‘Pure Ceylon Tea’ or ‘tea hub’? The billion dollar question

News reports point to an important decision that the minister concerned has been requested to make on the above subject. If this is correct it is important that we recognise that it is more than a million dollar decision that has been called for. It is so important a decision because it could determine the future of one of Sri Lanka’s most-valued industries and thus the future economic strength of the nation.

Given this scenario, it is not a decision that must be taken without in-depth study and documented proposals on either side of the debate in a transparent manner. It’s of such importance that the Government and the industry should commission an independent expert panel with a good knowledge of the global market realities, and the economic and social implications to make their professional recommendations. Rushing into decision-making that could impact one of the nation’s valuable assets without such a review could be a dangerous step.

A need for a national review

The objective of this document is not to support one or the other proposition within the current issue. On the contrary my objective is to share relevant information relating to the changing global tea market with the hope that it could contribute to building a national consciousness of the need for an independent and transparent professional review of the future of the Sri Lanka tea industry.

Demographic, psychographic, and social developments impacting the future

Those who are in their fifties and sixties need only to look back at the changes that have taken place in the ‘lifestyle’ of today’s 20 and 30 years old in Sri Lanka itself. How have these changes impacted on the ‘new generations’ habits relating to their preferences for food, drinks, clothing, music and so on?

How many specialty coffee shops have opened up? What new instant drinks have entered the market? Even at funeral houses, coffee machines have apparently appeared. New technology connects and exposes the younger generation to the globalised world. Whether one likes it or not the fact is that the only certainty appears to be change itself. This is not surprising because in every decade or two a new a new generation has appeared on the global scene. The difference today is probably the increase in the pace of change impacted by technology and the globalisation of markets.

Writing on understanding the transformation of the Indian consumer, Ram Bijapurkar uses Virginia Valentine’s description of an age cohorts as follows:

It comprises of a group of people born at roughly the same time in the same place or country. Consequently, they have experienced the same major economic, political, and social upheaval at about the same age. Their lives are punctuated by the same crises. They share the same nation – memories of music, film, entertainers, public figures, fashions, and fads. And they encounter every new decade, each with its own particular flavour, at similar stage in their lives.i

Let us consider the case of those in Sri Lanka who are 30 years old. They would have been born in 1982. Would they have a feel for what took place in the 1970s when hotels were not allowed to serve rice meals three days of the week or could not serve food at weddings with more than 100 invitees? The image of a political party such as the JVP could be quite different to them compared to those who experienced the situation in 1971. To those in their thirties, life is what it is, what they have been and are exposed to. Their habits and attitudes are impacted by the realities they have experienced and culture they have grown up in.

This reality has its impact on the market place as well. Even a large multinational like Kodak which was the household name for photography, who even invented digital photographic techniques, let new entrants eliminate their treasured film photography business from the global market.

When I was in my thirties in Sri Lanka, I personally can’t recall girls in jeans or slacks – not to mention the emergence of the widening gap between the sari jacket and the sari itself. I am not being critical of these changes but emphasising that every aspect of life changes from generation to generation and that it has its direct impact on the market place. Obviously it takes time for the major damage to have drastic impact. However, it is today’s trends that that marketers must identify to draw a picture of what it could be in the longer term and plan for the future.

Business as usual is therefore not an option. The very fact that the industry is today debating on alternative approaches is obviously an indication of the industry appreciating that there is a need for change to meet new challenges. However, on a longer term perspective the challenge to the Sri Lanka tea industry goes beyond the two alternatives being debated today.

What value does ‘today’s consumer’ attach to the claim ‘Ceylon Tea’?

When consumer research carried out in the UK a few years ago revealed that the awareness of Sri Lanka as a ‘tourist destination’ was only 3%, many were surprised. Could we face a similar shock relating to the reality regarding Ceylon Tea?

Research into consumer purchasing has shown that an awareness of a brand alone does not generate a sale. Thus, even if consumers know of Ceylon Tea, that alone will not drive them to buy it.

In marketing we refer to the concept of ‘Brand Salience,’ which is the ‘degree’ to which your brand is thought about when a customer is in a buying situation. Some time ago marketing referred to ‘top of mind awareness’ and it was measured on the basis of a consumer mentioning your brand when the product category it belonged to was mentioned.

However, newer research findings have challenged that thinking and now the concept of brand salience takes into consideration the state of mind of the consumer at the very occasion of the purchase itself. In this regard it is established that the ‘degree’ to which the brand is thought of in the buying situation plays the important role in winning the sale.

The ‘degree’ being impacted by the salient influences that reside in ones brain and comes up to dominate at the point of the purchase decision. It is also noted that not more than two or three brands may come to mind when the need for a product in a specific product category arises. Within this scenario, how strong an impact does the ‘influencer’ Pure Ceylon Tea have on the consumer purchasing decision? This is the important question to which the Sri Lanka tea industry must find the answer.

