Facing competition in the tea cup

Sri Lankan tea is facing increased competition form other tea producing countries with lower costs of production and younger plantations. Emerging tea producing countries are also testing the waters for stronger brand building and marketing.

Indonesia, Argentina, Malawi, Tanzania, though not new to the tea trade are steeling a march over Sri Lanka on price, with some of the teas posing a serious threat to Sri Lanka’s low grown sector.

Industry watchers say teas produced in Vietnam in particular is making its way into some of Sri Lanka’s traditional markets with teas similar to the local low growns, but at low price.

Other countries meanwhile are stepping up efforts to add value to their teas in the hope of international success, with Nepal the latest in the fray.

Industry watchers say virtually unknown to the World until the early 1990s, Nepalese teas is as old as the Darjeeling teas and older than Sri Lanka’s plantations.

Efforts however now under way to brand and create a niche for the Himalayan nation’s brew.

The private sector has literally taken over promoting the Nepal Tea brand to the international market, with the Himalayan tea producers also looking at venturing into organic tea production to cater to emerging trends in the consumer end.

Nepal is reportedly also looking at increasing its 17 percent orthodox tea production.

Tea Board Chairman Niraj de Mel says despite Sri Lankan strengths in the Orthodox tea segment, the island could loss market share as more international tea packers opt to curtail production costs – with tea buying prices a key factor.

De Mel says soaring oil and energy prices, high labour costs, labour migration, insufficient and ill planned replanting and restricted areas of research are among key concern hindering the industry.

Industry officials say local tea firms should also focus on increase value added exports, which over the last two years has dropped from about half of Sri Lanka’s tea exports to the 30 percent levels.

Value addition offers higher margins against bulk exports, giving tea producers enough leeway to create reserves and plough back profits for replanting and upgrading manufacturing facilities.

According to the UN’s Food and Agriculture Organisation meanwhile, world tea exports increased by 4.4 percent in 2004 to reach 1.47 million tonnes, as shipments from all major exporting countries increased during the year.

World net tea imports also continued to increase in 2004, by 1.5 percent, reaching 1.42 million tonnes.

The FAO said the trend reflected the increases in traditional developed country markets of the European Community (up 2.4 percent to 215 000 tonnes), the United States (5.3 percent to 99 000 tonnes) and Japan (2 percent 56,000).

Most of the growth in these markets is reportedly in response to promotional efforts on the health benefits of tea consumption.

Available evidence from medical research suggests that moderate consumption of tea offers protection against heart and blood vessel disease, some cancers, and bacterial infections, says the FAO.

Sri Lanka Tea Exports Prime Destinations ~
To End July 2005
Countries Bulk Packeted Bags *Other 2005 2004
Kg/Mn
RUSSIA /CIS 21.92 8.55 2.32 5.85 38.65 42.75
U.A.E 10.21 5.06 0.42 1.78 17.49 17.12
SYRIA 12.01 4.12 0.46 0.07 16.67 16.20
IRAN 11.18 2.76 0.02 0.31 14.28 9.49
TURKEY 5.11 2.79 0.14 1.97 10.02 14.38
JORDAN 0.69 5.29 0.63 0.02 6.63 8.10
S.ARABIA 3.25 1.74 0.36 0.05 5.42 5.69
JAPAN 4.26 0.64 0.36 0.22 4.91 4.93
LIBIYA 4.78 0.05 0.03 4.86 1.58
CHILE 4.56 0.18 0.03 0.03 4.65 3.77
FINLAND 4.19 0.09 0.18 0.02 4.42 6.03
TUNISIA 3.39 3.39 4.05
OTHERS 18.02 9.42 4.89 3.89 36.24 38.48
Total 98.84 44.64 9.91 14.29 167.70 172.61

Source : Tea Board

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