Transporting tea is more dangerous than consumers realize. Challenges include pirates and gangs of highway robbers. Yet, advancement is in the wind, with global positioning satellites (GPS) on ships and trucks, plus expansion of WTO and labeling requirements. Transport remains a costly worry to tea industry leaders. Planning is difficult, and most nations have no reliable data on tea export tonnage. The industry faces stress, although long-term progress looks likely.
The tea trade is gradually orienting export to the value-added sector. Hasitha de Alwis, Sri Lanka Tea Board director, reports, “an increase of over 13,000 tons compared with last year on packet exports.” Listed price for this export increased by almost one-third over last year. The teabag export format also increased, by nearly 8% in weight, and almost one-third in listed price.
Export statistics do not reveal a complete analysis of tea type sold internationally to consumers. A wide trend is more “average” tea retailing in attractive, branded packaging. Such tea can be exported in bulk for budget transportation, but then repackaged for point-of-purchase branding. A different market is the re-export trade, which is often premium tea. This extra transportation step is generally hidden from consumers (and complicates quantitative analysis, as the same tea has been exported at least twice).
Re-export is great news for shipping business, but an extra cost to tea companies. Laws pertaining to re-export are contradictory and frequently ignored. Paradoxically, tea that is properly exported may run afoul of laws at point-of-purchase, or even earlier, at customs.
A good example of a careful company involved in diverse re-export is Twinings. Twinings sold in North America ships from the U.K., which does not grow any tea. Twinings re-export method is bifurcated, with tea retailing in tins shipped pre-packaged (tea already in the tins), and tea retailing in cardboard boxes shipped as bulk (not yet packaged for sale). Thus, Twinings headed for North America is transported in two formats to the same North Carolina hub. The Greensboro factory blends and fills for teabags, and then packages in cardboard boxes.
While most tins are manufactured in Asia (with low labor costs), Twinings tins are U.K.-made. Tea tin re-exportation, in general, is horribly complicated. Tin mis-labeling occurs in three ways: wrong location of tin manufacture, wrong filling location, and wrong location-of-origin of the contents (the tea itself). Twinings tins are the most advanced that I know of in terms of labeling regulatory adherence. Incentives are legalistic and economy-of-scale.
Wondrously, a single Twinings tin displays 11 languages. Thus, one manufacturing “run” can maximize quantity advantage, with each tin suitable for shipping around the world, pre-made for retail sale in dozens of nations. Such packaging modernity is increasingly necessary, because export globalization places intense pressure on economy-of-scale factors. Twinings utilizes the bottom of the tin for additional nation-specific regulations, arranged nicely in alphabetical order, from Argentina to United Arab Emirates.
Twinings provides a valuable service to the whole tea trade by conveying educational information to the consumer. The English Breakfast tin reads on the front, back and side, “a blend of Ceylon and Indian teas.” The word “blend” carries regulatory meaning often misunderstood by executives. Laws differentiate between blending and packing. This labeling differentiation is regularly violated by tea companies, especially cheaper businesses. The English Breakfast tin, in a good-faith covering of the regulatory bases, reads on the front “Blended and packed from imported teas by R. Twining and Company Limited, London, England” and on the bottom, “Product of UK.”
Too often, labels list only the nation to which the tea was transported for blending, implying the nation-of-blending is the source of the tea. This can be legal. Companies take advantage of this loophole, stating or implying, with narrow technical accuracy, an importation source, but without a single statement listing the producing nation. This keeps the consuming public ignorant of tea sources. If the nation-of-blending is more prestigious than nation-of-origin, a company has an incentive to ignore the producer. In potential violation of law, some tea is not even blended, but merely packed straight from bulk shipment, with the packing in a nation separate from that of origin, and no mention of source. Mere re-packing, without blending and without mentioning single-nation origin, brushes against U.S. law, and seems unethical to me.
