Monday, 25 August 2014 00:00
Tea Board Chief recaps progress in office, outlines key challenges
Today Sri Lanka is a well-known for tourism, garments and cricket, but what first helped spread its name across the world was Ceylon Tea.Although the nation is a proud owner of this product which is simply unbeatable in terms of taste and quality, it is yet to establish and own a space in the global industry. This is not a recent issue but one that Sri Lanka has been trying to address for a couple of decades.To gain better understanding on how the nation is faring in this space, the Daily FT recently interviewed Sri Lanka Tea Board (SLTB) Chairperson Janaki Kuruppu, where she provided fine insights into how the STLB ship is being steered under her leadership to ensure that the Ceylon Tea brand remains in the minds of the global consumers.The Tea Chief is optimistic and confident she and her team will reach their destination in the journey they set out on a little over two years ago.Following are the excerpts of the interview:By Shabiya Ali AhlamQ: Since you took up your appointment as Chairperson of the Tea Board, how far has the institution progressed?A: The SLTB is responsible for the regulation, development and promotion of the tea industry. I believe that before one starts to make any improvements to an institution, it is imperative to have the necessary human resources and systems in place.
The first factor I had to pay attention to when I was appointed was the human resource area since there was a court case and a ban on employing more people to the institution. I had to settle that case and fill in the cadre so I had the necessary talent in terms of the required numbers to ensure the SLTB operates in a smooth manner. Since then we have recruited about 70 to 80 people. We were short of that number of staff.
On the systems front, we had many processes but none of them were documented and computerised. I had to attend to the hardware and software in that regard. It was after sorting out those issues that I was able to get into the actual work I was supposed to do – regulation, development and promotion.
On the regulation side we had to amend the Act, especially with respect to refuse tea. It was important since at that time there was tampering taking place with the tea production. We regularised the factory visits by tea inspectors to monitor the quality aspects. To encourage them to carry out a higher number of visits, we incentivised the system. As a result of this effort, for the first time in the history of SLTB, all warehouses in and around Colombo were inspected.
No matter how careful we are on delivering high quality leaves at the point of production, if finally at the warehouse point it is not processed in a hygienic environment, the efforts at the beginning of the chain will be lost.
To ensure a clean process is taking place, our inspectors paid surprise visits to the warehouses and rated them as poor, average, good or excellent in terms of the conditions. We had given an ultimatum for about 100 of the warehouses that were ranked as poor to upgrade before the next registration date. Failing to do so will result in them not being allowed to be registered with the SLTB. These efforts were in the interest of quality.
We then started the registration of local packers. So many companies sell tea in the local market and the quality of those products was not checked. It is not fair for Sri Lankans who have the birthright to taste the best tea in the world to be drinking low quality tea. Hence we made it mandatory for all companies selling locally to register with us, so we can monitor their conditions.
A 24-hour hotline was launched so any person who suspects unethical or malpractices taking place in the industry at production level can make a complaint. That has been very successful.
When I was given this job I thought it was going to be a cup of tea, but there is so much to do in terms of catching fraudulent people. To ensure that no individual or company engaging in fraudulent practices slips away, we partnered with the Special Task Force (STF) to help us in this regard.
I also realised that there was no proper database system for the information that we have. For that I have started the process to bring in a scientific data management system which is computerised so that the industry can have more reliable information faster.
The more you increase regulation, the more there is room for corruption, and some are of the view that if you want to get rid of corruption, you must avoid regulations altogether. That is not correct; there has to be some balance between the two and we are trying to establish that balance.
On the development side, we introduced the B Leaf 60 program, which emphasises that of the lot that goes for production, at least 60% of the leaves should be damage free, it should be the best. The factories are now beginning to realise that when they buy best leaves, their wastage is brought down to a great extent, and as a result their cost of production is reduced.
As a part of the program to reduce post-harvest losses, we are giving subsides to purchase plastic crates and construct sheds to store the leaves till transportation. As a result of this effort by the Tea Commissioner’s Department, currently about 60% of the tea leaves are transported in crates.
The SLTB had a lab facility but it did not have the necessary equipment and qualified people to handle that area. Under the current salary structure of the Government, it is difficult to attract people with post graduate degrees in chemistry, etc. We had to restructure the human resources of the lab and we hired the first PHD holder for the institution. We have now brought it up to standard and obtained accreditation for the lab. I must stress that we are the only accredited lab for pesticide residue analysis. By uplifting our lab facilities, the private sector is given the option of voluntarily testing their teas as most of them don’t have the necessary facilities in-house.
