Interview with Jayampathy Molligoda Chairman, Sri Lanka Tea Board
Tea is not just a commodity but a culture of Sri Lanka. To discuss about this very factor, Lanka Courier visited the office of Mr Jayampathy Molligoda, Chairman, Sri Lanka Tea Board. He is former Deputy Chairman of Bogawantalawa Tea Estates PLC, has been appointed as the Chairman of the Sri Lanka Tea Board in 2019. Following are the excerpts of the interview;
Q. Tell us about the brand, Ceylon tea. How it came to be and the evolution of the brand?
A. Tea is a beverage, so when you try to market Ceylon Tea, ideally, it has to be in the form of a brand. The issue here is, in the global market there are many countries marketing different brands of teas.
In the global beverage market, we are a niche player. Kenya produces some 570 million kilograms (kg) a year compared to Sri Lanka’s which is less than 300 million kg. In 2020 we only produced 287 million as there was a drought in the tea growing estates during the earlier part of the year. Although Sri Lanka produces some 300 Million kilos annually, countries like Kenya produces 570 million kg of black tea known as CTC.
Hence Ceylon tea has to be marketed in a way that shows that it is orthodox and different to green tea as well as CTC black tea. With regards to Green tea, China, Japan and Taiwan are leaders in producing and marketing. Globally the tea production is more than 6,000 million kilos, when compared with this, our production is very small.
We are focusing on our marketing efforts on this niche orthodox black tea as well as our sustainability credentials. Our tea priceis the highest at auction level, because of the perceived quality of the Ceylon Orthodox Black tea. So how do you market and sustain our marketing effort in a way that we get a premium? The only way is to differentiate Ceylon Orthodox Black tea from the others. From there or how do you add value? We should be proud of our locally owned brands and we add value according to Sri Lanka Tea Board definition where less than 3 kg packs are considered as consumer packs. Sri Lanka adds value to Ceylon Tea to the tune of 40percent. In our 270 million roughly, 40 percent consists of value addition in the form of flavors and infusions. Although our exportable tea quantity is less than the Kenyan tea exports, Sri Lankan foreign exchange earnings are higher than that of Kenya, because of our value addition component in the teas.
At the same time marketing trends are fast changing, so then it’s the question of how do you promote while catering to the discerning consumer? Ceylon Tea brand image originated from the unique characteristics & quality of high grown teas but over the last 30-40 years, tea growing has spreaded down south. Tea from in southern areas, Galle, Matara, Deniyaya, Akuressa is much sought after by Middle Eastern buyers. That is the beauty of the Ceylon Tea where you have the high, mild and low grown types which appeal to various markets. Talawakalle, Nuwara Eliya, Bogawantalawa, Malwatte Valleyagro climatic regions and few garden marks such as Somerset, Pedro, Norwoodare where you get the best of the high grown tea. Hence, we need to look after the supply chain including small holders and even estate workers. To this end we have a Tea control Act of 1957 and Tea Board law of 1975 where there is a reasonable price payable to small holders, based on the prices fetched at tea auctions by the respective tea factories, which is unlike other countries. We are second in value only next to China. Contrary to countries like Kenya which produces more, we are higher in value, due to price, quality of our orthodox black tea and exporters have been able to add value.
Q. Who are our main competitors? And what are our challenges?
A. When you talk about competition, most of the conversation is some what production oriented, so Kenya, India, China can be considered our main competitors. But I personally prefer not to consider China because they are best at Green Tea and even in Kenya, they produce CTC Black Tea. Similarly, if you look at the entire beverage market, we also need to compete with players like Coca Cola and other brands. Tea is only second to water and falls into the hot and cold brew and in that, we have to compete with coffee which covers a huge chunk of the market. We lost the UK market to Kenya, because UK consumers mostly use tea bags but still in high end market, many prefer Ceylon Tea.
The other step demonstrating our credentials, to which we pay the highest salaries. We look after our workers and small holders including their welfare. Environmentally sustainability is also maintained with our other efforts to reduce carbon emissions etc. At present we are promoting solar powered panels at our factories for which the Tea Board is subsidizing the interest component of the bank loans. These are some of the strategies we are using to promote tea in order to meet the challenges from our competitors.
Q. There is however some negativity associated with this tea…
A. Which is why we promote pesticide free tea but unfortunately in the growers it is difficult for them to curtail and manage weeds. Traditionally they had been using chemicals to assist. We employ an integrated weed management system where there’s very little chemical. Ideally a pesticide free tea is the way forward. The Tea Research Institute (TRI) has stipulated how much weedicides and pesticides can be used. When we allow pesticides there can be environmental impacts. In the case of Saudi Arabia they claim to have found a pesticide we never used, which could have been due to environmental contamination. It is unclear if it came from Sri Lanka. They had collected it from their supermarkets and logistics centre. We asked if its pure Ceylon tea label which means it is packaged here and we need to take responsibility. But that too has not been clarified. At which point how do we know if any unscrupulous dealers packaged multi-origin teas as Ceylon tea.