Import/export confusion abounds. Taylors of Harrogate ships “Afternoon Darjeeling” to the U.S. in an attractive cardboard box, using black print on white background, with gold border around floral design. The 50-teabag box reads, “We select fine teas from the highest tea gardens in the foothills of the Himalayas,” and under the heading “Ingredients,” states “Darjeeling tea.” Also printed on the box is “Packed in England.” However, the same box’s hygienic over-wrap reads in full regarding source, “Tea, produce of more than one country.” The Darjeeling Planters Association is particularly sensitive to such confusion over origin, and recently made Trademark history with a TM’ing of “Darjeeling.” But, re-export still perpetuates a blurry definition of tea terms, including Darjeeling.
A further complexity occurs when a company ships out of multiple ports from one nation-of-origin, a tactic generally restricted to the largest tea businesses, such as Tata Tea Ltd, part of the Tata Sons globally prestigious empire based in India. The patriarch, the world’s leading Zoroastrian businessman, is Ratan N Tata. The Tata tea business is run by Homi R Khusrokhan, managing director, and Percy T Siganporia, deputy managing director.
Tata Tea refers to itself as the “world’s largest integrated tea operation.” Under Siganporia’s authority, subordinate executives were authorized for the first time to collect and release certain export data. One single shipment was 2,000 metric tons, large enough to dwarf many tea companies’ total annual output. This shipment was to Iraq under the United Nation’s aid program known as “Food for Oil.” For the U.S., Tata has shipped up to 123 container-loads of instant tea in a single year.
The Tata system possesses an admirable reputation earned over generations: well-managed, concerned with ethics, and highly focused on quality control. The headquarters office is in Calcutta, the northeast export hub where the Kolkata Port Trust runs the world-class docks there and in nearby Haldia, comprising India’s only super-port.
The federal government has oversight for Kolkata ports, under the Ministry of Shipping and Transportation. The tea exporter’s trade group is Calcutta Tea Traders Association, the CTTA, not to be confused with another nation’s CTTA, the Colombo Tea Traders Association (nor with Colombo’s acronymic TEA, Tea Exporters Association).
The Colombo Port goes by the call letters, CMB. The entire island nation relies on this one port, and virtually all Sri Lankan tea is exported. A trend here is stronger security, utilizing Sri Lanka’s Navy. The Navy budget is relatively high because of a rebel flotilla, the Sea Tigers. The Western world too often ignores the existence of this rarest form of separatist-extremist organization, a sea force. Sri Lanka’s Navy now purchases fast-attack vessels from Israel, a shipping transaction delayed by ethno-religious factions. Sri Lanka did not previously recognize the existence of Israel, but now maintains diplomatic ties. The island’s main ethno-religious minority is Hindu, brought from India long ago to work the tea fields. Muslims are a smaller minority, but with political clout as a Parliament coalition partner. Sri Lanka is majority Theravadic Buddhist. In this nation’s case, the tea trade is not a mere passive bystander in the new global ethno-religious conflict, rather a geopolitical player whose international role is underpublicized in the Western press.
New corporate structures are emerging out of Sri Lanka to handle export. As of the beginning of this year, John Keells Holdings, the largest capitalized company on the Colombo stock exchange, removes from dormancy Gordon Frazier Ltd, a company acquired with the buyout of Whittalls. Gordon Frazier becomes the vehicle for tea export, and will co-exist under the JKH umbrella with tea brokerages and joint ventures in plantation management. To prevent appearance of violation of self-dealing laws, two directors resigned from the holding company. The new amalgamation moves beyond Asian-style intertwined corporate structure, and the importance of this unique export entity is demonstrated by the selection of Michael De Zoysa as managing director. De Zoysa has over 30 years tea experience, including several top directorships with Unilever Ceylon Ltd.
This newborn export enterprise brings De Zoysa back into the tea trade, which he left to head a telecommunications company. The challenge to transparency regulations is uncommon for the tea industry, not typical of Asian enterprise, because brokering tea must appear “at arms length” from profit-making caused by managing or exporting the product. And, John Keells Ltd brokerage recently became Ceylon’s leading broker. The complexity is vast, involving almost 30 separate companies. Entering the era of export globalization, historically socialist nations are moving toward impartially pro-business government oversight and accounting-firm independence. De Zoysa will likely oversee an eventually highly profitable business, able to strategize faster and longer-term than much of the competition.
