1. Tea plantations and pluckers of Sri Lanka
Learning Team -2B |Akash Tyagi |Akshay Kalley|Anya Felix| Pooja Sharma |Vinay Potti

2. Introduction to Srilanka
• Located south off the Indian sub-continent
• Strategic naval link between West Asian and South East Asia.
• Center of Buddhist religion and culture
• Republic and unitary state governed by semi-presidential s/m
• Founding member of SAARC and a member of United Nations
• Free market economy and one of the fastest growing
economies with GDP at 8.3 %
• Affected by civil war running from 1983-2009
• Largely affected by Portuguese and English colonization
• Mainly a plantation economy famous for cinnamon, rubber
and Ceylon tea
• India is the largest trading partner of Srilanka

3. Doing Business in Srilanka
Region: South Asia
Income category: Lower middle income
Population: 20,451,826
GNI per capita (US$): 2,290.00
DB2012 rank: 89
DB2011 rank: 98
Change in rank: 9

4. Religious aspects of Srilanka
Account for
majority of
plantation workers

5. Cultural dimensions of Srilanka
Hofstede Scores
80
70
60
50
40
Hofstede Scores
30
20
10
0
PDI IDV MAS UAI LTO

6. How things work here
• Dominated by Family owned businesses
• Rewards allegiances more than skills
• Deep roots in Hinduism and caste system
• Strictly defined hierarchy with roles and responsibilities
• Leaders from within the family are promoted
• Decision always made at the highest levels
• Oriented towards low price deals and hard bargaining
• Use of intuition, faith and feeling to guide through decisions
• No regards for disagreements
• Joint ventures with foreigners are considered prestigious
• Friendship before business

7. Plantation Industry in Sri Lanka
Sri Lankan tea prices at
record high levels
Tea Rubber • DuePalm Oil
to global supply
shortage because of
weather conditions
• Strong demand in
Middle East
• average tea prices
were up 8% YoY in
2008
• Area (2009): 222,000 ha • Area (2009): 95,000 ha Naturalscale – just 4 of 22on
• Small rubber prices
• Production (2010): 331.4 M • Production (2010): 153 M the rise plantation
regional
kgs kgs companies
• • Area: 2,876 ha
During 2008
• Export (2010): 314.6 M kgs • Domestic (2010): 107.2 M
• Export Earning (2010): kgs crisis, synthetic rubber
• Production (2008): 29.4 M
$1,376.3 M • Export (2010): 51.5 M kgs kgs preferred more
was
• Gross Margin (2010): +15% • Export Earnings (2010): due to lower cost
• Gross Margin: (2009): near
$736 M • 50%Natural rubber prices
• Gross Margin (2011): 58% are now picking up

8. History of Ceylon Tea
London
1st tea plant
brought by
British from
China planted in Founding of
the Royal Planters 1st fully
Botanical Association of equipped tea
Ceylon
Gardens Ceylon factory
1824 1839 1854 1867 1872 1873
Experimental 1st tea 1st shipment of
tea plants from plantation in Ceylon tea to
Assam & Loolecondera London
Calcutta India by James Taylor
and
establishment
of Ceylon
Chamber of
Commerce

9. History of Ceylon Tea
Tea plantation
became greater
than coffee
plantations.
Henry Rudolf The Tea
Trafford – one Founding of The Research
of the pioneer Colombo Institute was
tea planters in Brokers' established in
Ceylon Association Sri Lanka
1880’s 1894 1896 1915 1925 1927
Founding of The Thomas Tea production
Ceylon Tea Amarasuriya was almost
Traders became the first entirely for
Association Ceylonese to be export
appointed as
Chairman of the
Planters'
Association

10. History of Ceylon Tea
The Tea
Research
The Ceylon Institute 1st Ceylonese
Tea commenced tea broking
Propaganda work on house, M/s
Board was vegetative Pieris &
formed propagation Abeywardena
1932 1934 1938 1940 1941 1944
Law A biological The Ceylon
prohibited the control to Estate
export of poor suppress the Employers'
quality tea. Tea Tortrix Federation
caterpillar was was founded
developed

