At the recent Colombo International Tea Convention marking 150 years of Ceylon Tea, I was asked to speak on a panel on ‘Trade and Finance’. Amidst all the discussions around ethical tea, branding, and supply chain, I was keen to add a new perspective. I was also very conscious that I was one of only a handful of non-tea industry experts speaking at this event. Yet, with that disclaimer, and asserting that I would draw from around the tea industry to provide some implications and ideas for the tea industry, I made three points – one on finance, and two on trade. I’ve captured them here – expanded and extended from the original remarks.
1. Ceylon Tea – First to Launch a Blockchain Transaction in Tea?
After 150 years, the tea trade today is ideally placed to leverage on the blockchain revolution taking place today. Blockchain is a virtual transactions process that has huge potential for trade finance, and is already being piloted. It works on a distributed ledger technology system, where end to end transactions are done seamlessly and with greater transparency and predictability. We are seeing this with several commodities already and many pilots blockchain transactions have been done recently. Last year, Barclays Bank was the first to do a blockchain letter of credit (trade) transaction between Ornua (formerly the Irish Dairy Board) and Seychelles Trading Company. The Commonwealth Bank of Australia and Wells Fargo did one for the cotton industry, HSBC worked with Bank of America Merril on replicating a letter of credit on a distributed ledger, and it has been used in the grain and fisheries industries.
It’s definitely something for our banks and our big tea trading houses and commodity brokers to look at. Having marked 150 years of this traditional industry, Sri Lanka should now be at the cutting edge of it – we must be the first country in the world to do a blockchain transaction for tea. This will also add to our repositioning globally as a modern beverage brand. While local banks may take time to get onboard, international banks like HSBC and SCB operating in Sri Lanka should lead the way in making this happen.
Things are certainly moving fast in the world of blockchain pilots. This week the largest blockchain consortium, R3, announced that thirteen global banks have built a prototype trade finance application on R3’s Corda platform. According to Global Trade Review, the app, hosted on distributed ledger technology (DLT) will streamline the processing of sight letters of credit and is one of a number of trade finance apps R3 will be piloting on the platform this year. Eleven of the banks involved are Bangkok Bank, BBVA, BNP Paribas, HSBC, ING, Intesa Sanpaolo, Mizuho, RBS, Scotiabank, SEB and US Bank.
– from GTReview, ‘R3 Corda reaches trade finance milestone’ https://www.gtreview.com/news/fintech/r3-corda-reaches-trade-finance-milestone/
I was shared this excellent white paper on how blockchains can help enhance transparency in product supply chains, by R3’s Niki Ariyasinghe. With Sri Lanka wanting to strengthen the Ceylon Tea value proposition of being an ethical, clean tea with high quality, discoverability and transparency in the supply chain becomes ever more important. Blockchain can help with that, as shown in this paper.
AmEx has this useful primer on the application of blockchain specifically in the trade finance space.
2. Ceylon Tea – Not Just a Beverage, But a Lifestyle
We often think that tea is competing in the hot beverage market, or more accurately, in the highly competitive beverage market. I think we need to change that. Tea should be playing in the lifestyle market. During the whole Tea Convention we heard many speakers extoll the virtues of Ceylon Tea – in terms of health, wellness, cleanliness and purity. It is then a logical extension of that that our tea should play in the lifestyle market – ‘its not just a beverage, its a lifestyle’. This proposition can also be aligned to Sri Lanka’s new push on wellness tourism as a new export sector (under the new National Export Strategy).
Increasingly the healthy lifestyle segment is a growing consumer segment around the world – especially among young people. More and more people care about what they eat and drink (organic, all natural, pure, clean, poison-free, environmentally conscious, etc.), and what beverages complement those smart choices. They should be seeing tea as an integral part of that lifestyle, and be choosing tea as a lifestyle choice rather than a beverage choice.
This also then means policy makers and trade promotion agencies need to reorient how they see the tea trade, or the trade aspect of tea. While it used to be that in Sri Lanka the tea export sector was looked at by the Tea Board or the Export Development Board, under this new positioning, tea needs to be promoted much more holistically.
