Interview: Mufaddal Jafferjee
How can the Sri Lankan tea industry be further integrated into the global tea supply chain while protecting the Ceylon tea brand?
MUFADDAL JAFFERJEE: The global tea industry is very fragmented, and the largest brand in the world holds less than 10% market share. Unlike in the electronics industry, for example, the origin of teas used for blends tends to be guided by local tastes. Efforts to homogenise taste towards a single blend are unravelling, and in markets where the offerings used to be rather limited, such as the UK, Europe and North America, we have seen choice growing. Market leaders continue to lose share to new brands that offer speciality teas and herbs, and target specific cohorts via social media and online sales.
Meanwhile, grocery sales are driven by discounts, which means compromising quality at every turn. This has had a deleterious impact on consumer perceptions of quality, especially in relation to black tea. It is in this challenging environment that Ceylon tea operates. Supply chain integration is driven by price, and Ceylon finds itself at the higher end of the cost spectrum. Ceylon teas are more expensive to produce, given their more artisanal process, higher labour costs, challenging farming terrain and the absence of economies of scale.
This leaves the industry with few options, other than to move up the value chain, create a more niche brand – either individually or in a partnership – and continuously invest in producing quality teas. Fundamentally, given the cost dynamics, a promising future will always be possible for Ceylon tea, if the nexus with quality remains strong. This is the only sustainable, competitive advantage for an industry with a 150-year heritage.
In which ways can value-added products and product diversification help to elevate the tea industry?
JAFFERJEE: The tea category seems to have an image problem due to multinationals’ aggressive discounting at the grocery level, turning it into a mere commodity. But the story of tea, especially Ceylon, is so much richer. Flavour is greatly influenced by the agro-climatic region where the tea is grown and by the techniques used to pick and produce it. Only teas produced via this small-batch, orthodox method allow one to taste such natural diversity. Hence, it is both a challenge and an opportunity to actively engage the customer and drive home the unique features of Ceylon tea. This seems to be the fundamental issue for the industry, which has so far been reliant on private label products.
There is an overdependence on a few import markets for our tea: over 70% is exported to the Middle East, North Africa, Russia and the Commonwealth of Independent States. The industry needs to enter new markets in a more meaningful way, while remaining relevant to the millennial demographic in our current markets. These ventures require continuous investment and innovative marketing. In recognition of this the industry created a fund worth almost $40m to achieve some of these objectives, with a campaign that will use social media tools and focus primarily on consumers.
The industry has built significant expertise and production facilities to service the needs of grocery stores. However, new products need to focus on opportunities in food service, gifting, ready-to-drink and experiential retail. The global trends of wellness, ethical trade and the craft movement bode well for a natural product like Ceylon tea, but considerable financial investment and expertise in marketing are required to reposition premium black teas like Ceylon as a preferred hot beverage. There has been a strong resurgence in tourism to Sri Lanka, over a decade after the end of the conflict. Tourism itself has changed considerably, with more independent travellers seeking novel and authentic experiences. Our tea estates and their heritage bungalows are located in majestic landscapes and have become magnets for tourists. They not only help to reinforce the message of Ceylon tea through social media, but also act as an important revenue vertical to sustain the large tea gardens and their infrastructure.
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