11. History of Ceylon Tea
Ad Valorem
Tax was
The first clonal introduced for
tea fields teas sold at
Independence began the Colombo
form British cultivation auctions
1984 1951 1955 1958 1959 1965
Export duty on The State Sri Lanka
tea was Plantations became the
introduced Corporation world's largest
was tea exporter
established for the first
time

12. History of Ceylon Tea
Many of the
The government-
government of owned tea
Sri Lanka estates which
nationalized the had been
Production and tea estates nationalized in
exports of owned by the the early 1970s
Instant Teas was British were privatized
introduced companies. again
1963 1966 1971 1980 1992 2006
1966: 1st Sri Lanka Total
International became the production
Tea Convention official supplier reached 310.8
in Sri Lanka. of tea at the Million kilos
1980 Moscow
Summer
Olympic Games

13. Where Sri Lanka Tea Stands Now
Global Tea Production
Top 10 destinations of Ceylon tea from Jan-Sep 2011
Tanzania 2009 % Share of World Export Market
(Units : Qty – MKg)
Indonesia
China
6.06
Zimbabwe Jordan
19.38
Uganda Kenya Kuwait
 Ceylon teas held 1st
17.84 position as the largest
Malavi Azerbaijan
Africa Total
exporter of teas until
Kenya Japan 3rd largest producer 2007 when Kenya took
Sri Lanka
Iraq this position. 2011
India
12.05 21.84
Turkey 2010
China
 The Colombo auction
Sri Lanka U.A.E
centre has retained first
Bangladesh
Syria position for the highest
South India
Vietnam
Iran 31.7
priced teas.
NE India
Russia
0 200000 400000 600000 800000 1000000 1200000
0 10 20 30 40
2010 2011

14. Business system of tea industry
Producing country Tea Plucker/Worker
Plantation/Estate/Small Farmer
Factory
Collector Factory worker
Producting/Consuming
Buying Brokers
Center auction
country
Tea
Company
Restaurants and Food services
Retailer Exports
work places company

15. Labor issues in tea plantation in Srilanka
•Both private and state owned enterprises are
Flow of Trade of Tea involved in tea cultivation.
•Small holding sector has shown remarkable
improvement in productivity, land
consumption, employment and income generation
to the industry.
•Few salient characteristics include lean
structure, family ownership and control, clear
property rights and the state’s subsidiary
mechanism.
•Few companies dominate the tea industry leading
to corporate concentration and leaving tea
cultivators and small holders vulnerable.
•Deriving their origin from British Colonial era
Tamil workers dominate the tea plantation industry
both as pluckers and small holders.
•The business is attuned to collectivism, respect
for authority and existing class structures and
dependency except at tea pluckers level which is
dominated by women.

16. Labor and trade laws in tea plantation in Srilanka
•Both private and state owned enterprises are
involved in tea cultivation.
Terms and Employment of
Social security conditions of •Small
Industrial safetyholding sector has shown remarkable
Industrial women and
relations
employment improvement in productivity, land children
consumption, employment and income
generation to the industry.
Employees The Shop and Employment of
provident Fund Office Employees Industrial Women, Young
(Regulation of Factories•Few salient characteristics include lean
Ordinance Disputes Act Persons and
•Freedom of association is guaranteed by Article 14 of the Constitution. Children Actclear
Employees Trust
employment & structure, family ownership and control,
remuneration) Act
Fund property rights and the state’s subsidiary
•Trade unions are legislated under the Trade Union Ordinance of 1935 which
mechanism.
provides for the registration and control of Trade Unions.
Termination of
Payment of Workmen’s
Gratuity Act Wages Board •Few companies dominate the tea industry
Compensation Employment Act
•Government has alsoOrdinance ILO Conventions on Freedom of Association (C187)
ratified leading to corporate concentration and
and Collective Bargaining (C98). leaving tea cultivators and small holders
vulnerable.

