Ceylon Tea: To blend or not to blend?

Let me begin my thoughts with a quote generally attributed to Ralph Waldo Emerson: “Build a better mousetrap and the world will beat a path to your door.” The argument goes that if you have a superior product, then customers would seek you out.

Is Ceylon Tea good enough for the world to beat a path to our door? Before we answer this question, we must understand the divergent viewpoints presented. Ceylon Tea is seen both as a brand as well as a produce.

Adherents of the former viewpoint believe that Ceylon Tea, both as a product and brand has unique attributes and therefore potential in the global marketto stand on its own. They invoke Geographical Indication protection, controls on production, marketing and licensing the use of brand Ceylon Tea. Most of the producers believe in this conceptual framework.

The latter opposing viewpoint is presented by exporters who believe in responding to market needs, increasing market share and getting better UD$ yield per Kg of tea exported.

The purpose of this article is to present the business challenges the industry must contend with as the decision makers address the conundrum to blend or not. We can also examine how some products and brands have responded to similar challenges.

Two unique propositions

Ceylon Tea has two unique propositions. First, the source proposition; by virtue of geography Ceylon Tea has certain qualities that are sought after by tea drinkers. Thus source is presented as a key marketing argument. Second, the purity proposition; highlighting the virtues of the unspoilt tea gardens – the wholesomeness of an untainted product from the fresh green tea gardens of Ceylon.

There are many products that have mounted successful campaigns on the source and purity arguments – Scotch whiskey, French wines and champagne, cheddar cheese and Jaffa oranges are some examples of products and produce that have obtained geographical indication protection.  However none of these efforts have protected these countries from upstarts.

Wines from Chile and Australia are taking share away from the French, while Florida and South Africa are producing equally good oranges. The same goes for Scotch whiskey. India is the largest market for scotch.

Tiny Scotland may not be able to bottle enough scotch to satiate all of India’s thirst for the Scottish beverage. Thus many brands have resorted to moving their bottling closer to the market. By bottling in India they are putting at risk the source and purity argument. Thus competition and responses to competition can come in many forms.

What the advocates of the source and purity arguments don’t accept is the possibility of a disconnect between consumer and producer perceptions. Marketers have struggled to keep pace with changing consumers, their needs and wants often ignoring the writing on the wall. Henry Ford famously said: “You can have any colour as long as it is black!” But the bigger challenge is when the product and form change with changing times.

 Challenges to be addressed

Let me share some examples from related and unrelated industries to present the many challenges that we will encounter as we look at market Ceylon tea as a brand.

The product – form and function challenge: Since the discovery of photo film, we have learned to capture, store and retrieve pictures. How we do it now has changed dramatically. Eastman Kodak was the biggest brand of photographic film manufacturer in the world. Today it is fighting for survival because it stuck stubbornly to a product form it was familiar with, rather than embrace new digital forms. Think about the many forms that the tea experience is delivered compared to coffee and other beverages.

The ingredient (component) challenge: Most aircraft are fitted with Rolls-Royce jet engines, a top brand on its own. When did you last choose an airline based on the make of the aircraft or the choice of jet engine? Our decisions about the quality of an airline are based mostly on proximity based factors, the touchy, feely, creature comforts such as decor, seating, and the choice of food. Not the components that make up the aircraft!

Similarly, though Intel produces the finest processors, we tend not to focus on the processor or on the operating system, forcing Intel to put an “Intel Inside” sticker. When did you last buy a computer based on your processor or airline ticket on the aircraft engine for that matter? Despite the brand of computer and the Intel processor, don’t we get very upset when the OS is slow to load? And when the airline food is off-colour! If consumers don’t see tea in the same light we have a huge challenge on our hands.

The destination and experience brand challenge: Starbucks Coffee brand believes it is bigger than the products it represents – posing the destination and experience brand argument. Does Starbucks serve the finest coffee? Probably not, yet these ubiquitous cafes have become part of western lifestyle. It doesn’t matter from where Starbucks source their coffee as long as people throng their cafes for the Starbucks experience. As long as the destination and experience brand argument is relevant and meaningful to its customers, Starbucks will thrive without customers worrying about the origin of the coffee that is served.

The loyalty challenge: Retailers allocate a substantial proportion of their advertising Dollars to build loyalty. In the modern competitive world one of the primary challenges faced by retailing is reducing transaction costs. Many retailers such as K-Mart and ASDA have filed for bankruptcy, while larger formats such as Carrefour and Wal-Mart continue to grow.  Often customers seeking value are more loyal to their retailer than the brands they sell and may not wish to go shopping for a brand of tea that is difficult to find. Thus access to channels is a big challenge that brands must overcome.

How do these arguments apply to Ceylon Tea?

Multinational brand marketers look at “Ceylon tea” as an ingredient – in a brand of tea rather than branded Ceylon Tea, much like Intel inside your computer. You work with your brand of laptop computer and not on Microsoft Office OS or your Intel processor.

There is a risk of MNCs moving away if you insist on putting restrictions on the way they market their brands; no company wants to be tied up marketing a “brand” they have no control over. India and the Middle East learnt this from Coca-Cola.

Tea consumption in the world is changing. Black tea is consumed by older conservative individuals while younger consumers don’t want to be tied to the rigours of brewing tea. Tea consumption and tea drinkers in Europe are both declining. Egypt and Pakistan have moved to blends that Sri Lanka cannot produce economically.

In growth markets such as the US, tea is delivered in a form we are not too familiar with; iced tea. And Americans prefer destination brands such as Starbucks to consume their beverages. Coffee lovers will frequent Starbucks for the experience and not worry too much from where Starbucks source their coffee. The fact that Starbucks is struggling in the grocery channel proves the point, that consumers would rather buy their regular brand of coffee from their retailer than the more expensive Starbucks Coffee.

Production too has moved from geographies and beyond nation states. Beverages such as Coca-Cola have moved beyond a limited geographical phenomenon to a globally loved beverage. Being anchored as an American brand produced in America could have spelt its doom long ago.

Many barriers to surmount

The unassailable fact is that Pure Ceylon Tea as a product and brand has many barriers to surmount. The first challenge is getting close to the modern consumer as a brand in a form that they can relate to; black tea in a tea bag has a long way to go. We need to match R&D investment dollar for dollar, to come up with alternatives to other beverage choices. Second we have to have access to the channels at a cost that is competitive. With our current cost of production, we struggle to make the mark.

We can learn from these many marketing lessons. The fact that Ceylon tea has potential as a GI protected trademarked produce is a given. Source can be a lucrative niche with high profit potential. But the market at the top is limited.

When thinking about the potential for future growth, producers and marketers must walk a tight rope. There is no question that we must continue to push for the top end premium sector as a brand. However, it would be suicidal to prevent those who have the expertise to blend tea and take on the global blending centres such as Dubai and Germany, because we are afraid of taking on the world.

Ultimately tea is a commercial crop that needs to be produced in a commercially viable manner, be responsive to market needs and must be free from political meddling. Propping up one interest group against another is unhealthy and that is something we don’t want for Ceylon Tea.

(The writer is a Marketing Strategist and counts over 30 years of experience in the private sector and has played significant roles in senior management positions across a number of industry verticals. He works in a leadership role in a public quoted company. He can be reached via [email protected].)