History of Ceylon Tea

The curtain fell in June 1998 on one of the oldest British styled institutions, set up for the merchandising of a divergent product such as tea. The sound of the “Gavel," the emblem of authority through the centuries that had remained as the Harold’s wand for transferring the ownership of the many millions of tea sold at the auctions, will be heard no more. It is no doubt a sad idea, but in today’s world of commerce, the London auction has failed to move on with the developments that have taken place in other fields.

Through their direct involvement on the production side, commencing with plantations in British India, followed up in Sri Lanka, and later shifting their bases to East Africa, London became truly an international centre for the marketing of tea. London is the only Auction Centre in the world that is not a producing country, but has been marketing teas from numerous producer countries.

London attracted widespread buying interest, where teas from a great variety of producing countries were regularly offered in competition with each other. London, because of its strategic location, provided a centre for the re-export of tea to over fifty destinations.

The auction system was acclaimed as the universal remedy for the marketing of tea. The inauguration of this system in London helped to establish a global system of tea auctions in most producer countries, thereby creating a world market for tea. This arrangement worked perfectly as long as the world’s tea production was under British control. As the industry in the producer countries developed, and became more matured, they were looking for defects in the system.

Prior to world war two, more than sixty percent of teas produced by British interests the world over, was marketed in London. After the cessation of hostilities, London auctions did not reopen until 1951, whereas sales were resumed in Calcutta in 1946, and in Colombo in 1947. Due to the problem of disposal, new auction centres were started in other producer countries.

The Chittagong auction commenced operating from 16th July 1949. East African auction centres began channelling their own teas through Nairobi in 1956, Mombasa in 1969, and Limbe in 1970. India opened up auction centres in Cochin in 1947, Coonoor in 1963, Amritsai in 1964, Gauhati in 1970, Silguri in 1976, and Coimbatore in 1981.

Most producer countries after having taken the clue from Britain, were fast to develop their own methods of marketing tea. This was all done at the expense of London. The post war period witnessed a sharp drop in the quantities consigned for London auctions. In contrast, quantities sold at the auction centres in producer countries have increased, and for 1996, Sri Lanka had consigned over 95% of its production through the Colombo auctions.

Marketing of tea in the countries of origin has a direct attraction to the producers, as it converts their produce into cash within a short period of time. Further, the change of ownership of plantations has also altered the balance in favour of domestic auctions. London does not receive the support of most of our regular buyers, who between them keep the Colombo market active. The Middle East sector, and the CIS along with the Russian federation did not operate in London, with the result producers were forced to brace Colombo, to obtain the maximum support for their teas.

London failed to keep abreast of local prices. The pattern of tea exports to the UK itself has changed, and the later trends indicated that the London auction was fast losing its importance as a source of supply to the British consumer. They started to operate more forcefully in the countries of origin, to secure their requirements. It was estimated that only about 15% of the tea consumed in the UK appear to have been purchased in London.

In addition, a number of indirect advantages were identified, that benefited the country in the long run if all Sri Lanka teas are sold locally. If all activities associated with the export of teas were conducted in the country, the earning power of both the broker and the shipper would improve. Employment opportunities in the country were bound to look up, and additional avenues for all those associated with the industry to enhance their earning power surfaced. A new perspective dawned to local exporters. With the tea industry now looking up, there will be greater opportunities for value addition, and with it the net foreign exchange earnings were bound to increase.

The London auctions no doubt served a very useful purpose during the pioneering days of tea marketing, but today, it has outlived its usefulness. The decision to dispense with the London auctions would have been taken after a great deal of deliberations amongst the members of the British tea trade. This forma is a very close fraternity of tea persons, and it would have been a very difficult task for the few people in authority to pass the ultimate resolution to wind up operations. This would have been one of the most intricate issues that surfaced during this century, for the British tea trade.

The expected shadow did fall on the most celebrated locations such as Mincing Lane, The Plantation House, Sir John Lyon House, and the London Chamber of Commerce Building, that acquired fame and esteem, due to its involvement with tea. Tea will not be traded in these locations any more. and the London tea trade will have to reset their sights, if they are to continue in tea business. This, no doubt is going to be a trying time for those Britishers involved in tea, but with the experience gained through centuries in tea marketing, they will evolve a method to remain in business.

