Ceramics industry in a catch-22?

Last week when the Sri Lanka Ceramics Council invited me to be a speaker at the Ceramics Symposium 2011, I never envisaged that this task would be so challenging. The reason being that the industry players who are reliant on the global market are not only having issues on the demand side of the business, with the GSP+ for example, but also from the supply chain end which is intermingled to the political economy at play.

In simple words, one can say that the industry is in a catch-22 situation and requires some key actions if it is to regain its commanding competitiveness, especially if one is in the non tile business of the industry.

Fashion industry

Believe it or not, the ceramics industry is part of the fashion industry of a society. Tableware, ornamental ware and ceramic tiles, may be on a wall or floor in a house, will portray the lifestyle of a typical consumer, be it in Sri Lanka or anywhere in the world.

Hence, one can define this business as creating a perception of how one’s home should look, which will be in line with the lifestyle that a typical household would like to depict to the outside world. This highlights the importance of the infusion of style, design and identity that is required if one is to thrive in this business.

Supply chain

It’s strange but I see that most industries in Sri Lanka are dragged into the political economy that is at play, especially when it comes to the supply chain. In this case it’s the constant supply of raw material like kaolin and ball clay. This issue is surfacing stronger given that countries like India and China have banned its export.

This calls for an urgent requirement for a survey to be done, particularly in the low lying western, southern and north western areas, whereby identification of economically viable deposits of kaolin and ball clay can be done. If this is not done as a priority initiative, the industry is heading for a supply chain constraint that’s going to further aggravate the existing challenges.

Mining insurance

Another key area of concern is that mine operators of ball clay find it extremely difficult to secure licenses for the continuity of their business. Some of the reasons cited for the district secretariats halting the licenses are objections raised by local associations and the issue of not finalising the National Mining Policy that will drive in speed of implementation.

Some can comment that these are the typical development issues of an industry, but if it seriously affects the running of an industry, then questions arise whether we are providing ‘ease of business’ from a policy perspective for the private sector to drive growth.

This will further take us down the ranking on the world competitive survey, which will not help Sri Lanka attract investors in this post-war economic war agenda that the country has set itself.

Middle of the business

Almost 20-45 per cent on the cost structure is accounted for energy in this industry, which is essentially outside its control. There have been many discussions with the then management of shell but it has not materialised with a clear agenda for this industry.

There has to be a policy decision that comes from the State for a joint programme to be initiated in order for a stronger energy efficiency model to be pursued. May be joint procurement of white burning ball clay, refractory material, kiln setters, plaster, colour, stains, alumina, grinding media and silica pebbles will help manage the cost structure of this industry.

I would also argue that concessionary finance can be provided to this industry for modernisation of plant and machinery so that it can be directed to investing in the kilns that can be made energy efficient. May be productivity improvement strategies like benchmarking competition can be done to identify best practices that can make this industry competitive in Sri Lanka.

Demand end

One can always jump start an industry by launching aggressively to the next generation products like advance ceramics if you are reliant on the global market, but it is a costly business model initiate. A better option is to see how best can the current model be refined and if there is no option, move to the strategy of driving innovative products.

In this light I guess pursuing the market segment ‘Gift Box’ should be seriously focused. There are many companies operating in this segment currently but may be it can be supported strongly from a policy perspective given that Sri Lanka is already ranked as a top notch supplier of quality ceramic ware globally.

The recent decision by one of the wealthiest housewives of the world, Nita Ambani, to procure 25,000 pieces of crockery from Sri Lanka is a strong endorsement. We now need to develop on this. I guess the brand owners of ceramics will know more on how to sketch the game plan in this segment.

Next generation

From a strictly marketing perspective, one way of differentiating an entrenched competitive business pressured by very heavy cost structures is to innovate. In the case of this industry, the move to advance ceramics is an option, but I must caution that this strategy is heavy on investment, which is the very challenge that the private sector is up against in Sri Lanka.

Some of the products that can be introduced are in the segment of bio ceramics slip casting, which includes complex organic-inorganic chemistry interfaces that may not be very price sensitive as the focus will be more on quality consciousness. Such options can be pursued by the industry given that cost is an issue.

Sri Lanka can also enter the automotive components that are ceramics fine end driven. This includes isolated spark plugs, precision extruding for catalyst support and pressings and pressings for brake pads to name a few. These products ideally fit the skilled work force that Sri Lanka has and I guess what’s important is policy support.

There are also many products in the defence industry that can be sourced from the ceramics industry of a country, but again it requires a policy decision for such sourcing to take place.

One voice

Given my experience of working across industries, one area that is key for the ceramics industry to work on is to have a ‘one voice’ in the public eye. I see this strongly in the apparel and tea sectors in the country and hence we see how strong policy interventions can be made to make these industries set the stage globally by forming business trends.

The ‘one voice’ perspective is also very important so that policymakers can intervene and drive key initiatives like what we see in the tea industry, with the national strategy on driving promotions globally.

For this to happen, a common agenda must emerge from the industry. This can be possible only if the two strong players get together and set the agenda for the industry so that the rest follow. This has been my take of many successfully but challenging industries in Sri Lanka, like renewable energy to be specific.

Support Government

Another very important building block agenda is that the policymakers must get the vibe that the sector supports the Government’s agenda for the country. This is a tough line to toe, but this is what it takes if an industry needs to be developed with a strong policy framework.

At the recently-concluded Davos Economic Summit, a top CEO from India mentioned the same ethos that holds ground in India. I would term this the working environment of a political economy that is slowly but surely concreting itself, especially in South Asian countries.

Next steps

Whilst I believe the ceramics industry is in a catch 22 situation, especially if it is reliant on the global market for business, a point that needs to be highlighted is that I have seen many industries in this catch-22 mentality in the last five years that have been strongly linked to the economy. But with focus and clear deliberations together with patience today, these industries are up and running and in fact giving leadership to the total private sector.

Some of the next steps that the ceramics industry can consider are as follows:



1.Get the industry together and agree on a common working agenda.

2.Share this agenda with the policymakers and get the anchor of one of the key personalities in the public sector. Ideally a technocrat so that there is continuity in the future.

3.    Whenever success is achieved, make joint statements together with the line ministry whilst try to avoid if possible informing the Government of the seriousness of the industry via the media.

4.    Hinge the overall image of the industry to the overall country strategy just like what the ceramics industry did in Spain.

5.    Work towards setting up a cluster under the National Council for Economic Development or the Ministry of Industry and Commerce.

(The author was invited by the Ceramics Council of Sri Lanka to be a speaker at the 2011 symposium on the topic ‘Making the ceramics industry competitive through differentiation’. He has a double degree in marketing and is a doctoral candidate in business administration. He has been a GSE scholar from Rotary International, Sri Lankan delegate to the World Marketing Forum and the Global CEO Summit in 2010.)