Innovative Value Addition in Tea Industry: Sri Lanka vs. Japan

Abstract

Abstract Sri Lanka is the third largest tea exporter in the world but nearly 60% of its exports are comprised of bulk tea. Bulk tea secures the lowest prices in world tea market. Sri Lanka earned an average value of US$4.83 per kilogram from 2014 to 2018 for its tea exports, compared to US$24.24 per kilogram in Japan, a highly innovative tea-producing country. The objective of this study is to examine the root causes of product innovation in Sri Lanka, as compared to Japan, by conducting a historical analysis of literature followed by field surveys in Sri Lanka and Ureshino, Japan. About 98% of the tea produced in Sri Lanka is black tea and has mainly focused on incremental innovations in blending, flavoring and packaging than radical innovations. Japan produces a large number of innovative beverage and non-beverage products from tea. Having a large number of small and medium processing factories (4698), Japan’s product innovation capabilities are mainly attributed to firm-level factors and support services. This study recommends that Sri Lanka should link together farmer organizations, processing factories, research institutes and universities to make its tea industry more innovative.