In this age, the lifeline of the world is the brands that a company owns. If we examine the tea industry, it’s strange but the top 10 destinations for Ceylon Tea in the 1960s, 1985 and in 2010 are continuously changing. Every 15 years the industry is challenged with the task to find new markets and develop a new relationship with consumers, which is the most costly exercise with which one is challenged in a business.
In 1960 the top five markets were UK, Australia, USA, Iraq and South Africa. In 1985 the top five were replaced with Egypt, Iraq, Syria, Saudi Arabia and UK falling to No. 5 position at 13.4 million kilograms of tea from the 69.1 million kilograms it did way back in 1960.
By the year 2010 the top five countries were Russia, UAE, Iran, Syria and Turkey which just explains the crunch issue that we are up against. This may be due to economic blocks formation or due to trade agreements or by different tariff adjustments coming to play but the fact remains that if we had a strong branding campaign this impact could have been mitigated given that consumer loyalty could elucidated for which people will be ready to pay a premium.
Image building via tea
The recent sponsorship of Ceylon Tea with Sri Lanka Cricket is a positive development given that the specialist for global image building of Nations Simon Anholt stated that nation brand development can be done in eight ways.
One of themes is the export pillar which ideally fits in to the Ceylon Tea-cricket partnership, the logic being that Ceylon Tea is consumed in over 31 countries across the world and touches millions of people by way of taste, smell, touch and visual elements. Hence the brand aura of Ceylon can be mobilised by Sri Lanka just like Japan used Sony or Toyota brand names. I guess the nation brand value increasing from 35 billion dollars to the current $ 61 billion could not have happened if not for such interventions like what Ceylon Tea has done.
But the key issue is how the current seven billion promotional fund is to be activated. Even after Rs. 2.5 billion going into the consolidated fund in the Treasury, the balance Rs. 4.5 billion is a large sum of money if we are looking at ground level activations coupled with media support.
The real challenge is how we handle the Russian market given the economic woes and the instability that is creating many payment issues to exporters. I guess time might even out but in the short term how the marketing promotions are to be done will be the question.
From a marketing point of view, when in recession is the best time for brand building, the logic being that only strong brands can invest on marketing promotions whilst if one is trading in dollars the cost of operations can be lower.
So what next?
Maybe the next step is to ideally select the top 10-12 markets and invest 30-40 million dollars on brand promotional work in partnership with the private sector. This must not only be on-above-the line activity but also below-the-line so that we can really make the spend move consumer behaviour.
We must also invest in research so that we can monitor the habits and attitudes of modern trade on the category beverages and see the movement to Ceylon Tea. The good news is that with the new Government at play, the commitment to do the right thing to move the market share of tea will happen given that the governance structure is strong and supportive to long-term strategy.
Tea – Ethical route
If we track back on the success of the apparel industry, in the early ’80s Sri Lanka was termed as mere contract manufacturers and some even used to refer to the industry as tailors, but thereafter with some strategic thinking by the industry, it gave leadership to the world by making Sri Lanka the fashion apparel of the world for ethically-manufactured clothing.
This has given teeth to the industry in competing with price-savvy merchandise coming in from Cambodia, China and Bangladesh and today this noble industry is targeting five billion dollars plus in export revenue by making Sri Lanka an apparel hub in Asia for R&D and technology sharing for fast fashion.
“Every 15 years Ceylon Tea is challenged with the task of finding new markets due to economic structures changing globally, but with strong marketing one can mitigate the impact due to the relationship with the consumers that brands have developed”
We see a similar trend in the tea industry, where with strong leadership the plantation industry was nationalised in the 1970s when it came under Government control; it went on in the 1980s to make a bold decision to make the Colombo Auction control the global demand chain by breaking away from the great London Auction system which has held ground for many years. The Colombo Stock Exchange commanding the highest values for tea globally is a testimony that this decision was correct.
Then in the 1990s the supply chain was privatised to the private sector which gave the opportunity for new thinking to be introduced to the industry with strong R&D power and capital infusion that resulted in Sri Lanka becoming the best performing country globally for value addition tea, commanding 43% whilst turning around the business to a 14.2 billion profit within a few years of operation.
The above very clearly indicates the skill set in the private sector is right together with the strong policy support when administered with passion to beat competition. In fact, Sri Lanka can be called a game-changer in the market place.
What is now required is to focus on the demand side of the business and correct the system. Thereafter, with the activation of the demand mechanism, the more difficult task of correcting the issues of the supply chain can be done.
This can include a robust replanting campaign and extending the RPC contracts to 66 years so that two bush cycle times can happen whilst the burning issue of linking the wage increases to productivity can also be done strategically.
[The author is an alumnus of Harvard University (Boston). The thoughts are strictly his personal views.]