Amend rules to allow growers to take their own teas to the market

Amend rules to allow growers to take their own teas to the market

Sri Lanka’s most successful tea marketer, Mr. Merrill J. Fernando, has advocated that present restrictions limiting tea growers from marketing their own teas should be lifted saying "producers are best suited to export their crop (and) therefore present restrictions should be lifted and they should be incentivized to market their crop direct."


He has said in the latest annual report of Ceylon Tea Services PLC that farmers taking their own crop to the market is a growing trend and Sri Lanka should take advantage of it.


"Consumer interest in this concept is growing dramatically" Fernando said in the recently released report of Dilmah company which reported that the year ended March 31, 2013 had seen group revenue up 21.3% to Rs.7.1 billion though the profit after-tax was down 15.2% to Rs.1.4 billion.


He attributed the decline in profits to the previous year’s foreign exchange gain of Rs.767 million dropping to Rs.167 million due to appreciation of the rupee against the US dollar. As a result the higher sales revenue was not reflected in the profits.


However, Ceylon Tea Services PLC, one of the highest dividend payers quoted on the Colombo Stock Exchange, is maintaining its previous year’s dividend rate with the directors proposing a final dividend of Rs.10 per share which together with an interim dividend of Rs.30 per share paid previously giving shareholders a return of Rs.40 per share for the year under review.


Fernando said in his review that important markets including Europe, the Middle East and Asia continue to offer exciting opportunities for specialty tea and other innovations to "creative minds and serious marketers who believe in tea. No other tea origin offers such great opportunities as Sri Lanka."


Dilmah’s answer to the emphasis by retailers on cheap tea was to move in the opposite direction by aggressively driving its innovations though at much cost. Consumer response had been encouraging, he noted.


"Dilmah innovations in Tea Gastronomy, education in tea and in taking tea beyond traditional boundaries are shaking the tea category. The Dilmah School of Tea continues to share knowledge of tea with hospitality and culinary professionals from around the world, helping them to understand tea and integrate tea as a luxurious addition to their guest experience," he said.


"The lack of knowledge of tea in relation to its traditional manufacture, taste and other aspects beyond the conventional presentation of tea, has compromised the ability of the tea industry to compete with other, less healthy and much less sophisticated beverages. We are changing that, even on a small scale, by delivering innovation that respects authenticity."


Fernando regretted that government too appears to have left tea to its devices with stakeholders in the industry showing no vision or initiative towards moving from suppliers to marketers.


"Tea has remained fossilized in a colonial trading culture of producer, broker and supplier/exporter, as forced on us over 150 years ago. This is to the detriment of the people of Sri Lanka as the unimaginative and outdated approach of stakeholders has only caused the industry to lose a plethora of opportunities to foreign owned brands and other beverages," he said.


Fernando made the point that regulations applicable to tea exports in the 1980s still prevail although many are irrelevant today, 30 years later.


"Application of outdated regulations in the current environment cause serious setback to exporters of value added tea. It is essential that the Tea Board reviews and updates regulations from time to time, an essential element in a marketing environment," he said.


"It must be understood that conditions suitable for regulating and guiding traders of bulk tea and private label are not necessarily appropriate to marketers of value added tea, under Sri Lankan brand names."


Fernando urged that entrepreneurs, especially those who operate successfully in sophisticated markets, who grow, process and pack at origin – that is here in Sri Lanka – under locally owned brand names should receive preferential treatment.


"There is no doubt that strict regulations and guidelines are necessary to assist exporters in every possible way and towards monitoring their activities to ensure compliance. They should however be relevant, focused and, above all, adapted to conditions in the market place," he said.


Discussing prospects, Fernando said that he did not expect any improvement in global demand for tea this year. However, CTS’s efforts in driving the quality image of Ceylon tea via the Dilmah brand is providing the company with new opportunities though at a very high cost.


"Benefiting from these innovations, I hope to report good results in the current financial year," he said.


CTS has a stated capital of Rs.200 million, an available for sale reserve of Rs.226.1 million and retained earnings of Rs.7.5 billion in its books. Total assets ran at Rs.8.75 billion and liabilities at Rs.0.8 billion.


MJF Tea (Pvt) Ltd with 65.38%, MJF Exports with 21.28% and Dr. T. Senthilverl with 7.72% are the major shareholders of the company with all other shareholders individually owning less than one percent.


The CTS share traded at a high of Rs.749 and a low of Rs.575 during the year under review against a trading range of Rs.994 to Rs.530 the previous year.


The directors of the company are: Messrs. Merrill J. Fernando (Chairman), Himendra S. Ranaweera (Deputy Chairman/CEO), Malik J. Fernando, Dilhan C. Fernando, Minette Perera, Roshan Tissaaratchy, Rajan Asirwatham and Gritakumar E. Chitty.