Taking SL-owned tea export brands from good to great

In business the most difficult part is finding, servicing and retaining markets and market share. In exports, this is even more challenging.

The ultimate in value addition is brand marketing. The optimum return in global business is achieved by the growth and development of brands. The national economy where the brand is owned has a huge benefit irrespective of where products are manufactured or sold, e.g. Red Bull of Thailand or Samsung of Korea.

Until recently Sri Lankan exporters did not enter this arena.

The resources required in terms of investment to enter the field of brand marketing are massive. Moreover, as a general rule of thumb, any serious brand marketer has a presence in any market where there are over 40 million consumers to be cared for if he wishes to be a key player. One has necessarily to be close to the market place and be physically present there for several reasons and from many important points of view.

Brand marketing overseas

A handful of daring Sri Lankan businessmen has taken the field in recent times and is engaged in brand marketing overseas. A few have production facilities in crucial markets and at least one owns the distribution and marketing channels as well in one of Sri Lanka’s most important markets for tea. They have made admirable progress.

One or two are key players in certain markets, e.g. Dilmah in Australia, New Zealand, Riston, Akbar and Imperial in Russia, Mlesna in the specialty tea segment and Heladiv focusing on Ready to Drink. There are others who do not immediately come to mind.

Tea is a product where we have a large exportable surplus – approximately 300 million kilos per annum. We have to sell this quantity abroad and deriving the best value for our country from tea is critically important for the economic prosperity of our people. It is within our grasp if we think in the common interest.

Focus on production

In the plantation crop sector, so far most of our attention, exertions and strategies to derive better returns from our products have been production-based, e.g. fertiliser subsidy, fuel subsidy, replanting subsidy, concessionary tax rates, etc. The industry and trade have been preoccupied with productivity and yields. However, the returns have not been commensurate with the investment.

These production based aspects and best practices in production are important no doubt, but we must not be pre-occupied with them at the expense of losing sight of those alien to our country, running away with the ‘cheese; and the real gains from what we produce.

The wisdom of producing more in regard to plantation crops may be questionable. In commodities, price levels move in direct relation to the principles of supply and demand.

No strategic focus

Sadly, there has been no strategic focus on the consumer end of the business on our part as a tea growing nation. Non-nationals and multinationals have turned our produce into huge profit-generating and money-spinning businesses.

Liptons and many others owe its origin to this country. While so many other foreign players have used the attributes of Ceylon tea to gain consumer preference, develop their brands and secure market share in the past, we as a country were not focused on these issues and in fact encouraged our teas to be pillaged and plundered.

Consumer tastes and preferences change with time and circumstances. Less attention is paid now to where a product originates from in the globalised and borderless world we live in. Ceylon Tea by itself no longer holds the pristine position it held for itself 50 years ago and now it can be considered at best as a ‘sub brand’.

Government involvement

Unless the country’s Government decides to take upon itself to enter the field of brand marketing Ceylon Tea, it is inconceivable to visualise a mechanism where individual players from our country derive the full advantage.

 To select a single private sector organisation to run with Sri Lanka’s most valuable and important tea brand is fraught with the dangers of controversy and contentious dispute.

Governments on the other hand are not meant to enter this type of business and it is again inconceivable for several tea exporters to all sell under the same brand. Where it matters is the projection of Ceylon Tea with the lion logo as the main brand and not merely as the sub brand which is to some extent being resorted to at present by many players.

There are limits to the level of value addition achievable if all operations are restricted to the shores of our country using teas grown in a single island. Unlike before, the throughput of consumer goods takes place through modern trade channels where consumer choice and selection reign supreme. Super and hyper markets will not entertain a distributor offering teas of a single origin exclusively.

A proposal

The Sri Lanka Tea Board should identify the key Sri Lankan-owned brand players who have a proven track record, have already achieved a level of success and have the ability to demonstrate their potential to deliver even better results in the future if supported.

Today there are methods employed to value brands and reputed professional firms are able to report and certify brand values which are widely acceptable. Sri Lankan brands to qualify for support will have to periodically obtain brand valuations which will be a key indicator of performance.

Brand values

With the introduction of International Financial Reporting Standards in Sri Lanka in January 2012, brand values will soon adorn the balance sheets of local companies. It is widely known that brand values far exceed the value of all other assets in the balance sheets of large conglomerates and multinational companies.

Brands are sold and bought like other assets. Though intangible they are by no means fictitious and change hands at values expressed in trillions of dollars. Banks should be made to accept brands as collateral. The culture should be encouraged. Brand values should enhance companies to raise public money both locally and overseas.

Funds so raised should be freely permitted to be used outside the country for investment, marketing, promotion and advertising. In the past the funds available for tea promotion have been applied to assist selected companies to promote the marketing of their products overseas. In the case of at least one Sri Lankan brand player, the decision to support has proved to be totally justified.

Allocation of funds

The allocation of funds for the industry may be better served if concentrated at the consumer end rather than on the production end.

The production end may be best reorganised with a paradigm shift in the model used to care for stakeholder interests, which must primarily include the plantation worker.

Mechanisms will have to be in place to ensure returns to the Sri Lankan economy from profits made outside the country.

The enlargement of brand values owned in Sri Lanka ultimately accrues to the country irrespective of where operations take place.

(The writer is a past chairman of the Exporters Association of Sri Lanka and can be contacted on [email protected].)