The lion logo is registered in nearly 100 countries. Ceylon Tea is even more difficult because for instance in EU countries, it is required that Ceylon Tea be registered under geographical indications rather than the traditional certifications. We have signed a Memorandum of Cooperation with Sri Lanka Atomic Energy Board to differentiate Ceylon Tea to identify inherent characteristics and the reputation inherited from the good old days.
Q. Do we have technical facilities to differentiate unique quality?
A. TRI does not have, which is why we were struggling earlier. We came to know the only scientific way to differentiate Ceylon Tea is using ‘stable Isotope technique’ which is available at Atomic Energy Authority. It is akin to a fingerprint. Technologies Isotope is how it is acquired. In the past, we could not prove how Ceylon Tea is differentiated from the others. We also got eminent tea tasters to do sample tasting of multi origin teas along with Ceylon teas and we developed a scheme to detect through the five senses. However, that alone is not acceptable internationally as it is subjective.
As for quality improvements to the Ceylon teas, a lot of things are happening, including minimizing unnecessary impurities and detecting the addition of foreign matters to tea manufacture. We have converted our outcry auction system to a digitalized system. Presently all auctions are done electronically with over 200 buyers representing exporters at the auction. There are about 11500 to 12000 catalogue teas weekly. Last year, the Colombo auction average price has gone up from Rs545 in 2019 to Rs. 627/= per kilo, an increase of Rs.82 per kilo of tea. During the first two months of this year, the auction price has further increased up to Rs. 645/=per kilo of tea. In fact, Sri Lankan fob price of tea has gone up to Rs. 932/= per kilo during the first two months of 2021 from Rs 823/= per kilo, which is Rs 109/= increase, compared to corresponding period last year. Despite all this the success depends on the exporter’s ability to find new markets, competing with other beverage players, ranging from coca cola to other branded tea. Including regaining lost markets that have now become accustomed to CTC tea. We lost Egypt when they entered into a free trade agreement with Kenya. If you look at Turkey, bulk tea is going through the port where they charge145 percent duty. The larger the market the more difficult since the duty is higher. Still for all, the Ceylon Tea fetches USD 1 more per kilo than other origin teas at auction level,due to our unique characteristics and quality parameters.
Q. I have noticed when you travel to countries like China and India, there’s a tea culture where even when you visit a restaurant you are offered their brand of tea. This tea culture, unfortunately, we don’t have in our local market.
A. This is a valid point in promoting Ceylon Tea using our own culture. We did something similar to other tea ceremonies when the tourism industry was impacted, we had tourism bubbles and when we had Ukraine and Kazakhstan tourists, we arranged for them Ceylon Tea ceremony upon their arrival. In Sri Lanka tea is a way of life but it is inherited from the Colonial powers. What we are planning to do under Ceylon Tea promotion is that we need to have a nation brand visibility. Tea is being marketed as a traded product by the traders. While we are proud of our own exporters, in the global market tea is a beverage.
We have two cabinet appointed tender committees and have submitted cabinet papers focusing on 10 nations which has key opinion leaders, who will be appointed to promote Ceylon Tea. We also have own promotional campaigns schemes, pending cabinet approval which gives the producer the opportunity to promote without having to wait three years.
We also encourage them to pursue online and offline trade fairs. We are confident that by October this year, we can have a presence in Dubai.
At the same time there is a wellness factor associated with Ceylon Tea. Now with COVID-19 we are hyping up on inconclusive evidence of immunity boosters. I see a slight improvement in the younger generation for pure Ceylon Tea. People tend to accept natural beverages and the purity of Ceylon Tea plays a huge role. We are going ahead with the global campaign not on cost but wellness factors, the authenticity associated with sustainability. This is why we also encourage traders to pay extra money to the workers. There is a debate about the Rs.1000 wage, rather than saying we can’t afford it, we must say that with every cup they are paying an extra to the workers. The younger generation does not want to make the multinationals richer but that their contribution has had a far reaching impact.
Another important factor is, the rainforest alliance where environmental factors are considered. It is good to see that most of our local companies are RA certified.
Q. My final question is about the workers’ wages and shortage of workers, how do we come out of this situation?
A. Your question gives the answer as well. When we ask industry players, especially the RPCs,they say they are not happy with the Rs.1000 increase, and when labour shortage infers to the issue with the price you pay to the employee. So this wage of Rs.750 may not be enough to attract workers. We suggested to consider paying an attendance incentive which the unions and RPCs initially didn’t agree to. With all due respect to the industry players, I have advised that if there is a labour shortage we need to incentivize. The problem with piece rate vs daily rate, you need to have stringent quality measures. The quality may drop. Traditionally the workers need a livable wage as well, ethical partnership finds that living wage must be given, if you cannot migrate into productivity linked wages at once. It will get reflected in supplying bad leaf. You need to come up with some king of a ‘motivation factor’, so I reckon with the little wage increase they will come back to work to maintain additional plucking round, which in turn will improve standard of leaf. It is a balancing act. It is true that the companies (RPCs)were making losses but as per CSE filing of financials for the last year, 2020 they had made profits. They need to look after the workers and only then workers will work hard and contribute to the performance of the estates.