This news no doubt came as a surprise even to those outside Britain, as the auction system originated in that country in the 17th century, for the sale of ancient books and artefacts, where its proper assessment of its true value was found difficult to determine. The first sale of this nature of which there is any record in England, was tried out in 1676 by a booker seller called Cooper. He prefixed his catalogue of rare books with “readers, it had not been unusual here in England, to make sale of books, by the way of auction, but having being practised in other countries to the great advantage of both buyer and seller, it was therefore conceived, for the encouragement of learning, to publish the sale of these books in this manner of way."

The tea auction was an institution initially set up for transferring extensive quantities of tea from China, where it was grown, to the Western world, where it was so eagerly consumed. Monopoly had been the name of the game, and this had left a permanent mark on the reputation of the British trade, and the marketing of tea was no exception. The public outcry was against the British East India Company, who held the monopoly for the conveyance of China tea to Europe.

It was only in 1836, that serious notice was given to this shortcoming in monopolistic form of trading, and for the first time, it was decreed that every chest must be auctioned at East India House. This in a way was a break away from the normal machinery of commerce.

The East India Company, being a quasi-government body, was able to enforce the law. In the midst of such accusations, the authorities felt that it was more prudent to dispose of the cargoes by public ‘outcry’ at the auction rooms rather than by private deals, where there was rich scope for corruption.

It is estimated that in the free world about 75% of the tea produced is sold through the auction system, and it had been so for the about 158 years. Marketing of tea through the auction system is the most popular method of disposal of tea It is the very nature of tea as product of infinite varieties that has made it to retain this system for such a long time. It is said that the quality of tea depends as much on nature as on man. The jat of the tea bush, soil, altitude, climatic changes, wind velocity, and seasons, all play their part in infusing the varying degrees of quality into tea. It is very sensitive to atmospheric changes, that day to day weather changes leaves their impression on the quality of the tea. Unlike most other commodities, tea cannot be designed to be brought and sold on predetermined specifications. Tea is an infinitely varied product, which needed to be sampled, and catalogued, almost accurately chest by chest.

The obvious way of establishing a value for a product of this nature, was at the auction room, where all buyers were given an equal opportunity to purchase their requirements. By 1750, the British East India Company auction system had developed. On arrival of the precious cargo, the tea chests were transferred to the company’s warehouses, and samples drawn from each chest. They were then presented to the their panel of tea “tasters” for grading and valuing. All their findings were entered into huge fat catalogues. The entire tea trade, comprising of brokers, their clients, and the London tea merchants would turn up at the East India house for the auction. Bidding for these countless lots would continue for four gruelling days. This modified strategy for the marketing of tea however, did not in any way cover up the monopolistic slant prevalent in the system. It was no other person than Mr Twining, a household word today, who missed no opportunity, to call to account the shortcomings in the system.

Some of the original customs that existed when auctions were held under candlelight, are followed even to date. A successful bidder, is given the opportunity to take up subsequent lots of equal quality, and did not have to wait until the candle had burnt down to the required extent.

The monopoly held by the British East India Company, could not be held forever. The reaction of the Americans, to the disposal of excess leaf, the imposition of tea taxes, the loss of the Chinese tea market with opium being the major cause, all surfaced at a time when the Company’s finances were sinking.

The tea monopoly held by the company came under close scrutiny, when the Company’s Charter came up for renewal. The strong urge of the London tea merchants to dispense with this monopoly was carried through in this instance. A bill calling for the invalidation of the monopoly held by the British East India Company was presented in Parliament and received the Royal Assent on 28th August 1833.

This great monopoly came to an end, and the immediate response was to bring the tea trade under the tea trader’s own management, and to change the location of the tea auction to Mincing Lane.

Many changes have taken place subsequently, in the location of the auction rooms. Mincing lane and in particular, Plantation House at once stage, was world’s recognised centre of the Tea Trade. Then the trade interests were relocated at Lyon House, where the auction rooms had the best panoramic view overlooking the river Thames. In 1990 the auction centre was once again moved to the Chamber of Commerce Building, and held in the elegant Council Chamber, considered a dignified setting for a grand event. It was from this location that the candle that was lit originally in 1750, started to dim from early last year, and was finally extinguished in June 1998.

