In December, the Advocata Institue in Sri Lanka published a report that described the declining competitiveness of the Sri Lankan tea industry as an example of shifting competitive advantage in the agribusiness: “Increasing competition from countries such as Kenya, India, and Indonesia has resulted in reduced market share and low prices in the international market.”
Authors cautioned that statistics show “that the most mass market consumption of Ceylon tea, with the help of the supermarket discount culture, occurs in the West's advanced economies. For instance, 59% of tea imported into the United Kingdom in 2021 came from Kenya, purchased at an average of $2.20 per kilogram, far below the premium for Ceylon tea. Moreover, 45% of tea imported into the United States came from Argentina, purchased at an average of $1.24 per kilogram, even lower than the average premium for Ceylon tea.
These figures show that the common perception of advanced economies as the ideal destinations for Ceylon tea to earn higher premiums is not necessarily founded on reason. The truth is that the highest prices for tea in the international mass market exist in the developing countries to which Sri Lanka already caters.”
Download the 138-page report free of charge at Advocata.
Developed countries earn billions of dollars transforming tea and other commodities into packaged goods. Germany, for example, generates 5.4 billion euros annually (about $6 billion US) from processing tea and coffee.
That is why India, Sri Lanka, Kenya, and Tanzania, among other tea-producing countries, invest in infrastructure and free-trade zones to process tea.
West Bengal announced in December that it wants to build a 10- to 12-acre tea blending, packaging, export, and logistics hub at the port in Kolkata. “The much-needed facilities for value addition would be located near the port gateway at Balagarh,” say government officials.
The state and port trust proposes to acquire and develop the property into an economic development zone modeled on the highly successful Dubai Multi Commodities Centre, the UAE’s largest free-trade zone. Total investment is estimated at $52 million to develop 900 acres. The port plans to expand its cargo capacity to 115 million metric tons.
Construction of a similar facility is underway near the Mombasa Tea Auction in Kenya, and last month, the newly launched Tanzania Tea Auction began operations at a warehouse complex in Dar es Salaam designed to add value to tea shipped from neighboring countries, including Uganda, Rwanda, and the Congo.