Sri Lanka’s tea industry performed well in 2021 earning 1.3 billion U.S. dollars despite lower yields and higher costs of production.
Chairman of the Sri Lanka Tea Board, Jayampathy Molligoda says that Sri Lanka earned approximately 1.3 billion U.S. dollars from the export of 288 million kilos of tea in 2021.
In a press release, Molligoda said the cost of production of Sri Lankan tea is among the highest in the global market and tea production peaked in 2013 and has declined since then. He said auction prices in Kenya and India are cheaper than in Colombo.
He said Sri Lanka needs to ‘focus more on the front end of the value chain’ by marketing the clean, sustainable and wellness aspects of Ceylon Tea.
It said, “The total export quantity is 288 million kilos. During the year 2020, the export revenue was Rs 230 billion (US $ 1,213 million) and the export quantity was 266 Mn. kilos. It is significant to mention the average fob price at customs, which was Rs. 867/= per kilo in 2020 has further increased to Rs. 915.97 per kilo, whereas in 2019 it was only Rs. 823/ per kilo of tea exported. The sales and tea production statistics for the month of December are yet to be finalized. However some 296 million kilos have been sold and closer to 300 million kilos tea production have been achieved for the full year. Last year tea production was only 279 million kilos”.
The negative side is that our tea estate productivity has been declining over a period of time; the year 2000 the tea production was 305 million kilos and has increased to 328 million in 2010. The peaked production of 338 million kilos in 2013 – since then there has been a gradual decline of tea production, which is 2.6 % decline based on CAGR. The cost of production of tea producers has been increasing due to many factors which includes low productivity, both land and labour, high overheads and adverse impact of climate change and Covid-19.
It is relevant to mention here that the Kenyan tea production (main competitor for Sri Lankan teas) has been increasing rapidly and Sri Lankan tea production has been declining during the last 10-15 years. This is due to lack of tea replanting & infilling undertaken and the producers’ inability to address climate change effects and other factors, as there has been a gradual erosion of soil and land degradation, despite application of fertilizer.
Kenyan tea auction price in US $ is lower compared to Sri Lanka and, their growers are getting lower tea prices, whereas in Sri Lanka, small holders are getting a reasonable price and it is being regulated under Tea Control Act No. 51 of 1957.
As can be seen, Ceylon Tea is the most expensive teas in the global market- gram to gram and as a result, there is a tipping point in the tea pricing structure for our tea exporters and marketers to be competitive in the global market place. In view of the above, an ‘integrated productivity and quality strategy’ is one of the key focus areas for the producers to reduce costs per kilo of made tea to enable the exporters and marketing teams to capitalize on Ceylon Tea ‘brand equity’.
In the circumstances, it is important that the producers adopt an integrated balanced nutrient management system with more and more mineral and organic inputs to be applied in order to improve the soil quality to achieve Environmental and economic sustainability and focus on social well-being of the workers and small holders/growers rather than looking for short term gains.
The overall performance is satisfactory. However, achieving any further increases of higher prices for Ceylon Tea has become a challenge, because Kenyan and Indian auction prices are much lower than Colombo auction prices.
Nevertheless, we need to focus more on the front end of the value chain by implementing the already approved promotional activities under ‘Ceylon Tea global campaign coupled with aggressive marketing strategy formulated with the support of all the industry stakeholders’ participation.
Therefore, the brand story that the cleanest tea in the world has to be reinforced through maintaining minimal level of chemical residues and demonstrating sustainable credentials including purity and wellness factor of Ceylon Tea. We, at Sri Lanka Tea Board wish to extend our gratitude to all the stakeholders for their dedication, commitment and the relative performance. It’s a great achievement under difficult and challenging environment.