Proposed automation of the Colombo Tea Auction

The first Tea Auction in Colombo was held on July 30, 1883 in the offices of Somerville & Co., down Queen Street now renamed Janadhipathi Mawatha. At that time there was much criticism and opposition to this attempt by Somerville & Co. to create a new avenue for the marketing of Ceylon Tea.

Prior to this, Ceylon teas were shipped to the London Tea Auction or sometimes directly to overseas buyers, many of whom had an interest in the plantation industry. Even on the day of the first Auction there were several questions asked and consequently the Auction commenced later than scheduled.

The Auction itself was only modestly successful with only one lot of Kabaragala un-assorted tea selling for cents 45 a pound whereas the other four lots remained unsold due to either lack of bids or due to bids received not meeting the Broker’s expectations.

Notwithstanding this disappointing start Somerville & Co. and the other brokers persisted and were able to conduct auctions on a regular basis from 1885.

Therefore, there arose a need for an organisation to formulate rules for the conduct of the Tea Auction and in 1894 the Ceylon Chamber of Commerce formed the Colombo Tea Traders’ Association to “promote the common interest of buyers and sellers of tea in the Colombo market”.

From these modest beginnings the Colombo Tea Auction has grown to be the largest tea auction in the world in terms of the number of lots sold. Mombasa in Kenya has for several years been the largest tea auction in terms of the volume of tea traded.

The Colombo Tea Auction has seen many changes over the years as it evolved to meet changing circumstances. The Colombo Tea Auction was originally conducted in the Ceylon Chamber of Commerce Building in Chatham Street on one day of the week on a regular basis in one auction room.

As more and more tea was being sold through the Colombo Tea Auction and the number of lots increased the auction split over to the second day.

With the further increase in the number of lots the Board Room of the Ceylon Chamber of Commerce building was converted into a second auction room.

The new Ceylon Chamber of Commerce building at Nawam Mawatha made provision for two custom built auction rooms, but in the course of time this too proved to be insufficient and today the Colombo Tea Auction is conducted on two days of the week concurrently in three auction rooms.

Other innovations in the tea trade included the shift from solid wood boxes to Plywood cases to paper sacks, metrication with lots being in multiples of 10 and not 12, the change from Pounds to kilograms and the shift from a Monday/Tuesday auction to a Tuesday/Wednesday auction.

All these changes were opposed by sections of the trade when they were first proposed, but decisions were taken in the best over all interest of the trade and today no one would want to undo any of these changes, which have had a long term beneficial effect on the entire trade.

Today with tea factories increasing the number of grades to meet buyer demand the number of lots are correspondingly increasing placing a further strain on the system. As it is an auction on two full days namely Tuesday and Wednesday results in a severe strain on buyers having to taste, grade and evaluate up to 12,000 different lots of tea during the other days of the week, so that they could be prepared to bid for teas at the next week’s auction.

Unfortunately even now several buyers find it difficult to do so and in an auction where the numbers of lots are around 10,000 to 12,000 several teas especially those from not so well-known selling marks of factories remain un-graded or not adequately graded and often sell for less than their true worth.

Since the obtaining of a fourth auction room is both an expensive and impractical option at this stage the Colombo Tea Traders’ Association appointed a Sub-Committee consisting of all relevant stakeholders to look at the merits of using modern technology to automate the Colombo Tea Auction and thereby increase efficiency while hopefully bringing down operating costs.

This Sub-Committee has spent a considerable time looking at different options of reducing the auction time which would enable buyers to spend more time evaluating their teas and therefore be in a better position to bid on all teas suitable for their requirements at the next auction.

Many of the senior members of the committee were also mindful of the concern which senior staff members of their own organisations had when they computerised their company’s operations in the last quarter of a century.

After a long process of evaluation the Colombo Tea Traders’ Association has selected Millennium Information Technologies to partner them in the proposed automation of the Colombo Tea Auction.

Millennium Information Technologies would provide the technological input while the Automation Sub-Committee and the Industry Group which was appointed from among the younger members of the stakeholders, many of whom have grown up with computerisation and think of modern technology as an indispensable part of their lives provided the specialised tea knowledge.

Millennium Industrial Technologies has an excellent track record having among other things successfully computerised the Colombo Stock Exchange.

The aim of the partnership between the Colombo Tea Traders’ Association and Millennium Information Technologies has been to evolve a auction system unique to the Colombo trade embodying and enhancing the positive features of the Colombo Tea Auction built up over the years.

Other Tea Auction centers in Kenya and India have automated to varying degrees with different levels of success. It was however decide that we should only look at these systems for guidance and experience and not re-produce any of their features which do not form a part of the current outcry system at the Colombo Tea Auction.

There are those who feel that automation should be all encompassing. For example at the recent International Tea Convention in Colombo during the discussion on the proposed automation of the Colombo Tea Auction, the Head of the Unilever International Tea Operations criticised the proposed system as simply re-producing the current outcry system and not making full use of the available technology.

This International Tea Convention had Tea Experts from around the world focusing on the long term sustainability of the Tea Industry.

A key element of the marketing of tea is stability. Most tea reaches the consumer in a branded form, in packets or tea bag or whatever that contains tea of a consistent quality, week in week out, year in year out.

If there was concern about the sustainability of the system packers would take action to alter their blends to meet anticipated changes before these are thrust upon them.

For example: an announcement some years ago that Sri Lanka would be shifting a significant portion of its manufacture to CTC production resulted in several packers removing the Ceylon component of their blends anticipating the non availability of adequate quality of Ceylon Orthodox Tea in the future. As it happened the change did not take place, but the country lost several regular buyers.

The proposed automation of the Colombo Auction is progressing at a slow space in an attempt to ensure the stability and long term sustainability of the Colombo Tea Auction. There are those who criticise this approach but it is felt that in the long term it is necessary to persuade all stakeholders of the benefits of computerisation rather than for it to be thrust upon them. This gradual approach means looking at the individual parts while not losing sight of the overall picture.

For example computerisation of all pre and post auction documentation would have an immediate benefit on the trade while facilitating further automation.

The ultimate aim is for the Colombo Tea Auction to be more transparent and less costly to operate thereby increasing competition resulting in a win win situation for all participants and stakeholders.