that in order to avoid such an issue, Sri Lanka must move to sell tea at a more affordable price which can be achieved through the blending of tea which would reduce the production costs and allow a more competitive price range.
Speaking to The Sunday Leader Merrill Fernando disputed the projected earnings laid out by the Tea Exporters Association (TEA). According to TEA the country can increase its exports from 330 million kilograms at earnings of Rs. 194.6 billion to 450 million kilograms earning Rs. 648.7 billion.
According to Fernando such figures could not be achieved with their proposal as the tea exports would have to be sold at an average of Rs. 1,427 per kilogram, which is an increase of over Rs. 500 from the current Rs. 908 per kilogram.
Fernando rubbished the projections stating that it would not be possible to sell Ceylon Tea at a higher price with cheaper teas mixed in.
Fernando drew further attention to the dangers of such a proposal stating that, “in the near future thequality of Ceylon Tea will continue to diminish if we blend it with imported tea. Eventually Sri Lanka’s tea industry will be non-existent.”
Fernando instead suggested that Sri Lanka continues to export its tea the same way it has without blending it with low quality imported tea. “Despite Ceylon Tea being in the highest price bracket in the world market, it continues to sell at high levels. Furthermore India, China and Bangladesh are withdrawing from the international tea market due to the growing demand in their local markets.
This will leave Sri Lanka and Kenya as the two main suppliers on the world stage, the country will be set for a boom in the industry,” he explained.
Fernando expressed his belief that Sri Lanka can increase its output if the government will assist with subsidies. With many of the small plantation holders complaining that the current quality of the crops are below standard the government must step in and assist them to improve the quality. “Many small holders are not keen on replanting the land as it would mean that for over a year they would have no income. The government should step in and assist them,” he said.
Lal Premanath, head of the Federation of the Tea Small Holders’ Association, confirmed that this was their prime concern. “If the plantation owners are provided with government support they would be willing to replant their crops; it stands to reason as they would earn more from higher yielding plants,” he said.
TEA’s concern that lower prices in the tea market would reduce the sales of Ceylon Tea appears to be misplaced. The last four years, dating back to 2008, Sri Lanka has continually earned in excess of Rs. 129.7 billion. However, despite these stable sales figures TEA is arguing that cheaper options would affect the sale of Ceylon Tea.
The wine industry is an example of quality topping quantity. Despite Australia, New Zealand and America entering the wine market, France continues to dominate the stage whilst maintaining its high prices; the secret being improved quality.
Fernando and Premanath both expressed their belief that if Sri Lanka continues to improve the quality of tea, exports will continue to be high. Fernando added that Sri Lanka must now look to create its own brand names and sell its tea on the international market. “There is no issue with increasing our output, however, unless we market ourselves on the international stage the export levels could drop,” he said.
In a letter to Minister of Plantation Industries, Mahinda Samarasinghe, Fernando pointed out that both the Planters’ Association of Ceylon and the Sri Lanka Federation of Tea Small Holdings Development Societies had expressed opposition to TEA’s proposal.
However, no major tea export company wished to comment when contacted on a situation that could prove to be detrimental to the tea industry in the country.