Contemplating the past ---London tea auction

London tea auction remains the oldest marketing centre in the world, after having commenced operations on 10th January 1837. The sad news of its ending ceremony in June this year will take many by surprise. The sales that were conducted on a weekly basis will now be held on a fortnightly basis before it is finally abandoned at the end of June 1998. It will no doubt be a sad moment for all those associated with the London tea trade to witness the last lot being knocked down at the final sale in June. The gavel that had been the emblem of authority through the centuries, and which has remained as the Harold’s wand for the transfer of ownership, will be heard no more.

Sale of tea by public auction had been the principle channel of marketing since the early eighteen centuries in England. Foremost vendor during the early stages was the East India Company. On the purchasing side too, all activities were again confined to a small group of tea merchants, who enjoyed an exclusive right to operate at the auctions.

Monopoly was the name of the game. While the East India Company enjoyed the exclusive rights of the Eastern Trade, which lasted for almost two and a half century, this monopolistic form of trading where there was a high concentration of buying and selling activities in the hands of a few were not viewed favourably by the business community. The public cry was against the East India Company who held the monopoly for the conveyance of Chinese tea to Europe. This Institution, being a quasi-government body, was able to hold its own up to a point, but were compelled to change their attitude when the general public became hostile.

The short comings and the monopolistic slant prevalent in the system was make public by no other person other than Mr Twining himself. The various brands he established, are house hold words today. He advocated that it was more prudent to dispose of the cargo by “public outcry” at the auction rooms rather than by private deals, where there was rich scope for corruption.

As a result of public agitation, the entire modus operandi relating to the sale of tea by the East India Company was coming to an end. A partial victory was won in 1813 when the Indian trade was thrown open. A further ten years passed before they cleared the next hurdle. They were then permitted to indulge in private trade in British ships within the limits of the company’s charter. The monopoly of the Chinese trade however was maintained by them. The main motive for the final termination of the exclusive rights of the East India Company enjoyed with the Chinese could be summed up in one word-“opium." Though this ill-famed drug was officially banned, it was universally consumed in China.

Trading in contraband in Britain was not in any way keeping with the theory of enfranchised trade based on laisser-faire. Powers of the East India Company had to be subdued, and the bill annulled. The Royal Assent was obtained on 28th August 1933, and enforced from 22nd April 1834.

The immediate reaction was to shift the auctions from the East India house to another location, after having liquidated their stocks at the last sale held in July 1835. Large quantities of free trade teas from India began to arrive from about the latter part of 1834, and a new centre had to be found soon. The congregation of brokers, merchants and dealers for the first free trade was so large that the auction had to be conducted in a commodious room in “Change Alley," used for an academy of dancing.

The tea trade in general has always been regarded as a compromising lot, but at the first auction, there had been exchange of acrimonious words, between the selling broker and the buyers, on the subject of quality. Loud shouts of “unfit for sale except as poisons—withdraw –withdraw," were heard. Suspected lots were withdrawn for the benefit of all concerned, and the sale continued. The reaction of buyers for any kind of unorthodox dealings was well demonstrated from the very inception. The dispositions governing future sales were thus established, and any acts that would damage the smooth working of the tea trade were censored. All misdeeds were frowned upon and forbidden The London Auction has always been conducted in an atmosphere of mutual understanding and goodwill.

With the end of the East India Company’s monopoly, all eyes of tea men turned towards the Commercial Sale Rooms in Mincing Lane. With it, the undivided reign of China came to an end. The first free sale of tea at the new location was conducted in October 1834.

It took a further quarter century before tea auctions developed, to be of serious attraction to the British tea trade. What was established then, has continued even to date. The original broker fraternity comprising of W.J.Thompson & Sons, George White & Co. and Wilson Smithett & Co. joined by Gow & Wilson at a later date, still occupy the rostrum, as succeeding generations to their original concerns.

Presentation of information on catalogues follows very much the same way with different lots under individual estates. On the buying side, records maintained by the Tea Centre inscribe names like Twining, Travers, Mennell, Ridgway, Peek and Horniman, as original buyers at the London Auctions. They still continue to do so on a regular basis.

Uncertainty did exist about the exact date, when Sri Lanka teas stormed the London Auction. According to D. M. Forrest, who after much investigation, tend to be of a different opinion with the popular belief that 23 pounds of James Taylor’s tea from Loolecondera was the first lot of Sri Lanka tea to be sold in London in 1873. In fact, a valuation of Rs 53 or the equivalent of pound sterling four and shillings 7 had been placed on this tea. He considers that such a small quantity could not have found its way into any broker's catalogues. Up to about 1877 Sri Lanka tea exports had been insignificant in relation to Indian teas.