The tasting panel has also been expanded to test more samples and bring in more variety of experience and foolproof systems to stop tampering with the process. We currently follow a random sampling method but there is a misconception that we test all teas. That is incorrect and not possible either. There are requests to do so, but it is not practical. It is done randomly so no one is favoured.
Coming down to promotion, all are aware that a fund was set up and a Technical Evaluation Committee (TEC) was appointed to select an agency for the global tea promotion. This was done in February 2012.
I am used to working very fast, having being in the private sector for more than 20 years, and I went on with that same speed. We started calling for pitches from advertising agencies by April 2012, and by April 2013 we were done with the selection process. However, we did not have a marketing plan or a strategy to give to the agency. We had to analyse key markets, identify target markets and develop a 125 page marketing strategy document.
There was so much groundwork that had to be completed; else we would be wasting that money. Till that time, that is before 2012, the meaning of marketing for the SLTB was to participate in trade fairs where they distributed leaflets and tea! Unlike tourism, our product has to be in the shelves of that market. There is no point in advertising if the product is not there in the target market. We had to identify B2B and B2C strategies depending on the presence of our brands in that market.
Three positioning strategies were identified for the 25 different markets based on Ceylon Tea status. The first is to position Ceylon Tea as a prestige product, the second is to position it as an ethically-made product and the third is positioning it as a health drink. So depending on the consumer sophistication, the positioning strategies will be used.
There are 20 marketing strategies identified, including very unique concepts such as buying supermarket shelf space, JVs with exclusive tea shop chains, awards for best innovation in value addition and a local campaign to involve and motivate the tea pluckers and factory workers. As you see, it is not just an ATL and BTL plan. ATL and BTL are only two out of the 20 strategies.
Further, the promotion team had never carried out the work that would be required in this campaign, hence in order to implement this campaign successfully we needed staff with more specific qualifications to handle a large, complicated marketing plan. We have now got approval and we are in the process of filling new positions in a marketing cell that has been specifically formed to implement this campaign.
After setting up all this ground work, since 2013 we have been implementing some parts of the marketing plan – such as the cricket sponsorship, the participation in new and lost market trade fairs and establishment of a tea lounge chain to go international. I believe that a premium brand cannot be sold on rational benefits only, emotional benefits are also needed. It is for that reason that we introduced the tea lounge concept to bring in the experience.
We have also started having discussions with supermarket chains on listing our products and we have been successful. In UK at Harrods we have got three brands listed and that is a huge success. We have also negotiated a deal at the Dubai International Airport, where almost all the world travels through, to put up 19 hoardings.
We are in discussions with exclusive tea shop chains in Germany and we are in the midst of hiring expert marketing consultants in some markets such as Europe and South America to fine-tune our strategies.
We are also in need of skilled people in overseas markets to monitor the campaign. We have successfully appointed honorary tea ambassadors in South America, UK and Switzerland, and we are in the process of appointing exclusive tea promotion officers in China, USA and Australia.
As you see, it is a well-thought-through work plan, or else we could have just busted the money.
Q: How would you describe the current status of the industry and its competitiveness in the international market?A: The tea industry has its own problems, like any industry. The issues are mainly on quality, productivity and lack of innovation. We are addressing those from the part of the regulator. We are only the regulator and we can’t do anything by force. It should be in the interest of the players in the industry to adhere to the rules to ensure quality.
The industry is private sector-led. When we reject someone’s tea shipment, they want SLTB to be out; when a new factory or new exporter wants to register, they want SLTB in. So most of the complaints you hear from some industry people are very self-motivated.
Our industry has grown in production, exports and price per kg. In terms of foreign exchange earners, we are the third highest but look at our number one and two, which is worker remittances and garments. In garments we assemble the product here, it is tough to survive. But our tea, no one can copy it. It is the result of the agro climatic conditions of our country. That is something we should hold on to and take full potential of. There I think the industry has so much potential.
The new trend around the world is to follow a healthy lifestyle and for that we have a product. We have a healthy and clean tea. If the consumer trend is in your favour, then I say for any industry there is a future.
The global tea industry has gone to sleep. Coffee is so alive. No one has done much to promote this beverage; it is such a mundane everyday thing where no one really thinks much about it. Ceylon Tea has the opportunity to take that and revolutionise the tea category and own it.