17. Dilmah – A look at the competitiveness
Duncan Hindustan Lever Dilmah tea Tata Tea
Pricing / per Kg Major Brands of Dilmah Tea
tea
•Both private and state owned enterprises are
No.1 Taj Mahal, Yellow cultivation.
involved in tea
Premium leaf tea market Label and Green Tetley
(Rs 200-220/ kg) •Small holding sector has shown remarkable
Label CYCLON GOLD Temptations
The improvement in productivity, land
Top 10
company
Premium dust category By 2010 it Dilmah is
Threeconsumption, employment and income
global tea and Top It is
Roses
was
(Rs 180-200 per kg) was theCYCLON GOLD Star
SHHAKTI generation toavailable LEAF TEA up-
PREMEUM
the industry. an Chakra Gold
brand and
founded in third largest market
the No 1 in over 92
Medium leafby
1974 sector global tea
DOUBLE DILMAH PREMEUM
•Few salient countries.
brand of
brand from TEA characteristics include lean
brand PREMEUM LEAF
Merrill J
(Rs 140-180 per kg DIAMOND Red Label and Taaza
origin. TEA BAGS Ceylon Tea. clear
a tea structure, family ownership and control,Premium
Tata Tea
Fernando
property rights and the state’s subsidiaryTea
Tata
mechanism.
DILMAH PREMEUM TEA BAGS Premium, Kanan
Medium dust category SARGAM CLASSIC ENGLISH Devan and
(Rs 130-180 per kg) •Few companiesBREAKFAST TEA tea industry
Taaza, Super dominate the Gemini
CLASSIC leading toBREAKFASTconcentration and
ENGLISH corporate TEA
Popular or economy leaving tea cultivators and small holders
category RANGLEE vulnerable.
(Rs 120-140 per kg) RANGLIOT A-1 and Tiger Agni Sholay
Economy dust teas
(Rs 120-130 per kg) A-1 and Ruby Agni and Leo

18. Issues faced by tea industry
• The war has ended but the conflict is still on
• EU withdrew the preferential trade agreement in July 2010.
• Diplomatic, military and financial support from
China, India, Russia, Iran and Pakistan also has ensured the
Political power of UN is still weak.
• Tea in Sri Lanka is one of the country’s biggest cash crops, but
families working on tea estates are among the nation’s poorest
in terms of earnings as well as nutrition.
• Human rights international investigation still not supported by
Social the Government of Sri Lanka.

19. Issues faced by tea industry
•Government making reforms and introduced education reforms and provisions for
bringing the literacy rate up.
•Sri Lanka to restrict imports from India in order to further develop the local
production.
Economic
•Sri Lanka is engaging in large-scale reconstruction and development projects
following the end of the 26-year conflict with the LTTE, including increasing electricity
access and rebuilding its road and rail network.
•Government seeks to reduce poverty by using a combination of state directed policies
and private investment promotion to spur growth in disadvantaged areas, develop
small and medium enterprises, and promote increased agriculture.
•Depreciation of Sri Lankan Rupee appreciates Tea Prices.
• Overcast and heavy rains and storms.
• Declining soil quality resulting in the quality of tea reduction.
Environmental

20. Internal
Low Yields Labor shortage
Ageing Tea bushes
Global warming (Changing weather patterns) Increased Wages
Future
Outlook
World tea moving
High Dependency on
towards diversified
Middle East and
brands and value
Russia
added products
External

21. Sustainability through Good Agricultural Practices
Scientific
Land Use
Planning
Income
guarantee Sustainable Replanting
irrespective Tea
of ethnicity
Managing
Costs
Expenditure on improving quality of life of the workers is indeed an
investment and not actually a cost
- Dr. Dan Seevaratnam

22. The Macro problem
Sri Lanka is only exporting about 300 million kilograms of tea out of the total world
exports of 1.8 billion kilograms
Sri Lanka’s share has shrunk to 18% from 25% a few decades ago
Ceylon tea is premium and niche, and unable to cater to different market demands
SriLankan firms are not multinationals in tea industry
The Russian example
Bulk tea exports have gone up at
expense of packeted tea
Russian import tax on packeted tea
Blending Ceylon tea (51%) with
other types of tea increasing its FDI
The benefits are not passed on to
the producer in SriLanka

23. The Tea Hub Concept
• Set up Free Trade Zone (FTZ) within SriLanka
• Allow enterprises and Dilmah to setup blending facilities
• Liberalize tea imports from other countries
• Enforce 50-70% Ceylon tea in the blending process
• New logo to enable differentiation between pure Ceylon tea and FTZ
tea
• Test Market and expand
•Benefits from blending and commercialization are directly passed on
to the producer in SriLanka