According to the Public Ledger maintained at the Tea Centre, the first entry announcing the sale of “Ceylon” tea had been made, on the 26th of October1878. On the 28th Monday, 10 packages of Ceylon teas along with 277 packages of Indian teas came under the hammer. The following day the following report was published.

Ceylon:-“At the public sale the first consignment yet received, comprising 10 half chests, was sold at 1s 11 ½ d for Orange Pekoe, and 10 ½ d for Pekoe Souchong. These prices were considered fairly satisfactory. The appearance and style of the leaf is very good, but the quality of the liquor somewhat dull and capable of much improvement.”

With these humble beginnings, the future of Sri Lanka teas was well conceived. The results of the first outing attracted great attention and it spread beyond the little world of Mincing Lane. Growth thereafter was rapid, and within the first five years, commencing from 1880 to 1885, quantities had increased from 1,229 packages to 32,577 packages. According to the brokers, within this period, over fifty new estates had begun to dispatch teas to London auction on a regular basis.

The social changes that were taking place, backed by a duty reduction, helped to increase the tea drinking habit in the country. The per capita consumption in 1850 was only 2 pounds, but increased to about 5 pounds in five years. Correspondingly, imports increased from 85,500,000 to 175,092,000 during the period 1864 to 1884. This was a crucial period for the tea producing countries. In addition to maintaining a steady improvement in their supplies to the UK, they were also fighting a battle to wane the British away from the Chinese types, to which they had became accustomed to earlier. In 1888, Indian teas arriving in the UK exceeded the Chinese varieties, but Sri Lanka teas had still to make an impact.

Chinese teas came under heavy attack as being inferior to Indian teas, and heavily adulterated, and often contaminated. The outbreak against the Chinese varieties was so great, that the British trade came out strongly, referring to these teas as “rubbish," and containing poison. It was only at this stage that the “Assam’s” and the “Ceylon’s” became a sales attraction, and was used as a guarantee for quality.

The original attempts at promoting the sale of Sri Lanka teas in Briton were made by the planters themselves. It was mostly by word of mouth, when on home leave, or on retirement, that the planters passed on the good news regarding the excellent quality of their teas. Quite a few planters, on retirement, established small outlets on their own account, for the sale of Sri Lanka teas.

By the turn of the century, British tea trade had reached maturity, and settled systems of operations. By 1903, about 55% of British tea came from India, and 30% from Sri Lanka. In addition, Java and Sumatra supplied 19 million, and China’s contribution had shrunk to 7% or 21 million pounds by weight.

By the turn of the century London auctions had obtained sufficient support from the main tea producers provide the main supply line to the Western world, establishing a global price for the product. India remained the largest supporter of the London auctions and up to about the early 1930’s these teas from both north and the South dominated the sale, their shares often exceeded 60% of total offerings. Sri Lanka’s share on the other hand, was maintained at around 25%, and the balance came from Java and Sumatra. East African teas were just beginning to appear in some of the London brokers catalogues during this period.

The Second World War interrupted the continuation of the London auctions, and the sales were suspended from 24th August 1939 until 16th April 1951. The termination of the London auctions came at a very crucial time when most of its sponsors were leaning toward establishing a marketing system of their own.

When auctions were resumed in 1951, sale quantities had declined from over 200 million kg during the peak period to about 50 million kg. The position however improved thereafter with Indian support. Problems relating to sale quantities really emerged from the early part of the 1980’s, and by 1985 Indian offerings had declined to 10 million and Sri Lanka to 2 million. East African offerings that peaked in 1980 with 50 million kg were also beginning to dwindle.

They were fast to procure the support of the fast emerging markets in Pakistan and Egypt, and directed most of their production to Mombassa where a larger cross section of buyers could operate, unlike in London where the operations are restricted. This trend that emerged from the early 1980’s continued, to reach critical levels in 1996. Sale quantities had diminished to 16 million kg. In contrast, offerings at sale centres in countries of origin are on a constant rise. After having obtained the clue from Britain, most producer countries are expanding their own marketing methods for the disposal of tea, in a manner most beneficial to them.

The candle that was lit in 1750 will be extinguished in June 1998
By Maxwell Fernando