STiR Tea & Coffee Industry International

Volume 7 Number 5

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26 STiR coffee and tea / Issue 5, 2018 (October / November) The speech was given by a senior executive in the garment industry, Nithan Sivagananthan. He began by noting the strength of the Ceylon tea brand as globally recognized as premi- um. He then politely listed how that premium is being eroded. Despite its high reputation, Sri Lanka is losing momentum in world markets. Overall global tea consumption has grown by 4.5% annually for a decade. Sri Lanka's production is almost exactly the same in volume as 15 years ago. China has increased its supply by 6.5% annually since the 1960s. SL's growth rate is 0.8%. Its market share has fallen from 20% to 6% over the past 50 years. Its exports are concentrated in a few often-volatile sectors: MENA (50%) and Russia (15%) dominate. Cheaper competitors are taking away sales. The UK imports just 3% of its tea from SL and 47% from Kenya. It loses value adding opportunities because its main shipments are bulk leaf (80% of exports.) That loses the premium and brand advantage. Many of the solutions Sivagananthan are the commonsense of the innovators. One of the positives of the common- sense is that it works and is illustrated by the flood of innovators and entrepre- neurs transforming India's and other Asian tea markets, attracting millennials globally to new combinations of tea and cuisine, new flavors and products in settings of new ambience and streamlin- ing the bush-to-cup logistics chain. Labor costs make Sri Lanka tea less competitive in global export market Boba tea, less fun without a straw • Know the end consumer and tailor your offers: Sivagananthan points to the vital need to understand millennials and younger groups in their own market: their preferences, routines, values, trends etc. The invigoration of the Indian and China markets and the belated renova- tion of the eroding UK core has rested on offering variety and a wide range of tea choices. Sri Lanka's industry hasn't got close to its customer base. It offers a traditional product through traditional marketing. He recommends recruiting and contracting talent that builds teams focused on customer insight and customer-centric innovation. • Prioritize professionals: "The tea industry is not attractive to graduates and professionals who are drawn to industries like banking, IT, hospitality." The best incentive is commitment to growth. India contrasts with Sri Lanka here. Many of its fastest growing and most innovative new tea firms are headed by engineers, software experts and graduates from elite universities. • Rationalize, globalize, and integrate the supply chain: This includes regaining control of blending in Africa and the Middle East, contracting for tea trade zones and bonded hubs within free trade zones, and extending design, packaging, marketing downstream nearer the consumer. "We need to move on from the belief that all investment should be within Sri Lanka to bring in revenue," said Sivagananthan. Automate the tea auction system to link it to e-commerce systems, encourage a wider range of buy- ers and greatly accelerate digitization. Obviously, these are all complex moves to make. But they seem essential and urgent. Can Sri Lanka catch up to the global pacesetters? UK Pricier Tea The latest round of market research will dampen the spirits of even the most stout-hearted British tea purveyor. Volume continues to decline as researchers estimate residents of the UK drank 870 million fewer cups of tea last year. Black tea is off the boil as tea drinkers purchased 5.7 million fewer pounds in the 52 weeks ending May, declining 8% during the past four years, according to Kantar Worldpanel. The market research firm reports that price increases and a switch to more expensive premium blends raised total value by 0.6% to $880 million. Black tea still accounts for 85% of cups consumed, according to PG Tips. US Straw Ban Bothers Boba Fans Bubble tea is the only beverage where the straw is part of the basic design of both the drink and the drinking experi- ence. That begins with the tapioca balls at the bottom of the cup. These can be sucked up only through a wide straw, typically ¾-inch, with a diagonal cut at the end to punch through the (plastic) seal on the lid of the cup. Alvin Yu, the co-owner of San Francisco's Steep Creamery and Tea summarizes it: "Boba is just, in general, an expression…. You have the tapioca pearls, but you also have aloe jelly, you have these herbal teas that we make ourselves. And it all requires a straw." There's a convenience factor. The seal lets the drinker shake up the rich mix of liquid and pearls, with no spills. Bubble tea aficionados respond strongly to the idea of drinking bubble tea without a straw: "It'd be really hard. I think I'd have to pour a cup and use a spoon or something." Straws are just a small part of the plastic issue but each day 500 million straws are used once and thrown away. They take up to 200 years to decom- pose and their size and shape make them a disproportionate life threat for birds and turtles. The solution is environmentally friendly paper straws at a cost of approxi- mately 10 cents each, which will add to the price but retain the experience.

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