Q: What is your vision for the Tea Board?A: To be an institution that is customer friendly, ethical and efficient, one that works as a catalyst for the tea industry and not a deterrent, and also the protector of the industry. It is 35 years old and no one has tried to change the place like this. I started with change of the work environment, better facilities, new systems, outbound training, incentives for performance, and others. But change takes time. I hope with these efforts we will be able to get a customer friendly efficient institution sometime in the future. Q: How well is the Tea Board supported by the Plantations Ministry? What has it done well and what can it do better?A: The Ministry has been supporting our proposals if it can be done within the existing procedures. For years we have been stuck with certain problems and bottlenecks in the system and we have been told to accept that there is no solution. Hence, if we come up with something new, we hit a block. Look at how much the country has changed, so small changes can be accommodated in the interest of taking the industry to the next level.
I would like the Ministry to guide us in ways to overcome some hurdles when we come across them, there are ways within the system to get things done correctly, legally and yet fast and efficiently.
Q: How has the lack of timely availability of fertilisers to tea growers affected production and how can this be addressed?A: Yes, there may be problems in the timely distribution, but we should appreciate that the fertiliser subsidy is there for tea as well now. It was not there before, it was only for paddy, and even before that there were no subsidies for any crop. We have to get the problem corrected, but the producers should also take measures. If I was a producer, I would keep ex-stock to face these delays. Now they save 50% of their fertiliser cost so they can purchase ahead and stock at the time when the fertilisers are available. But yes, we certainly have more work to do on ensuring the timely availability of fertilisers.
Q: What is the progress of the global tea marketing campaign? A: The Cabinet paper was approved in November 2011 before my appointment and the TEC and Cabinet Appointed Negotiation Committee (CANC) to select an agency was set up in February 2012. As my usual working speed, I immediately set out to do this job. As mentioned previously, the process of calling for pitches started in April 2012 and all the technical and financial evaluations were done and the selection was completed by April 2013. Ten agencies applied, of which four were shortlisted and two were selected. This happened in one year and was completed by April 2013. However, the documentation of the process took another year. I am not blaming anyone, but if we were guided more from the beginning, the documentation could have been done much faster. This is a unique tender, since it is not a product or a service tender; it is a mix of service and consultancy tender. It was an eight-member TEC and a three-member CANC and getting all of them together to discuss was itself a difficulty.
However, the good news is that it was done totally transparently and now all that is completed. The final recommendation was sent to the Ministry in June and they are compiling the Cabinet paper. SLTB has submitted the tender decision on agency selection in June; the marketing plan, the proposed budget and the staff requirement to implement the same before that in February. We are now awaiting the nod from Cabinet to kick off and hopefully that will happen soon.
Q: Do you have a date fixed?A: I don’t want to commit on any dates since it is now beyond my control; we can launch within six months from the date we get Cabinet approval. However, remember that SLTB is not just involved in promotion; it carries out so many other activities. Even in the promotion space, we have been doing a lot of work. The global campaign agency selection is only one part. For one-off projects, we have selected agencies and executed plans within the set timeframe. The Ceylon Tea House was one of the many that we have successfully implemented. If I have that extra staff, with the right skills and with my 26 years of marketing experience, having conceptualised and launched seven brands in Sri Lanka, I can guide this effort without any problem.
Q: Will you be able to give the names of the selected agencies?A: Till we get the Cabinet nod, I cannot reveal the names. Doing so could result in starting the process from the beginning. Unsuccessful bidders have been informed, but successful ones will be notified no sooner we receive the Cabinet nod.
Q: The delay of the campaign has raised concerns amongst exporters, since they feel the imposed cess it not used as it should be. They also feel that they are not sufficiently involved in the process. What are your views on this?A:I agree about the delay, the reasons for which I have explained at length, but hopefully there will be none anymore.
On the private sector not being involved, it is highly incorrect. There is a Promotion and Marketing Committee (PMC) that consists of almost 20 heads representing top private tea companies. We consult them before any promotion activity is implemented and before spending a single cent of the promotion fund built through the imposed cess. The PMC and the board have approved every single decision.
We initially came to an agreement that the umbrella brand, the Ceylon Tea Brand, will be given emphasis in the first two years of the campaign and then to focus on the private brands. Now there is a view that because of the delay we need to jump straight ahead to promote the private brands. That does not make much sense since the pooled fund was set up for the promotion of the Ceylon Tea brand.
At times the private sector finds it very difficult to agree on one thing. They all couldn’t agree on the 25 markets that we should target. We have even set up six regional committees consisting completely of the private sector to decide on the activities for that region.
