Debate on importation of lower cost tea
The debate on importation of lower cost tea has seen some theoreticians weighing in with their opinions. Rohantha Athukorala in his May 29 “Should SL take ‘tea hub’ route?” article in the FT claims that creating Pure Ceylon brands is close to impossible due to the cost and effort required. Hilmy Cader says the same thing in his FT article on the same day.
Having dismissed the premium, Ceylon brand strategy on grounds that it is beyond the capacity and budgets of Sri Lankan exporters, Rohantha proposes the import based “tea hub,” without any mention of how it will help Sri Lankan brands, which is the primary objective of the Tea Exporters Association proposal to import cheaper tea.
The fundamental point both Hilmy and Rohantha miss is that if marketers can’t create brands or develop existing ones further with Ceylon tea and its unique selling points, how an earth could they hope to do so with a cocktail of cheaper teas intended to sell on price?
What point of difference would Sri Lankan brands carrying foreign tea have over all the other cheap teas out there? The global brands would always sell cheaper with their massive economies of scale and promote heavily. And major brands in our existing markets are now packed in-market with tariff protection.
The glaring omission in these eminent opinions could be a genuine oversight or, more likely, ominous acceptance that we have to resign ourselves to be a mere packing centre for foreign brands using foreign tea, to the detriment of Ceylon Tea and Sri Lankan brands.
The only major industry where Sri Lanka has comparative advantage would then resemble the apparel trade at its infancy, when it was mocked for being a tailoring shop. Apparel has made giant strides since then and would soon have a local value added ratio exceeding the tea industry, if the imported tea proposal comes to pass.
The assertion that premium Ceylon tea brands are too tough to develop is contradicted by the many high end start-up brands created regularly in sophisticated consuming markets by entrepreneurs on a shoestring, funded only by passion. They initially sell online and in gourmet stores.
Retail chains are approached later when the brand has traction. These new niche brands take advantage of trends among more affluent consumers, fed up of poor quality mass-market brands, who hanker for artisanal brands with provenance. This is where Ceylon Tea needs to be pitched.
What resources did all the foreign brands that were created by Sri Lankan packers have when they started?
Sri Lankan exporters unfortunately limit engagement with sophisticated markets. Most of our tea goes to Russia and a handful of centrally planned economies. We will lose our place when they eventually liberalise their economies.
This proposal should never have seen the light of day. It is designed as a rescue package for exporters and not for the tea industry. The commentators referred to should exercise a degree of perception and bell the cat as to what really ails the industry.
Malik J. Fernando
