Sri Lanka is an island that is famous globally for its Ceylon Tea. Many foreigners who do not know what Sri Lanka is and where it is, seem to be surprisingly familiar with Ceylon Tea, thanks to its unique taste, fragrance, and colour.  According to the Export Development Board (EDB), tea exports have grown to be the top agricultural export product in Sri Lanka’s export basket, which provides direct and indirect employment to nearly 1 million people while around 4% of the country’s land area is covered, amounting to nearly 203,000 hectares of tea plantations.  Even though Ceylon Tea has been playing a dominant role in the global platform for decades, countries that were way behind Sri Lanka in terms of exports are now significantly doing better than Sri Lanka in the export industry at the present day. For instance, Kenya. In order to analyse what went wrong in our Sri Lankan tea export industry, The Sunday Morning Business took the initiative to investigate the tea industry.    Production industry According to the Tea Exporters Association of Sri Lanka (TEA), the total production of tea for the period January-December 2020 totaled 278.5 million kgs. This seems a discouraging number as 300.1 million kgs of tea production was produced from January-December 2019, showing a decrease of 21.6 million kgs YOY.  One of the key factors that Sri Lanka has identified in its production industry is that planters have discovered the effect of various climate changes on overall tea production. The discovery has resulted in the manufacturing of an array of fine teas which, like wine, are unique to each agro-climatic district in Sri Lanka.  For instance, Ceylon tea flavour and quality vary with agro-climatic conditions and seasons. The prime regions are Nuwara Eliya, Dimbula, Uva, Uda Pussellawa, Kandy, Ruhuna, and Sabaragamuwa. As a matter of fact, you would notice tea plantations mainly in the central highlands and southern inland areas of the island, as they are grouped under these headings according to their elevations. In reference to the EDB, Sri Lanka continues to remain among the top five tea-producing countries in the world because Ceylon Tea is celebrated for its unique flavour, variety, and quality. “The country’s tea exports are governed by black tea and are yet to exploit the rising global demand for green tea, organic tea versions, and herbal and fruit infusions to the fullest. Although China, India, and Kenya are the largest tea exporters based on volume, Sri Lanka is the third largest tea exporter by USD (US dollar) value, exporting $ 1.4 billion worth of Ceylon Tea to the world,” the EDB noted.   Export platform   Speaking to The Sunday Morning Business, Sri Lanka Tea Board (SLTB) Director – Promotion (Overseas and Local) Pavithri Peiris stated that the expected export target for the year 2021 is a total volume of 295 - 300 million kg.  This target has been set after a decline of 27.0 million kgs in exports, in comparison to 2019 and 2020.  With reference to data produced by TEA, tea exports for the period from January-December 2020 totalled 265.5 million kgs, in comparison to 292.6 million kgs in January-December 2019. “When analysing the exports category-wise, exports in all segments, ie. bulk tea, tea in packets, tea in bags, green tea, and instant tea, have declined in 2020. Revenue of Rs. 230.1 billion realised from tea exports for January-December 2020 shows a decline of Rs. 10.4 billion in comparison to the previous best of Rs. 240.6 billion in 2019,” TEA noted.  Subsequently, the total Free-On-Board Price (FOB) value for January-December 2020 of Rs. 866.70 (USD 4.71) has shown a growth of Rs. 44.45 (USD 0.09) per kg vis-à-vis Rs. 822.25 (USD 4.62) of January-December 2019, thus recording the highest ever FOB value surpassing the previous best which was during the corresponding period of 2019. One of the key factors of Sri Lanka exports that play a major role in the international borders is that almost 93% of Ceylon Tea produced annually is produced according to artisanal and orthodox methods compared to the crush, tear, curl (CTC) method practised worldwide. “At present, a larger portion of the country’s tea is exported as Ceylon Black Tea, and along with Ceylon White Tea, namely silver and golden tips, is celebrated around the world for their finest flavour,” an EDB statement added.    SL’s performance in comparison to competitors As mentioned above, yes Sri Lankan tea export has been in the industry for decades, and yes exporters are trying to their fullest capacity to increase the production capacity to cater for the international demands, but what we need to question is, why a country which performed so well earlier got beaten by other international companies such as Kenya.  Responding to the following question, Peiris stated that China and Kenya have overtaken Sri Lanka only in terms of producing larger volumes. For instance, Kenya is producing CTC and China is producing green tea in comparison to the main production of orthodox tea in Sri Lanka.  “Sri Lanka is a small island, and limitation of the land capacity is the main restriction to expand the tea growing areas,” she added.  Further, speaking to us, Tea Exporters Association Chairman Jayantha Karunaratne also stated that Kenya has only overtaken Sri Lanka as they have a comparatively bigger plantation area to produce tea.  “Over time, they have increased their crop figures by about 500 million kilos, hence resulting in their productivity being much higher than in Sri Lanka,” Karunaratne added.  Excluding Sri Lanka having serious limitations of land area issues, there are several other factors that limit Sri Lanka’s capacity in terms of expanding the number of production units. With reference to the EDB tea report published in 2019, there are more than five key reasons as to why the factors of supply are limited in Sri Lanka.  They are namely: “Different weather patterns affecting tea production, impurities in bulk tea when processing, lack of infrastructure especially in plantations, inadequate researches, high-interest rates, labour issues (Fewer plantation pluckers), high cost of investments for new technology, high cost of production and also the high cost of labour, packaging, transport, freight, electricity etc.”    Obstacles  When inquired about the possible challenges currently faced by the tea industry, Peiris stated that at the very moment, the challenges will depend on the economic environment in international countries. However, the prevailing Covid-19 situation can be a problem, she stated. “For example, if a few workers at one or two/three companies get infected with Covid-19, we would have to halt their operations, and that type of decline is possible.” In relation to this, Peiris said the SLTB has advised the exporters to not take a large number of the workforce at once for an operation. “We advised to operate them on a roaster basis by separating the segments and calling that particular segment at the individual level. We have already discussed this type of strategy with the exporters and they are practicing it,” Peiris added.  Now, what are the internal and external challenges the tea industry face at the present moment excluding the Covid-19 pandemic? Commenting in this regard, Peiris stated that one of the key issues in terms of external factors is the tariff and non-tariff barriers for exporting tea to other countries whilst the internal issue was the high cost of production and constant climatic change. As a solution to these issues, Karunaratne stated that industries in Sri Lanka should internally increase tea productions and also maintain good quality tea production while externally promoting Ceylon Tea in the international market by competing with the international brands.  “We want to achieve at least $ 3 million export turnover in the next five years, if certain obstacles are removed, we can expect $ 5 million turnovers,” he added.    The bright side The Sri Lankan tea industry has always maintained its highest quality standard in the world market during all times because of the strength of production in Sri Lanka. According to the EDB report published in December 2019, there are several significant strengths that serve the industry to export quality standard products for over decades. The strengths of the industry are namely “to do with diverse climatic conditions, less but also skilled and affective labour, unique characteristics in the production such as flavor, colour, etc, use of high technology for processing, value addition, and traceability, and the maintenance of the quality standards (SLSI, HACCP, GAP, GMP, EU Standards, Organic, ISO 22000)”.  With reference to this subject, Peiris said in terms of comparing 2020 and 2021, the Covid-19 pandemic in 2020 benefitted the tea industry, as most advertising campaigns highlighted the importance of drinking hot tea as a precautionary measure to combat the virus.  “This is why we got a good demand for Ceylon Tea during the pandemic”.  Alongside this pandemic, a media campaign was launched in 12 countries to promote Ceylon Tea in December 2020 with the intention of expecting more demand and more exports during this year. “Considering the pandemic situation, promotional activities were limited to the social and digital platforms only,” Peiris added.  Accordingly, the countries in which campaigns are conducted right now are Russia, Ukraine, the US, Chile, Germany, Australia, Japan, China, Turkey, Iran, Saudi Arabia, and the UAE, on specialised focused platforms such as Facebook, Instagram, and YouTube.  Adding to this subject, Karunaratne mentioned that the tea export promotional campaign which is currently in progress is a little slow. “With the changes in the international market, we need to keep reviewing our strategies,” he noted.    Conclusion  With the continuity of Sri Lankan tea exports being approximately 50% of tea in value-added form, conducting the Colombo Tea Auction, utilising improved technologies on commercial cultivation, using well established road-rail networks and highways, employing skilled labour, and all the other available resources will result in nothing but being one of the best export countries in the global platform.  Giving the concluding remark, Karunaratne stated that it is essential that commitment from all stakeholders and regulators is required to have a consistent policy in order to increase the turnover and achieve required targets for volume and value addition whilst also maintaining its reputation in the international market.