With the Ceylon Tea brand, our aim is to promote the Ceylon Tea Lion logo. In my first meeting I pointed out that the private brands are not giving enough prominence to the logo. Some even had it underneath the packs. They couldn’t agree with where they wanted to place the logo. Sometimes when there are too many people, it is difficult to come to an agreement. So what is the point of spending so much money on the campaign if the companies do not want to even place the logo in their packs?
However, I must say that this is done by only a few in the private sector; it is because of the encouragement I am getting from the private sector that I am still in this position. They have endorsed what I am doing and have supported me, but if someone says we have not consulted them, it is wrong.
Q: How has the Ceylon Tea brand benefitted from the Sri Lanka Cricket sponsorship? Were the outcomes as expected?A: The cricket sponsorship is one of the biggest achievements in our promotion efforts. It was done for three reasons, to connect Sri Lanka to Ceylon Tea, to bring a positive effect on brand Sri Lanka, and to increase brand awareness of Ceylon Tea, which has gone to the bottom of mind and not top. The younger generations don’t seem to even know that Ceylon Tea is from Sri Lanka; there is a disconnect and it was imperative that we worked on this.
So with the Sri Lanka Cricket team playing at international stadiums wearing T-shirts with Ceylon Tea on top and Sri Lanka at the bottom, what better way is there to make the connection?
Another effort in establishing the connection was the conceptualising of the tagline ‘Ceylon Tea, Sri Lanka’s gift to the world’.
For the brand Sri Lanka, top of the mind for consumers is violence, war and unrest, so we want to bring a positive connotation when the country is mentioned. Sri Lanka Cricket and Ceylon Tea are the positive elements that can help in this regard. If you take all the brands in the country, Ceylon Tea is Sri Lanka’s best brand. It is Sri Lanka’s most known, best positioned and strongest brand, so why not bring the positive rub-off on brand Sri Lanka through brand Ceylon Tea?
On increasing awareness, I could have spent the same amount of money on a three-month campaign with an international television channel for a few 30 second spots. Instead we opted for the three-year sponsorship. We found it worthy since the matches will be played on leading channels, during sports news, repeated, and telecasted for a longer period. Some say cricket playing nations are not our current key markets; to them I say we are targeting new markets.
Could we have done more with the team? Yes. There again I am still struggling since the agency is not on board. Whenever the team goes for an international tournament, we get the cricketers to a Ceylon Tea event. At the promotion we had at Harrods, Kumar Sangakkara and Mahela Jayawardena and others of the team participated. Even during CHOGM we got the team to come to some events. The sponsorship is used in such ways to create hype.
All marketing gurus I have spoken to have praised this effort as a right decision. Moreover, the tea growers and pluckers all are proud about it. Any marketing effort will not give results immediately and you cannot directly measure these outcomes.
Q: You mentioned there is a disconnect between Ceylon Tea and Sri Lanka. Have you considered changing the brand to Sri Lanka Tea?A: No. Simply because, if there is good equity and a good brand value coupled with high brand awareness, why change the name? We prefer to let it be. If we change, we will have to start from scratch.
Q: The Tea Board has a vision to reach earnings of $ 2.1 billion by 2016. In 2013, earnings stood at $ 1.54 billion. In that context, is the 2016 target achievable?A: If you look from 2009 to 2013, within those four years we have had 48% growth. Some years it has reduced, but we have seen an annual growth of 10-15%. 2014 also has been good so far. In that context I believe we can. It is a high target but if we get our act together fast, this is achievable.
However, we cannot achieve this target by producing more. That area we have almost saturated. We can get this only by earning more dollars per kilo since we cannot predict the volumes. All the promotion work will increase that value per kg since the consumer will be willing to pay that extra price. So the promotion needs to convince them to pay a bit higher. Sri Lanka still fetches the highest price in auctions.
The target is achievable but we have to do something totally new, for example like what we have identified in our 20-pronged marketing plan, for that to happen.
Q: What measures have been taken to ensure an increase in value-added exports and high quality of tea moving out of the country so that the promise of the Ceylon Tea brand is maintained?A: The value added percentage has been between 45 to 50% in the last so many years. However, it has been stuck in that range for about 18 years or so. We have even changed the definition of value addition to include 10kg packs while earlier it was only up to five kg due to a request from the private sector to obtain tax benefits given to value added tea. It is a great achievement that we have reached this ratio of value addition at that pace and we are certainly the best in this area in the world. India and Kenya are in the 12% range, so we are way ahead. However, something must be wrong in our strategies for us to be stagnant at this level for so many years.
