TEA INDUSTRY
Senaka Alawattegama
THE CUPPA NEEDS SWEETENERS
Sri Lanka’s tea industry continues to face barriers on multiple fronts
Tea industry overview
Despite the pandemic, the industry remained a major foreign exchange earner, generating around US$ 1.4 billion.
Main challenge
The chemical and fertiliser ban in 2021 – under the former administration – drastically reduced annual production from 300 million kilogrammes to 250 million kilogrammes.
Post-ban landscape
Despite the ban being lifted, production only increased by about four percent last year.
Industry hurdles
A government mandated 70 percent wage increase by all tea producers has exacerbated the industry’s financial woes alongside the rising cost of fertiliser, packaging, transport and fuel.
Extreme weather
Tea production dropped by six percent between January and April compared to 2023, and 23.4 percent in comparison with 2021, in the wake of extreme weather events.
Room for optimism
Ceylon Tea’s unique global reputation ensures continuous demand.
Forward strategy
Managing the situation carefully is crucial to protecting the brand, which suffered during the fertiliser ban as it lost market share to competitors such as India and Kenya.
Importance of the tea industry
It’s one of Sri Lanka’s leading foreign exchange earners, supports approximately two million livelihoods and is a crucial segment of the global tea market.
Core strengths
Smallholders – who produce around 70 percent of total output – are vital to the industry.
Smallholder geography
These smallholders primarily operate in middle and lower elevations while regional plantation companies manage most high grown estates.
Distribution
Low grown tea is mainly exported to the Middle East while high grown tea is sold to markets such as Japan and the EU. Meanwhile, Uva tea attracts the Japanese and Chinese markets.
Innovation
Given the decline in available workers, many companies are moving towards mechanisation while maintaining the quality that Ceylon Tea is known for.
Emerging trends
The industry is also focussing on regenerative agriculture and sustainability, through the minimal use of chemicals and improving soil health.
Key markets
China and Japan have been identified as significant growth markets with potential also seen in the UK where market share has been lost but opportunities remain.
Global market
Tea is increasingly marketed as a health beverage, which contributes to its popularity despite competition from coffee.
Sustainability
Initiatives that revolve around sustainability are expected to boost the market.
Climate change
It threatens both tea production and quality – regions such as Nuwara Eliya are experiencing drastic changes.
Climate impact
The industry is adopting regenerative agriculture and climate smart practices to mitigate these impacts.
Growth barriers
Political interference hampers the tea industry’s ability to manage its affairs.
Overcoming barriers
Strategic plans have been made but haphazard government decisions hinder long-term investments, forcing the industry to focus on survival.
Solutions
Overcoming hurdles calls for a reduction in political interference, addressing climate influences and increasing productivity.
Quality perspective
Sri Lanka produces high quality tea for international markets through numerous certifications.
Certifications
Multiple ISO standards, and Rainforest Alliance, Ethical Tea Partnership and eco label certifications.
Fair trade certification
Though not widespread, fair trade certification provides a premium for producers – and this in turn benefits workers and communities.
Promoting sustainability
Sri Lanka is developing its sustainability code to assure the world of its commitment to good agricultural and manufacturing practices.
Future action
The industry must address political interference, climate change and productivity so that it can thrive.
Industry success
Professionals in the tea industry must be resilient, passionate about agriculture and capable of facing challenges.
Opportunities
Speciality teas offer substantial growth potential. Sri Lanka can develop this market by moving away from bulk tea to higher priced speciality and value added teas.
Industry vision
Continuous hard work, adaptability and commitment are essential for the future success of Sri Lanka’s tea industry.
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