Sunday Times Editorial

Tea losing its flavour 

Sunday 29th November 2015

‘Ceylon Tea’ — that world famous trademark — had all but lost its brand name and goodwill, to later arrivals; now, the tea industry itself is in the doldrums. Not for the first time, the Plantation Industries Ministry has had to go, hat in hand to the Government, seeking a handout to keep the smallholders and other producers from sinking under the weight of increased Cost-of-Production (COP) and falling prices. The gap had to be bridged by a subsidy from an already cash-strapped Treasury. The Government had no alternative this week but to infuse a billion rupees to keep the tea industry from total collapse.

This will mean that the wheels of the industry will not grind to an immediate halt, as prophesied by many. Contrary to a widely held misconception, it is the smallholders — not the big plantation companies — that produce the bulk of Sri Lanka’s teas. There are more than 400,000 small holders island-wide impacting on the livelihoods of nearly two million people.

Statistically, tea no longer holds the slot as the country’s top foreign exchange earner, having long been displaced by the US$ 7 billion (Rs. 986 billion) sent by Lankan workers overseas. Beaten also by the foreign exchange generated from garment exports, tea comes third with US$ 1.6 billion earned in 2014 (Rs. 225 billion) only ahead of other industrial exports, like rubber products. Yet, the tea industry remains an integral part of the Sri Lankan psyche – and our economy. It is world famous. Till recently it was tea, tourism and terrorism that the country was known for. Now terrorism is behind us, will tea follow suit?

Falling prices are not entirely due to domestic reasons such as high COP (as a result of labour and electricity costs). World politics — the civil war in Ukraine, the devaluation of the Russian currency and the turmoil in West Asia have hit once lucrative markets in Syria and Iraq, as well as sanctions in Iran (despite tea being classified as “food” and therefore exempt, banks remain wary of opening Letters of Credit for commercial purposes with Iran).

Domestic mismanagement, however, is indeed partly to blame. When the new Government promised an ill-advised subsidy by way of a guaranteed price to win votes following the January presidential election, it found to its horror that during its 100-day programme, the entire scheme backfired. Voting patterns at the August parliamentary elections showed tea growing electorates voted against the Yahapalana Government. The whole guaranteed price scheme (of Rs. 80 per kilo) was riddled with corruption. Conditions were imposed by bureaucrats in Colombo counter to what was promised in the interim Budget, restrictions were placed on the beneficiaries and field officers were bribed by those in the business.

And so, Tuesday’s meeting with the Prime Minister was to reverse the scheme, have the Tea Board enter the tea auctions and buy tea to prop up the market. Banks have been asked to support a national cause and exporters to lend their stores for excess stocks in the hope of better times ahead.

To say the tea industry is in the doldrums is therefore possibly an under-statement. Sri Lanka has been slow to up the ante in an industry the colonial British left us. The value-added teas have been slow off the block. The answer lies in the production of specialty teas where even if quantities are small, rewards are high. High-end spenders hardly bargain over price. There’s room at the top, but Sri Lanka is still competing to be a mass market supplier and bulk supplies – not brand. We are building brands for others. There’s no new thinking. Business magnate Upali Wijewardene once wanted to buy into the multinational Liptons to reach its markets worldwide — why can’t Governments think on such lines? Meanwhile, no census has been conducted for years, data are outdated, tea auctions are yet to be computerised and we have commercial courts restricted by antiquated laws dampening exports.

Unlike in a modern commercial enterprise very little profit is put back for advertising, or for research and development. Tea promotions are done on shoe-string budgets. The Tea Research Institute produces PhD candidates, not practical advice to producers. “Precision agriculture” is not a term they are familiar with.

The French have their INAO now called the Institut national de l’origine et de la qualite, a public-private organisation under their Ministry of Agriculture. They are both regulator and friend, originally of the French wine industry and now of their cheese and meat industry as well, relentlessly pursuing their products in foreign markets and defending their appellation d’origine (trademarks) around the world. Today, hundreds of thousands of middle-class Chinese think it fashionable to drink French wine due to their marketing strategies. The Scots have their Scottish Whiskey Association that does likewise with their famous brand of ‘Scotch whiskey’. These are apex bodies with well-paid officers protecting and monitoring the interests of their well-known brand names. Is there one organisation that does the same for ‘Ceylon Tea’, at the very least, as a health drink in an increasingly health-conscious world?

On the contrary, Sri Lanka is acquiring a reputation for exporting rubbishy tea, and even our good teas are blended with inferior teas from other countries and sold as ‘Ceylon Tea’ with no countermeasures from this end to arrest this damaging trend. The popular lion logo on our teas is flagrantly exploited by third party countries and re-exported from their capitals to markets while we stand and stare. There have been tea councils and tea associations in the past and we have a Tea Board and a Tea Small Holder Development Authority all pulling in different directions. It would be wise for Lankan authorities to take a close look at the way the INAO and the Scots protect and market their brands overseas. Other countries, including the US, have taken a cue from them — why not Sri Lanka? The workings of the tea market must be a public-private joint enterprise not left to unscrupulous businessmen, political stooges appointed by Ministers to statutory boards, misfit officers or bungling bureaucrats.

The French INAO lobby its case at places like the WTO (World Trade Organisation) and WIPO (World Intellectual Property Organisation) and help develop rules and agreements that are justiciable in courts of law around the world. When has Sri Lanka done any of this to protect its once-proud teas? These are all public-private exercises that the Plantation Industries Ministry must coordinate and oversee. The allocation in the 2016 Budget to the Ministry is a meagre Rs. 7.8 billion – less than half a percent of the total Sri Lankan Budget; surely, step-motherly treatment to a goose that once laid the golden egg.

On November 5, it has been officially said, the Prime Minister will announce the Government’s Medium Term Economic Policy in Parliament. The plan needed to revive the faltering tea industry is a long-term one, but even so, it will be interesting to see if the tea industry figures in the Government’s equation, or not.