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Message: <blockquote data-quote="rocat90" data-source="post: 19929056" data-attributes="member: 452168">Tea should have a wider angle than a mere beverage     <img src="http://static.ft.lk/ftadmin/wp-content/uploads/2016/03/20204916/Untitled-269.jpg" alt="" class="fr-fic fr-dii fr-draggable " style="" />At  a panel discussion following an evening presentation organised by the  Institute of Certified Professional Managers or CPM in Colombo last  week, a questioner from the audience put an interesting poser to Anil  Cooke, CEO of Asia Siyaka, a leading tea brokering company in the city.      The questioner, apparently dismayed by the current gloomy situation  faced by the country’s tea industry, asked Cooke: “Why should I invest  in Sri Lanka’s tea plantations?” Cooke was quick to correct the  questioner before answering his question. He said: “Tea should not be  taken as a plantation crop or even an industry. It should be viewed as a  beverage. It faces all the problems which any beverage faces and its  salvation too lies in the salvation of beverages in a global sense.”      Cooke here has looked at tea from a wide angle, an angle which many  concerned about it normally miss out. However, Cooke’s wide angle can be  developed further into a wider angle. In that wider angle, tea is not  only a beverage, but also an essential ingredient for manufacturing  medicines, cosmetics and perfumes – three industries which are growing  faster than the growth of the global output.     Tea marketing in Sri Lanka is still where it was left by British planters      When tea is considered from this wider angle, it boils down to a  problem of long-term strategising, marketing, inventions and  innovations. It is in these four areas where Sri Lanka has failed.      The country, while boasting of producing the best tea in the world  called the ‘Ceylon Tea’ has not moved even a single step forward from  where the industry was left by British planters.      It has continued to grow tea, manufacture orthodox black tea and sell  to consumers in a selected number of countries either in the form of  ‘bulk tea’ or tea in ‘teabags’. Hence, when the market prices depress  due to oversupply, adverse regional political turmoil or global economic  recessions, the tea growers back at home are forced to undergo enormous  economic hardships.      If the period is long, many of them become bankrupt. This is  specifically true with low country tea smallholders who at present  produce about 65% of the country’s tea output. Their woes are then  capitalised by interested political parties which create a political  issue out of the economic issue faced by the country.     The vicious cycle of price fluctuations      The present situation in Sri Lanka is such an economic catastrophe. The  average tea price per kilo was $ 3.51 or Rs. 459 at end 2014. This has  now fallen to $ 2.80, according to the latest market reports. Despite  the depreciation of the Sri Lanka rupee from Rs. 130 per dollar to Rs.  145 per dollar between these two periods, the rupee earnings have been  just Rs. 407 per kilo, recording a fall of <img src="http://static.ft.lk/ftadmin/wp-content/uploads/2016/03/20204918/Untitled-359.jpg" alt="" class="fr-fic fr-dii fr-draggable " style="" />Rs. 52 or 11%. This price is pretty much below the estimated cost of production amounting to Rs. 434 per kg.      If the tea producers are to be elevated to the income level which they  had enjoyed at end 2014, the rupee has to depreciate to a level of Rs.  165 per dollar. However, given the increases in labour charges and other  expenses during this period, even this level of income support may not  be sufficient to sustain the tea growers.      Hence, the country has been embroiled in a vicious and expanding cycle  of price depression, cost increases, currency depreciation, political  capitalisation and further depression of prices. This vicious cycle and  political capitalisation do not allow the country to go for long-term  strategising for curing the ailments faced by the tea sector.     Rising costs in a background of low yields     Sri Lanka’s tea suffers from both the high cost of production and low  yields. No commodity can compete in the world market unless it reduces  its average cost. That reduction comes from increasing the yield  levels.      According to Food and Agricultural Organisation or FAO of United  Nations, Sri Lanka’s tea yield standing at 1532 kg per hectare is only  marginally higher than the world average of 1518 kg per hectare  (available at: <a href="http://www.factfish.com/statistic/tea%2C%20yield" target="_blank">http://www.factfish.com/statistic/tea, yield</a>).      Thus, Sri Lanka is ranked 26th position in terms of the global tea  yields. This has to be compared with high yield countries such as  Malaysia (with a yield of 6778 kg or Number one position), Kenya (2177  kg or 13th position) India (2143 kg or 14th position) or Tanzania (1573  kg or 24th position).      Accordingly, in a background of high costs and low yields, any fall in  the international price of tea will make Sri Lanka sick because it has  no back-up resources to go through the crisis. Since price changes occur  frequently in cycles, Sri Lanka’s tea industry, though it is the second  highest foreign exchange earner after garments, is driven to a high  level of vulnerability.      The need for raising industry earnings     Sri Lanka cannot increase its tea yield levels overnight. However, it  can increase industry earnings by diversifying its use. The  diversification can be in the beverage sector itself as a novel drink,  on one hand, and into non-beverage industry sector as an ingredient for  producing pharmaceuticals, cosmetics and perfumes, on the other. Both  require investments in better marketing and continued research and  development.      <img src="http://static.ft.lk/ftadmin/wp-content/uploads/2016/03/20204920/Untitled-438.jpg" alt="" class="fr-fic fr-dii fr-draggable " style="" />Britons popularising tea as a panacea for all illnesses </blockquote>

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