Welcome to the Tea Tailors market analysis for the Sri Lankan tea industry in 2023! Delving into the latest data, this article explores key trends, export dynamics, and emerging opportunities within the flourishing tea market. As we navigate through the intricate details, uncover the insights and potential contributions this dynamic landscape holds for tea enthusiasts and industry stakeholders alike.
Tea production by elevation (million kg’s)
Low grown tea continues to dominate tea production in Sri Lanka, owing to its unique terroir. Cultivated between sea level to 600m, low grown tea receives abundant sunshine year round, coupled with dry and moist conditions, endowing it with a distinctive colour and taste. While low grown tea production has remained nearly consistent between 2022 and 2023, overall tea production (excluding green tea) has increased 1.79% to 254,155,850 kg’s.
Monthly average price by elevation
1 USD = 365 LKR (Jan 2023)
The average price per kilogram for low-grown tea continues to outpace tea grown elsewhere in the country. Tea manufactured in Sri Lanka is sold through the Colombo Tea Auction, which is the largest single-origin tea auction in the world. Attractive auction prices for low grown tea, coupled with strong demand from buyers, are the primary factors in its robust and growing production quantities annually.
In 2022, the average tea price soared in April and May owing to Sri Lanka’s economic crisis. Low grown tea averaged Rs.735/kg in January 2022 and ballooned to Rs.1,722/kg in September of the same year. Prices in 2023 were considerably more stable but have not returned to their pre-crisis and post-Covid levels and may not for some time under current macroeconomic conditions.
Tea export value and quantity by type
Tea Export Quantity
Tea Export Value
Bulk tea and tea packets claimed the lion’s share of total Sri Lankan tea exports in 2023, with the latter securing the top spot by exporting over 108 million kgs valued at nearly Rs.180 billion. Although the quantity of tea packets exported decreased by 2.5% from 110 million kgs in 2022, the export value increased by 6.9% during the same period, representing a substantial gain of approximately Rs.11.7 billion. In contrast, the quantities of green tea and tea bags exported both rose by 7% between 2022 and 2023, while instant tea and bulk tea experienced the largest year-on-year declines (-8.9% and -6.5%, respectively).
Despite their substantial export quantities, both bulk tea and tea packets fall short in terms of the greatest value per unit exported. Notably, the value of exporting one kilogram of green tea stood at Rs.4,010, compared to only Rs.1,490 for tea in bulk. Several factors may contribute to these figures, such as economies of scale or value addition. It is worth noting the seemingly high value per unit of instant tea, green tea, and tea bags exported, in contrast with their lower export quantities. This may present valuable opportunities for new entrants to Sri Lanka’s centuries-old tea industry.
Conclusion
While immediate trends in the Sri Lankan tea sector show positive signs, such as enhanced stability in auction prices and a surge in tea production, the focus should shift towards establishing long-term goals to bolster earnings and industry resilience. The prevalence of bulk tea in total exports suggests untapped potential for domestic value addition processes. It is crucial to ensure that the favorable auction prices for low-grown tea align with actual demand, preventing oversupply issues. Furthermore, the allure of high auction prices for low-grown tea might incentivize producers to increase output, potentially compromising quality for the sake of higher margins.
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