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Sunday, 3 June 2012

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Tea industry a slow burning candle - CEO, MTI Consulting

CEO, MTI Consulting, Hilmy Cader told an MTI thought-leadership forum of the local tea industry was not only critical for the forex it earns but also the largest employer in the country (with over a million people dependent on the industry for a livelihood).

He said the Sri Lankan tea industry was like a slow burning candle, burning on three sides. On the demand side, 'power' lies with top global brands, retailers and food service chains.

CEO MTI Consulting, Hilmy CaderCONCRETE

You need hundreds of millions of dollars to compete with that. The industry is far too fragmented to afford the entry fees! On the supply side, we have no choice but to produce and sell 300 million kilos a year. With the prices we get for the raw material, we can barely pay the wages (to support the low standards of living of hundreds of thousands of people) and provide a return for the capital invested, let alone re-planting century old bushes! Almost 75 percent of our exports comes from 10 countries in the Middle East and Greater Russian region. This includes Iran, Iraq and Libya. The more sophisticated a market gets, the less single origin Ceylon Tea they use (baring a very few niche examples).

When asked to describe how the industry is responding he quoted Albert Einstein "Insanity is doing the same thing over and over again and expecting different results".

"If you look at the focus of the industry and the analyses published in the media, it is inward-centric. We keep talking about auction prices, when we should also be talking about retail shelf prices. We keep talking about our own shipments, when we should be talking about market share of our competitors.

For instance, what is the share of Ceylon Tea in the major UK super market chains? (you will be shocked by the decimal points!)" said Hilmy Cader.

He also noted that, while we are focused on tea as a product, there is significant competition coming from outside the 'traditional tea cup' -ranging from Roiboos (the South African herb that is closely associated with tea) to coffee to iced tea.

Addressing the issue of how the industry can be more responsive to market needs and surge ahead. Hilmy Cader brought out an interesting comparison of the apparel industry in Sri Lanka. "If you look at the two major players (MAS and Brandix, who together are much bigger than the entire tea industry!), they were built by those with hardly any apparel experience and they did so in less than 20 years.

Most of the people in the tea industry have limited experience outside the 'traditional tea cup'. Maybe the tea industry needs a few MASs and Brandixs!" he said.

Hilmy Cader made some interesting observations to place the product in its 'life context'. He said, "The average supermarket has over 1,000 product lines and the average consumer uses over a 100 product lines in a day. Tea is just one of them and needs to fit into the 'life' of the retailer and the consumer".

 

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