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Investing in R&D is only way out for agro-exports: MTI

Comments / {{hitsCtrl.values.hits}} Views / Monday, 2 September 2019 00:35


MTI’s Thought Leadership Team comprising from left: Rajika Sangakkara (Sri Lanka), Hilmy Cader (CEO), Saima Mazhar (Bangladesh) and Darshan Singh (UK and Bahrain)

  • Convert the ‘feel-good’ promotional funds into R&D

According to MTI Consulting, Sri Lanka’s leading strategy consultancy (having worked on projects in over 40 countries), Sri Lanka needs immediate focus and investment in R&D, not branding campaigns. 

MTI also argues that to globally compete in branded retail products, countries require very deep pockets as well as the ability to sustain such investments over decades. This is not possible for a country like Sri Lanka – for multiple reasons, as articulated below. Hence there is a need to convert the country’s agro-produce into functional food ingredients that will generate a significant price premium. This is not possible without investment in R&D. 

Sri Lanka is a relatively small nation in terms of land area, therefore cannot compete on mass-scale agricultural production within the likes of India, Pakistan and Bangladesh. Even in this small land area, Sri Lanka has a highly-fragmented land ownership/agro-production structure – which means very low economies of scale and therefore lacks critical mass to invest in R&D. This is further compounded by the extremely low value-addition to the main crops. 

If you have to, then invest in promoting Sri Lankan brands, not ‘Ceylon Tea’

If you are Sri Lanka Tourism, do promote the country – because the customer first decides on the country and then the hotel. If you are Intel, do promote the ‘functional ingredient’ because that influences the PC you buy, besides Intel has very deep pockets.  But, not if you are ‘Ceylon Tea’ because:

nThe customer first decides on the brand, in some cases the retailer, not what’s inside the pack of tea. By generic promotion of ‘Ceylon Tea,’ you are essentially telling a customer (be it London, Moscow or Tehran) to walk into a supermarket and insist on a brand that will have ‘Ceylon Tea’ inside and then expect the supermarket to insist on their suppliers (who happen to be top global and regional brands) to shift to Pure Ceylon Tea. Possible but at what cost and over what time period? 

  • And to do the above, with such meagre promotional budgets that Sri Lanka has at its disposal and that too spreading it across continents! 
  • Ceylon Tea has no differentiating functional benefit that it can claim, only a reputation-based one.
  • The words ‘Ceylon’ went off the map 47 years ago, therefore what relevance would it have to those in their 20s and 30s today?  In any case, think of the communicating effort (and funds) that would be needed to create the link between Ceylon Tea and Sri Lanka?

Instead, why not pick (through a transparent and objective process) one or two Sri Lankan brands with global growth potential and ‘invest’ these funds to strengthen these brands globally?

A more ambitious approach would be to set-up a multi-billion dollar investment fund that will go out and acquire emerging global tea brands, including those in the fast growing Ready-to-Drink and Retailing segments, much like what Tata has done.

Of course the unique challenge that Sri Lanka encounters, unlike in the case of a multi-national company, is that it must produce 330 million + kilos of tea – because the livelihood of 400,000 + people depends on this. But, competing globally needs scale and the challenge for Sri Lanka is to be both small and big at the same time, much like what the New Zealand dairy industry. 

Strategising requires asking very simple questions, but our bloated egos and ‘lust’ for complexity is what clouds effective decision making.

MTI Consulting is an internationally-networked boutique management consultancy, offering advisory services range from strategic planning, corporate re-structuring, process re-engineering, performance management, international market entry, feasibility studies, due diligence, corporate finance, M&A, HR, executive search/head hunting, marketing strategy, branding to market research. Since its inception in 1997, MTI has worked on over 660 assignments in 43 countries, covering a diverse range of industries, clients and business challenges

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