In the opening session of the Convention, Tea Board Chairman Dr. Rohan Pethiyagoda mentioned that there is little empirical research on the medicinal benefits of tea. This was reiterated by the head of Twinings who spoke later and noted that, “There is no body of excellence for research on tea’s health benefits’. If we are to play in the wellness and lifestyle space we need to change that. Part of Sri Lanka’s tea promotional budget (that’s unfortunately already stuck in Government) should be unlocked to not only spend on ‘version 1.0’-type promotions like tea trade fairs, but to spend on commissioning medical papers from influential academics in prominent international universities or health research institutes.
3. ‘Your Ceylon Tea’ – Artisan, Curated, Delivered
Looking at the twin themes of the Tea Convention, I noted that one of them was ‘Spontaneitea‘.
A friend of mine is a banker in London, and whenever he wants to give a unique gift to a client, he orders a special bottle of wine from his favorite wine growing region of France. On demand, through e-commerce. We should be doing that in Ceylon Tea. When a consumer in London would order a speciality tea packed exclusively for him, personalized with his name, from his favorite of the seven tea-growing regions or from a single estate, with a note from the head tea maker at the factory, and delivered to his desk in 72 hours.
A millennial consumer – who increasingly wants to make unique and authentic choices – sees a video about a particular elevation of Ceylon Tea – say, Dimbulla – being used by a chef on a cooking show, and decides right away that she wants to order that speciality tea right from Sri Lanka and in time for the weekend when she has time to cook. E-commerce and logistics enables her to do that, and our tea brands must cater to it.
This also strengthens the link between tea and and tourism. If a honeymoon couple on holiday in Sri Lanka visited a Uva-region estate and factory during their trip, fell in love with that experience and the tea they tasted there, and wanted to order that particular tea spontaneously in the future, e-commerce and customization can enable that.
I remember Mr. Anil Cooke of Asia Siyaka Commodity Brokers telling me a few months ago that there had been frost on the high-grown estates a few days prior to that, and how this event would completely change the flavor profile of the tea made from that day’s picking. Imagine being able to get a customised order of getting that out to discerning consumers who have subscribed online to speciality tea packs. A limited special edition with that unique flavor profile, a collector’s pack of teas made on that frosty day in Talawakelle, at a premium price of US$ 500 for a 500g pack (instead of just US$ 5 for a 1 kilo of bulk tea).
Take a look at an equivalent model for coffee – with so many subscription models for coffee around the world, bringing personalized and curated coffee packs to discerning consumers.
The Roasters Pack in Canada allows you to subscribe from hundreds of coffees, delivered to your doorstep every month. Similarly Craft Coffee promises “fresh-roasted coffee, delivered when you need it” (subscription) and “tailored to your taste” (curation). Another site, MistoBox, promises that, “Your coffee curator reviews your preferences and selects a coffee for you from 300+ coffees” and “Your coffee is fresh-roasted to order by one of our 40+ amazing artisan coffee roasters”. There’s dozens more examples.
Of course, there are a few of these in tea as well, like Bruu Gourmet Tea Club, Teavana, and TeaBox. But I strongly believe that Ceylon Tea can have its own dedicated tea subscription service to take curated teas global, and direct from our estates and factories straight to the consumer – true to the spirit of Ceylon Tea of authenticity and purity.
An important caveat in all this of course is that Sri Lanka would need to rethink the tea auction system, because right now majority of tea that is traded is mandatorily sold via the auction only. Only very small quantities are permitted outside of it (around 10%). Yet, while our tea export that has gone from bulk tea to tea bags and other value added products, Ceylon Tea now needs to leverage much more strongly on the growing e-commerce market, and there are huge opportunities for capturing much more retail value right here in Sri Lanka through this.
For a wonderful website on the ‘History of Ceylon Tea’ recently launched by Dilmah, visit http://www.historyofceylontea.com
For an analysis of recent rends in tea export and drivers and challenges in the year ahead, read this article by my colleague – ‘Brewing Resilience Amidst Challenges’ https://www.chamber.lk/wp-content/uploads/2017/06/TIPS-Vol-21-22-June-2017.pdf