Twenty First Session of FAO/IGG ON TEA SRI LANKA TEA INDUSTRY MARKET REVIEW Bandung, Indonesia, 5 - 7 November 2014

Janaki Kuruppu Chairperson - Sri Lanka Tea Board

Source : ITC Report, London

World Tea Production (Mkgs)  Country 2006 2007 2008 2009 2010 2011 2012 2013 Sri Lanka 310.8 304.6 318.7 291.1 331.4 327.5 328 340 YOY % -2 4.6 -8.6 13.8 -1.2 -1.5 3.6 China 1028.1 1140 1257.6 1358.6 1475.1 1550 1790 1924 India 981.8 986.4 980.8 979 966.4 988.3 1126 1200 Kenya 310.6 369.6 345.8 314.2 399 377.9 370 432 Vietnam 142.5 148.3 166.4 175 170 178 190 180 Turkey 142 155 153 148 145 147 149 World 3579 3795 3863.5 3944.4 4162.5 4217.1 4624.62 4907 YOY% 6 1.8 2 5.5 1.3 9.6 6.1 Source : ITC Report, London

20th Session of FAO - IGG on Tea At the 20th session in Colombo under the Chairmanship of Sri Lanka, 3 new working groups were proposed: Working Group on Organic Tea Working Group on climate change Working group on Small Holder Farmers

So why an International Tea Producer Forum?

Vision and Mission of the ITPF Vision To position tea as the most acceptable, natural and healthy beverage globally Mission To position tea as the most preferred beverage universally through stimulating its consumption by facilitating and execution of generic promotional campaigns and raising awareness of the health and life style benefits of tea

Objectives of ITPF a. Safe guard interests of tea producer countries. b. Deliberate and evolve collective solutions on problems affecting producers. c. Provide technical co-operation, sharing of technology and expertise by member countries. d. Stimulate demand for tea by promoting consumption of tea. e. To undertake market studies, surveys, research projects aimed at addressing any specific issues f. To undertake and facilitate programs for providing training to members or their executives in various aspects of marketing tea.

Progress So Far 2012: Signing a Resolution in Colombo, Sri Lanka at the 20th Session of FAO/IGG to form an ITPF. 10 Countries namely India, Kenya, Sri Lanka, Indonesia, Bangladesh, Malawi, Rwanda, Tanzania, Iran & Burundi signed that MOU. Proposal by Sri Lanka as the current Chair of FAO/IGG on Tea to host a Ministerial Forum. 2013: Historical gathering in Colombo on 21st January 2013 and ITPF was formally established. Seven countries signed the MOU and the constitution (Sri Lanka, India, Kenya, Indonesia, Malawi, Rwanda, Iran)

Consent of Producer Countries Country 2008 2012 2013 2014 India Obtained Govt. approval Signed Resolution Founder member Obtained cabinet approval and completed the process Sri Lanka Kenya Response is awaited Malawi Rwanda Pending Indonesia Iran Bangladesh Consented to be founder member Tanzania Burundi --- Zimbabwe Consent of Producer Countries

Sri Lanka Tea Production

AGRO-CLIMATIC TEA GROWING REGIONS OF SRI LANKA

Tea Production – Elevation Wise Source : Sri Lanka Tea Board

SRI LANKA TEA PRODUCTION ELEVATION WISE (Mn. KGS) Year High Grown (%) Mid Low Total 2006 74.7 24 51.6 17 184.5 59 310.8 2007 72.5 54.4 177.7 304.6 2008 84.4 26 49.0 15 185.3 318.7 2009 72.8 25 44.7 173.1 60 290.6 2010 79.1 56.1 196.2 331.4 2011 79.2 52.5 16 196.6 328.4 2012 73.6 22 52.6 202.1 62 2013 75.5 56.2 208.4 61 340.2 Source : Sri Lanka Tea Board

AREA OF TEA PLANTED IN SRI LANKA Elevation Planted (Ha) Share (100%) High Grown 41,137 19% Mid Grown 71,018 32% Low Grown 109,814 49% Total 221,969 100 Source : Sri Lanka Tea Board

SRI LANKA TEA EXPORTS (Mn. KGS) Source : Sri Lanka Customs 2008 2009 2010 2011 2012 2013 Bulk 178.0 164.6 176.8 179.9 130.25 130.09 Packets 84.3 75.5 89.8 95.8 153.8 157.0 Tea Bags 20.3 18.7 25.7 24.6 21.4 24.07 Others 18.6 21.2 1.8 2.9 0.54 1.98 Re- Exports 10.6 20.5 14.6 8.51 Total (Mn Kgs) 319.8 290.6 305.7 323.7 320.7 321.65 Value Billion USD 1.26 1.18 1.37 1.51 1.44 1.55 Source : Sri Lanka Customs

Sri Lanka Tea Exports earning

Ceylon Tea Exports FOB unit price Source : Sri Lanka Customs

DOMESTIC CONSUMPTION Year Qty. (Mn. Kgs) Approx. 2006 27.5 2007 28.0 2008 28.5 2009 2010 28.4 2011 28.9 2012 27.8 2013 Source : ITC Report, London

DISTRIBUTION CHANNELS Type Percentage Supermarkets 25% Grocery retailing 30% Convenience stores 30% Tea Shops / Tea Houses 5% Others 10%

Tea Industry’s Role in Sri Lanka’s Economy Tea export earnings reached USD 1.55 Billion in 2013 a historical high contributing 15% to the nation’s foreign exchange. Of the 322 Mn Kgs exported over 55% was in value added form Tea generates 65% of export agriculture revenue Tea industry contributes approx. 2% of the island’s GDP With 2 Million employed directly and indirectly 10% of the population of Sri Lanka depends on the industry.

