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Tue, 22 August 2017 19:52:22
Sri Lanka’s tea industry under pressure due to high costs
30 Oct, 2014 07:54:24
Oct 30, 2014 (LBO) – Sri Lanka’s “Ceylon Tea” is in its death spiral due to higher cost of production and wages and, needs more value addition, marketing and branding to uplift the industry to its former glory, an industry official said.
“Ceylon tea still has its position for quality but it is under severe stress,” said Malik Fernando, who is a director of MJF group, founded by his father, Merrill J Fernando. The firm started as an export marketer but it now also involved in farming.

“Cost of tea production in Sri Lanka is double that of competing countries and our wages are double that of other tea growing countries and next year another round of wage negotiations would take place. Wages would then probably rise another 11% or so,”

“We are producing tea at a higher cost,” “Yield has been half compare to other tea growing counties, because there has been no investment in tea industry due to nationalization in 1970,”

“It’s highly unpopular to grow tea in Sri Lanka,”

“Wages are going up, costs keep increasing, margins are shrinking,”

"In international markets, our sale prices was on average 20 percent higher than other countries, which also made us vulnerable,"

Fernando was speaking at a forum organized by Charted Institute of Management Accountants (CIMA) yesterday (29) 2014 at Colombo.

The island’s has 206104 hectares of tea plantations of which 70 percent are small holdings that are cultivated by 397223 small holders who produce 1.5 million kilos of tea, statistics showed.

According to the publication 'The Long-term Profitability & Productivity of SL’s RPCs' by Ramani Gunatilaka, Sri Lanka had the highest cost of production at about 4 US dollar a per kilogram of tea.

Daily plucking average of around 18 kilogram of a local worker is less than half of that of a Kenyan worker who plucks 48 kilogram per day and is only two thirds of that of a South Indian worker (27 kg), she wrote.

At approximately 5.3 dollars of daily wage of a Sri Lankan plucker is almost double that of a Kenyan plucker ($ 2.6) and more than double that of a plucker from South India ($ 2.1).

Analysts say living costs in Sri Lanka are also high due to food protectionism, with people requiring higher wages to live.

Apart from the higher wages, the plantation companies in Sri Lanka provides accommodation, healthcare facilities and education for the workers and their families. Higher consumption of alcohol in both women and men is a common issue on most plantations.

Sri Lanka produces orthodox tea whereas East Africa produces CTC tea, which basically chops the tea into four grades.

Fernando claimed it was the equivalent to comparing prime meat with mincemeat, and African CTC was a crude mix equivalent to mince meat.

“We grow quality orthodox tea, but our branding and marketing is poor,” Fernando said.

“For example coffee is seen as an 'aspirational drink' in the world, whereas tea is not,”

“Overseas, even cheaper wines are bottled in the vineyard, we should follow the same policy with tea,”

“Single origin teas should be encouraged.”

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