A lesson in specialisation from Sri Lanka:

A recent article in the New York Times documents the story of Sri Lankan tea producer Merrill Fernando. During the 1970s, Sri Lanka’s old fashioned tea growers struggled to compete against foreign producers who used more efficient and modern production techniques. Facing bankruptcy and aware of Sri Lanka’s comparative disadvantage in mass producing cheap tea, Mr Fernando chose to specialise in providing higher quality teas to more discerning customers.

The result has been a tremendous success. His company, Dilmah, is now the sixth largest tea brand in the world, with products selling in 92 countries. Recently he has diversified into “tea tourism” and opened several “tea bars,” expanding the business and creating more employment opportunities.

While lumbering businesses in the U.S. and Europe continue to appeal to their domestic governments for protection against foreign imports, the story of Dilmah demonstrates the merits of flexibility. Through change and specialisation –  in this case in upmarket teas – Dilmah can offer a product people want at a price they can afford and without harming consumers by demanding discrimination against cheaper imports. Hopefully this is an example of good trading that businesses worldwide can learn from.