Sri Lankan Tea Industry’s Role in the Global Tea Economy Sri Lanka remains the world’s largest orthodox tea producer and the world’s largest orthodox tea exporter with 17% market share 2013 production placed Sri Lanka as the 4th largest producer of tea with 9% share of the global tea crop. As per 2013 export volume Sri Lanka has been able to sustain the position of 3rd largest exporter exporting to more than 150 countries. Sri Lanka also succeeded in maintaining her position as world’s largest pre-packed tea exporter and the number one in value added earnings (60%)

Ethical & Sustainable Practices Strict adherence of ISO 3720 Minimum quality Standard across entire supply chain Ensuring certification on Ethical Tea Partnership, Fair Trade Labeling , Rain Forest Alliance etc. Clean as ever in pesticide residues Compatibility with CODEX, FAO, EU & Japanese standards for Maximum Residue Limits Drive for re planting and in-filling to increase productivity and reduce cost of production Support Forest Garden Tea Growers to protect biodiversity & commitment for ecological sensitivity

Commitment to Sustainable Business business PURITY & FOOD SAFETY ETHICAL BUSINESS ENVIRONMENT SOCIETY Rainforest Alliance Certification GLOBAL GAP Certification Forest Stewardship Council Agricultural Standards Beyond the TRI & RRI Guidelines Committed to CEO Water Mandate Signatory to the ‘Caring for Climate’ Preservation of Biodiversity Committed to the Ten Principles in Human Rights Labour Standards Environment Anti – corruption Ethical Tea Partnership Living Environment Health & Nutrition Community Capacity Building Empowerment of Youth ISO 22000:2005 HACCP

OZONE FRIENDLY CEYLON TEA Accolade from Montreal Protocol in Canada for first ever Ozone Friendly tea in the world. Sri Lanka tea industry was awarded Ozone friendly status in 2007 for non usage of Methyl Bromide an Ozone depleting substance. Ozone friendly Ceylon tea supports the reduction of global warming. Environmentally friendly & ecologically pure tea. Helps an earth caring community to free the planet from pollution.

Unique Selling Points of Ceylon Tea

RE-EXPORTS (CEYLON TEA BLENDED WITH OTHER ORIGINS) Year Qty (MT) Value (Rs. Mn) (USD Mn) 2007 15,597 6,617 59.80 2008 18,577 10,683 98.61 2009 10,574 5,089 44.27 2010 18,607 11,567 102.30 2011 20,529 13,363 118.30 2012 13,907 11,405 89.46 2013 8,515 8,636 66.89 Source : Sri Lanka Customs

Tea Imports to Sri Lanka Year Quantity (Kgs) Value   (Rs. Million ) (USD M.) 2008 14,598,248 3,754.8 34.13  2009 9,960,129 2,979.4 27.08  2010 12,172,753 3,768.0 34.25  2011 11,406,044 3,770.4 34.28  2012 6,799,026 2,620.96 20.63 2013 5,083,763 1,778.87 13.78 Source : Sri Lanka Customs

Tea Imports to Sri Lanka (Kgs) 2010 2011 2012 2013 India 4,776,141 4,353,513 2,114,276 1,523,046 China 2,802,873 2,895,761 3,155,281 2,588,596 Kenya 3,871,167 3,690,453 1,335,224 794,991 Vietnam 352,203 97,909 154,260 68,750 Indonesia 207,068 182,620 29,840 4,000 Malawi 143,104 150,660 69,600 Germany 10,805 23,898 1,775 2,449 Taiwan 7392  - 150 Japan 900 220 U.K 9980 Nepal 1100 1250 Burma 3,430 Korea 14,240 TOTAL 12,172,753 11,406,044 6,799,026 5,083,763 Source : Sri Lanka Customs

MAJOR DESTINATIONS FOR CEYLON TEA 2011 Country Qty. MT % Russia 47.3 14.8 Iran 30.8 9.6 Syria 28.5 8.9 Iraq 22.2 6.9 UAE 21.5 6.7 Turkey 18.9 5.9 Azerbaijan 11.8 3.7 Japan 11.3 3.5 Kuwait 9.1 2.8 Ukraine 7.8 2.4 2012 Country Qty. MT % Russia 46.6 15.2 Iran 38.1 12.4 Syria 24.7 8.0 Iraq 23.4 7.6 Turkey 23.1 7.4 Libya 16.2 5.3 UAE 11.2 3.6 Azerbaijan 10.6 3.5 Japan 9.5 3.4 Jordan 9.3 3.0 2013 Country Qty. MT % Russia 45.6 14.2 Iran 38.4 11.9 Turkey 32.2 10.0 Iraq 22.2 6.9 Syria 21.0 6.5 UAE 17.5 5.4 Kuwait 16.0 4.9 Azerbaijan 10.8 3.3 Japan 8.8 2.7 Jordan 7.6 2.4 M.K Source : Sri Lanka Customs

Issues Facing Sri Lankan Tea Industry Exported to over 150 countries: No uniformity in standards applied by importing countries Lack of knowledge of consumer countries about good quality tea Low quality teas exploiting Ceylon Tea name Price War: undercutting Climate change Consequences – Extreme weather Dependent – EL NINO/LA NINA Phenomena play havoc

THANK YOU. Sri Lanka Tea Board E-mail: promotion@pureceylontea. com a THANK YOU. Sri Lanka Tea Board E-mail: promotion@pureceylontea.com a.com