Ceylon Tea’s survival hinges on quality and ethics, warns Dilmah Tea

By Nishel Fernando

The long-term survival of the Ceylon Tea industry depends critically on its ability to differentiate itself through uncompromising quality, ethical sourcing and value addition, according to Dilmah Ceylon Tea Company.

Dilmah Ceylon Tea Company PLC Chairman and CEO Dilhan C. Fernando’s comments, detailed in the company’s latest annual report, come against a backdrop of persistent global challenges threatening the sector’s sustainability.

He painted a picture of an industry grappling with intense discount pressure, changing demographics in traditional markets, relentless commoditisation, severe climate impacts and local production hurdles.

“The global tea industry remains challenging,” Fernando stated. 

“Crisis-related cost escalation and faint efforts at controlling food inflation in some territories resulted in intensified discount pressure. Too many tea companies yielded to that pressure.” 

He firmly positioned Dilmah against compromise.

“Our teas carry with them the livelihoods of workers, biodiversity of our country and the promise my father made ... making compromise in quality an impossibility.”

Fernando highlighted climate change as an existential threat. 

“Global warming is amongst the most significant threats to industry sustainability.” 

He detailed the impacts, including rising temperatures, erratic rainfall and extreme weather events damaging yields and ecosystems vital for fine tea. These global trends are amplified in Sri Lanka by “rising labour costs, stagnant productivity, an aging workforce and the urgent need for industry modernisation”. Despite the headwinds, Fernando noted a significant opportunity: the securing of Geographic Indication (GI) status for Ceylon Tea. 

“This represents an important step towards protecting and strengthening our unique origin proposition on the global stage,” he said, stressing the need for industry-wide alignment to leverage this advantage. The report acknowledges the global tea market continues its steady expansion, projected to reach US $ 20.4 billion in 2024, with a 5.7 percent CAGR through 2034. Significant growth is forecast for tea bags (doubling to US $ 12.9 billion by 2031) and the commercial (HoReCa) segment (growing to US $ 5.1 billion by 2031). Tehe value-added segments like wellness infusions, premium blends and RTD formats are also poised for exponential growth, driven by millennial and Gen Z demand for convenience, health and lifestyle alignment.

However, the report underscores that success in this evolving landscape demands differentiation: “continued success of brands will hinge on their ability to deliver differentiated offerings and in particular sustainability-driven storytelling.”For Sri Lanka specifically, the report warns that the recent benefits, a short-term uplift from the rupee depreciation and opportunistic price hikes, due to global supply constraints, are likely unsustainable. 

“Ceylon Tea has become increasingly expensive, particularly in US dollar terms, making it less attractive to price-sensitive, high-volume markets.”

This reality, Dilmah argues, makes differentiation non-negotiable: “the long-term viability of Sri Lanka’s tea sector rests on its ability to differentiate through quality, ethical sourcing and value addition. Branding, storytelling, sustainability and origin authenticity will be crucial levers.”  Dilmah also calls for essential government support through trade agreements and industry-wide quality assurance.