A new generation of governmental leadership is forming, with recent elections in Sri Lanka and fresh appointments from India. For the first time, India posts a Tea Board Branch Director, K. Sanjay Kumar, IAS, who combines expertise in multiple indigenous language, politico-military affairs (as a former Magistrate) and tea (as former managing director of Assam Tea Co). The Sri Lankan elections are also important progress. Colombo may now permanently shake off one transport obstacle, the insurance “war premium” levied on ships docked in corporate-designated “war zones.” This insurance fee is a wasteful payment to wealthy nations for the right to export tea to them.
In New York and New Jersey, The Port Authority is surviving, although its base in the World Trade Center is depressingly destroyed. Some staff bravely relocated to the port at Elizabeth, New Jersey, but countless records are lost forever.
At New Orleans, a port long known as a coffee hub, tea imports are quietly gaining marketshare. Before my phone call, New Orleans had not specifically analyzed tea imports, and their first best estimate was several orders of magnitude lower than the final calculation. From January to September of 2001, the most recent period available, New Orleans was port of entry to a surprisingly hefty 8,280 tons of tea. This upward trend has several components. The largest component is low-cost tea from Argentina. This type of tea transport, totally within the Western Hemisphere, is also gaining from Brazil. New Orleans’ slogan is “America’s Most Intermodal Port.”
A second type of tea arriving at New Orleans is trans-Atlantic, from Germany, Netherlands and the U.K. Such re-export is generally superior quality. James Finlay & Co (US) Inc. took the U.K. shipment. A third type of tea import, a new development for Port of New Orleans, is the container-size shipment. A pioneering container-load of tea from South Africa was taken by Universal Commodities of Bronxville, New York.
The largest transported size is the 40-foot container. Within the container, the largest individual packing size is now one metric ton, via the trademarked Super Sack. Super Sacks are expensive, but uniquely spouted, seamed, looped, flexible and re-usable.
Complexities still occur in transportation at the seemingly simplest domestic levels, such as truck-driving, with hazards and expense hidden from the public. In India, tea truckers in Assam are held up at gun-point, perhaps several times in one trip. This extortion is worsening. Many of the extortionary groups are separatist-extremist organizations, supported indirectly by Pakistan and by corrupt Assam officials who receive kickbacks. These militant separatists operate in Assam, but encamp across the border in Bhutan, where the Indian army historically does not tread. These extremists cost the tea companies dearly, and last year kidnapped a tea manager’s seven-year-old daughter. With the new global War on Terrorism, such activities, gradually, will undergo elimination.
The future of tea export requires proactive, creative thinking, with long-term, objective balance and strong-willed strategizing. This scenario necessitates a nurturing, formal establishment, one with government connections, but relatively independent, pro-business and aware of the reality of export globalization. Such a future-oriented establishment has finally come into existence. The Indian Institute of Plantation Management (IIPM) is now, after a long wait, operating as master of its own campus. The IIPM merits this permanent self-standing existence, under the guidance of Dr. Subhash Sharma, author of numerous internationally distinguished business books. IIPM goals include improvement in product quality and increased branding.
Competitive advantage is today’s rule, in the harshly profitable world of export globalization. The trend toward value-added product will continue, whether shipped directly from nation-of-origin or re-exported. Transportation does expose the industry to extremists’ organized violence, but here, too, progress is newly possible. The recent elections in Sri Lanka yield pro-business outcomes, including probable negotiations with the LTTE militants, which should allow socioeconomic progress in a nation dependent on tea export. Progress, whether waged from the War Room or the Boardroom, is not inevitable, but looks likely. Tea remains the world’s highest-consumption purchased drink, relied upon by billions of people for hydration and cultural tradition, and by tens of millions of people for employment. With proper leadership in the nascent convergence of political, military, social and economic sectors, gross revenue will rise and more tea than ever will be shipped.
Randy Altman has advised the United Nations and other transnational organizations, and has held directorships and officerships at various non-profit corporations. He also holds several adjunct academic appointments.