Consumer Goods

Our export arm, Sunshine Tea (Pvt) Ltd, is a prominent exporter of premium Ceylon tea, catering to many clients across North America, Europe, the Middle East, China, and the broader Asia-Pacific region, even as we look further toward the east in a bid to expand our horizons. The Company’s export portfolio spans many varieties of tea, including its flagship brands AvanTea, Gordon Frazer, and Teazup. The business also engages in contract packing and bulk exports, catering to a spectrum of clients under both private label and institutional arrangements. Over the years, Sunshine Tea has earned a reputation for its high-quality tea offerings, renowned as a reliable contributor to foreign exchange earnings for an import-dependent country looking to boost its external reserves position.

The Company’s operations are built on a hybrid model that combines value-added exports such as branded tea bags and flavoured blends with high-volume bulk tea sales, the latter of which comprises 60-65% of our total exports. The bulk segment has seen renewed traction over the last few years responding to a steady rise in the consumption of ready-to-drink (RTD) and bubble tea beverages. Sunshine Tea is already well-embedded in this emerging supply chain, particularly in East Asia where the Company supplies Ceylon tea as a base component for RTD blends sold under various regional brands. This has allowed us to build a quiet but increasingly strong strategic presence in rapidly evolving beverage markets across China, Japan, Taiwan, and Hong Kong.

Over the last two years, Sunshine Tea has been on a newly conceptualised expansion drive targeting the Far East due in part to strong growth potential and a degree of risk mitigation observed in that region. While we still very much continue to serve legacy clients in Europe and the Middle East, our ongoing pivot to Asia makes strategic sense given that it’s built on a calculated response to global market volatility and shifting consumption trends. Unlike some of their Middle Eastern counterparts, Far Eastern clients are generally seen as more reliable, with better credit terms and longstanding commercial relationships already in place, though this by no means suggests that we are compromising on our value proposition to existing markets.

Operationally, Sunshine Tea is vertically integrated and highly automated, with a highly advanced factory that handles some eight million kilogrammes of tea every year. The facility covers everything from cleaning and blending to tea bagging and packaging, supported by an in-house tea room and laboratory tailored for chemical and microbiological analysis. Meanwhile, a recent investment in warehousing has also served to consolidate the Company’s logistics capabilities. What was once an outsourced function is now managed almost entirely in-house, reducing costs and tightening our control over the overall supply chain.

With more than 100 skilled personnel and an annual turnover exceeding USD 18 Mn., Sunshine Tea has emerged as a major player in Sri Lanka’s tea export ecosystem. Backed by an impressive portfolio of international certifications – ISO 9001, FSSC 22000, GMP, Fair Trade, Rainforest Alliance, Halaal, SMETA, and SGP (Green rating) – our products speak to both our technical rigour and its ethical commitments.

In an increasingly commoditised market, what makes Sunshine Tea stand out is not just quality or volume, but a keenly cultivated strategic adaptability. Whether navigating the growing appeal of specialty teas or reconfiguring operations to remain cost-efficient in an economy battered by inflation, the Company remains a forward-looking exporter; one attuned to both the pulse of the global consumer and the persistent structural constraints that threaten to diminish the industry at home.

Sunshine Tea closed the 2024-25 financial year with strong topline growth, recording an 11% rise in export volumes as dollar and rupee revenue rose by 22% and 19% respectively. This was despite an appreciating rupee, which, while a welcome development on the domestic macro front, inevitably and invariably poses a challenge to any export business. Occasional fluctuations of the currency throughout the reporting period in spite of the overall appreciation also proved a hurdle but not one the business was unable to withstand. This growth, however, was driven by an unusual spike in demand for value-added products, particularly tea bags, with no corresponding increase in global consumption. We see this as a short-term surge rather than a sustainable trend, with demand already showing signs of softening as the new financial year begins.

Operationally, the Company continued to streamline during the reporting period. A major shift was the internalisation of warehousing – up from 20% to 80% – with the installation of a new racking system for raw materials that until now had been stored off-site. This move aimed to cut costs and protect margins amid rising input expenses.

Product development remained limited during the year under review, in line with Sunshine’s contract-packing model. While our own brands such as Zesta, AvanTea saw minor adaptations for markets like Ghana, innovation in 2024 was largely client-led. The vast majority of Sunshine’s output continues to be bulk tea and client-branded products, accounting for roughly 60-65% of total exports.

In terms of expansion, the Far East looked increasingly promising as a growth market. Sunshine Tea deepened its presence in China, Japan, Taiwan, and Hong Kong, targeting the expanding RTD and bubble tea segments. We made concerted efforts to boost visibility for our products by taking part in major trade fairs in China; the onboarding of a regional agent last year also marked a renewed push for brand-building, particularly under Zesta, which Sunshine Tea now exports following Group-level integration.

In marked contrast to this, challenges continued to plague traditional markets. In Iran, for instance, where an oil-for-tea programme continues, payment cycles stretch up to six months, straining exporter cash flow. Russia remains constrained by geopolitical and financial restrictions. Meanwhile, the Middle East still consumes black tea, but overall worldwide demand growth for a strong cuppa is tepid compared to the global shift toward herbal, flavoured, and RTD teas.

In terms of the overall health of the industry, tea production in Sri Lanka remained subdued during the 2024-25 financial year. National output rose by a mere 2%, well below Tea Board forecasts of 7-8%. Weather conditions, the lagging effects of the 2022 fertiliser ban – which had proved calamitous to the entire trade – labour shortages, and low replanting rates all contributed to what remained a dismal domestic picture. With constrained supply, even well-positioned exporters face a ceiling on how much they can scale, which does not bode well for the export sector as a whole in light of growing concerns about a global recession.

On the policy front, even as the economy promises to grow sustainably following the remarkably rapid recovery over the past two years, looming fiscal changes, the removal of the simplified value added tax (SVAT), and possible changes to VAT deferments pose some challenges worth preparing for. Resultant macro developments are likely to tighten cash flows and increase financial costs for exporters already grappling with global price pressures and stiff competition from lower-cost producers such as India and Kenya.

Sunshine Tea’s performance during the reporting period was not merely a response to market opportunity but a show of strategic restraint. Capitalising on demand shifts, the business tightened operations and laid the groundwork for long-term regional expansion, particularly in Asia and Africa, without venturing too deep into uncertain terrain. In many ways, 2024-25 was a year defined less by exuberance than by quiet recalibration, with Sunshine Tea emerging as a steady hand in a turbulent trade.