A significant proportion is going out as bulk because it needs to be blended, so this is an area to be addressed. If we can do the blending in our country, it will move out packed with our branding and we will have control of the blend and the labelling. Currently we have no control when it goes out in the bulk form. However, this is a very controversial topic and we have shelved the idea for now. That is one big decision that we have to make that will help increase in value addition. It is imperative that we come up with drastic strategies to increase these percentages.
Q: How is the worsening Middle East situation – Iraq, Egypt and Syria and sanctions against Iran – impacting exports?A: It has not affected us significantly so far in terms of losing volumes. The reason could be that those countries are stocking up on tea. For example, in Turkey we have about 40% growth. We are monitoring the situation closely, but it is difficult for us to do any promotion and market research in those countries although they are the key markets.
Even with regard to the global campaign, there is a debate as to how much should be allocated to promote Ceylon Tea brands in the Middle East as a chunk of these markets are in trouble. We are doing whatever we can to protect those markets, but in the meantime we need to have new markets to go. We have been looking at a few new and lost markets. For example, in China we have seen a 34% increase in exports. That will also be the first country where we will be establishing a promotion office. In USA we have seen 27% growth, Finland 26%, South Africa 24%, India 24% and Hong Kong 16%.
Q: What hurdles do you face when attempting to implement your strategies? How can these be overcome and with whose support?A: When others don’t understand why we need to change the way we have been doing things, why it will cost so much to hire a professional and why that work is much better quality, these are hurdles. All my life I have gone through a lot of change. This is the 10th industry I am working in. If we go on with the current mindset we have, we will not be able to achieve those great goals. If we didn’t think we could finish the war or double per capita income, we would not have achieved what we have today. We will even start attempting only if we start thinking that things can change.
Q: What kind of a role do you want the private sector to play going forward? A: Don’t come only with problems and complaints; if the ideas we come up with are not good enough, come up with better ideas and solutions. The private sector benefits a lot from everything we do. Of course this model of working with the private sector, along with the public sector, has been a key motivator for me to be here; the majority of them are very supportive of all that the Tea Board has been doing and trying to do.
Q: What are the improvements you would like to see in the tea industry in the medium and long term?A: We have put some totally new, out-of-the-box ideas for the sustainability of the industry. One area is wages of tea pluckers. Some companies in the plantation sector have been continuously emphasising not to increase the payments of the workers. My opinion is that if they are not willing to work for the current wages, if we reduce it is likely they will move out. They now have a number of other options. Paying them more will make them feel appreciated and recognised, and we need to keep them motivated to deliver high productivity. Some companies have maintained this balance very successfully, but you don’t hear about those stories. We have included doing a local campaign to motivate and uplift the standards of the workers in our promotion campaign.
Another proposal is to have a new tea auction centre. Currently it takes place in the Ceylon Chamber of Commerce premises. The brokers have requested a new place so that we have a world class tea auction facility. We are the world’s largest auction for single origin tea. When people come to Sri Lanka, if they know anything about tea, they visit the auction. It is a tourist attraction, but its current status is not impressive. For this, the SLTB has suggested having a fully-automated, custom-built, state-of-the-art auction centre.
Our cost of production is the highest in the world. This is because we pay our people better and we can be proud that the tea we produce has been made by a happy person. When looking at the areas where we can reduce cost, we identified transport as one area. We are suggesting going back to railway transport since the railway system in Sri Lanka was developed by the British for the transport of tea. The current method of using roads is costly and also damages the tea and the roads. All stakeholders in the industry are in favour of this. This is possible since the rail tracks are already in place and what is needed is to extend them to the warehouses.
SLTB also plans to have a fully-fledged MIS system since as of now each stakeholder has his own set of figures. We need to have a single MIS system that is integrated from the planter to the exporter so we can have traceability and accuracy. The buyers in the EU and other developed markets want to be able to trace which plantation and which factory the tea came from; this new MIS system will help achieve that.
The fourth measure we have proposed is to have a world class R&D centre. With this we want Sri Lanka to be the world’s university for black tea innovation. For green tea, China and Japan are way ahead. There is so much research on green tea benefits on health, but there is hardly anything on black tea. For this we should own the category. We want other countries to come here and innovate products relating to black tea. These are some of the new proposals we have put forward to the Ministry.
Pix by Lasantha Kumara