Sri Lanka’s tea industry needs to take lessons from its apparel counterpart to tap into international trends, including artisanal teas and ready to drink teas, and cater to trendy millennials, believes a top strategist.
The Calamander Group Founder and Chairman Roman Scott hopes to deliver a tough message to the tea industry when he addresses their Annual General Meeting (AGM) today. His Singapore-based holding company, with interests in real estate, hotels, food and beverage and consumer brands, also manages international brands, including The Coffee Bean and Tea Leaf.
Scott is also a global economic strategist, a bank restructuring expert and the Economic Spokesman for the British Chamber of Commerce Singapore. His forthright message to the local tea industry is centred on pragmatic advice and ways the sector must revamp itself to meet emerging international trends.
Admitting to not being a tea expert, he nonetheless insists the industry has to focus on international trends to understand where they should be heading. Looking at the $ 1.5 billion industry, Scott is very open about the need to move away from producing locally-branded end products and switching to linking up with the value additions of chains already established by international brands.
Sri Lanka’s tea industry is caught in the value added trap. There focus is a decade too old and does not take into account the current trends around the world. They are trapped in a giant tea bag. Taking a local brand international is yesterday’s model and while companies like Dilmah did it at the right time the world has moved on.
What Scott advocates is for tea companies to follow a strategy very successfully employed by apparel companies like MAS and Brandix where they manufacture for international brands at the very top of the value chain but not under their own name. The advantage of this model is access to the richest, most stable and trendy markets in the world rather than bulk tea destinations such as Russia and Iran, which are the current focus of the industry.
Sri Lanka’s tea industry has done well in these markets but they are also low-hanging fruit. The buying capacity of these countries is limited and linked to volatile commodities such as oil. They are also tightly controlled economies and don’t provide space for Sri Lankan-led value addition. Therefore if the industry wants to get a good price for their produce then they need to look at markets such as Europe and the US where there is a new breed of buyers who want premium teas and are willing to pay the price.
Sri Lanka is ideally suited to grab this sweet spot because it already produces the world’s best quality and expensive teas. Scott emphasised that they now can market it with all the buzz words of organic and other health benefits the new wave of millennials demand.
Giving examples of how the industry has missed a trick, Scott pointed out how when Starbucks went into tea they sourced the cups from Sri Lanka but not the tea. The same goes for beverage giant Coca Cola, which has expanded into non-soft drink products including tea but Sri Lanka has failed to become a supplier.
Small guys in the UK are taking advantage of these trends and supplying supermarkets like Tesco but Sri Lanka has not managed this. The local industry needs to develop this sophistication and understand how to appeal to new consumers. It is about what the market wants and not what we wish it would buy.
Scott also called on the Government to assist the tea industry more by liberalising imports for blending and export purposes.
Local consumers drink less than 5% of the local tea production. Even low-quality imports will not affect this market but it would assist companies to blend products and meet international trends.