Differentiator and value proposition

Today every brand in the market speaks of the health benefits of tea. To that extent this valuable claim is now a generic claim. Looking deeper into the market one notes that it is the strength of the individual brands that dominate the market. The global leaders Lipton, Tetley, Brook Bond and the like have won the ‘trust’ of their consumer and have the strength to market leading tea variants without any association to Ceylon Tea. Of course they have Ceylon Tea products too.

However, the fact is that the strength of their individual company brand makes it possible for them to market the larger share of their volume and variants without the Ceylon tea story. Looking into the shelves of supermarkets particularly in the developed markets we note many tea brands with no reference to Ceylon Tea at all. Given this scenario it is time for us to ask the question, is Ceylon Tea losing its power to influence the consumer with a relevant, credible and differentiating value proposition?

Call for urgent consumer research

We often speak of Ceylon being famous for quality tea, and some may assume that the entire world knows about it. However, when have we last verified this assumption through in depth research in the key markets? Is it our own perception or that of those involved in the tea trade, or only in the minds of the older generation? Does today’s ‘new consumer’ know about it?

Even more important, when another brand of tea (local or foreign owned) uses the slogan ‘Pure Ceylon Tea’ what impact has that on the buyer of that brand? Does adding this slogan increase the value perception of the brand? These are questions for which answers must be found in both developed and developing markets.

Generic branding promoting Ceylon Tea might be initiated but unless such communication is based on a realistic marketing strategy taking into account the actual position in the market place it could be a waste of money. The message strategy may be completely out of focus as regards market needs.

Research, research, research

In this context it is strongly recommended that before taking any policy decision, market research be conducted through a professional research agency to establish the factual position relating to the awareness, importance and preference influencing power of the slogan ‘Pure Ceylon Tea’ as well as the ‘lion’ symbol in consumer decision making in the selection of a tea brand, and its competitive value realities in both the developed and developing markets. Unless the reality is established the industry will not be able to identify its strengths, weakness, opportunities and threats with an element of certainty.

Relying on individual hunches and traditional beliefs in a rapidly changing market place with the emerging middleclass that will determine its future is not an option.

If for instance consumer research indicates that the message Ceylon Tea has no strong influencing power or a strong ability to add meaningful added value to a brand and or that it does not have any value adding connotations Sri Lanka tea will face different types of challenge to hold its position into the future.

The danger?

The danger lies in marketers either not recognising the changes taking place or others noticing future trends but not having the vision to see the bigger picture or the lack courage to initiate the required change. At the extreme end of the spectrum there will be those tending to continue on the basis that day of reckoning will not come so soon.

Looking at the marketplace in urban Sri Lanka let us try identifying what would quench the thirst of a Sri Lankan urban youth today? A cool drink that is in vogue, a bottle of water or a hot cup of tea? A friend drops in, in the evening; what a choice of drinks would one offer? This is a reality around the world. The new consumer is redefining the contours of the future market place. Let us consider some realities.

Whatever brand positioning strategy is developed and be it in conducting B to C or B-to-B marketing, ‘Brand Salience’ is of primary importance. Brand salience is the degree to which your brand is thought about or noticed when a customer is in a buying situation (be it a consumer or a foreign tea buyer). If no one thinks of and adds competitive value building a preference for the brand at the moment of buying truth, your brand is not going to be considered. Let us now give consideration to some trends in the market place.

Tea competes in the global beverage market

Defining what market your product competes in could make a difference to success or failure in marketing. I have often found difficulty when I mention the fact that first and foremost Sri Lanka tea competes in the global beverage market and secondly in the tea segment of the beverage market. It appears that some still work on the mind-set that tea primarily still competes in the global tea market. Such a mindset blinds a tea marketer from the competitive reality.

A brand of tea not only competes against another brand of tea but also against other alternative beverages consumers are exposed to. The reality in the market place today is that black tea competes in a sub segment of the traditional tea market, which is a segment of the global beverage market. Equally, black tea also competes with all other forms of tea offerings such as flavoured specialty teas, green tea, herbal teas, infusions and so on.

The changed scenario

The following extract from a Global Market Research report indicates the reality in the market place today:

“Consumers’ consumption of hot and cold drinks is increasing year-on-year, mainly to fulfil hydration and health demands, and partly to satisfy indulgence needs. This report identifies what is driving consumer soft and hot drink occasions and assesses which drinks categories are winning share of throat. Marketers must understand key consumer drivers to grow occasions and maintain market share.”

In the good old days consuming three to five cups of tea could have been the norm. Today’s new consumer may wake up with a cup of tea or coffee or as some reports indicate pick up the favourite cup of coffee from the barista whilst rushing to work. At work she may go for her favourite cup of coffee, herbal tea or the more health conscious the water from the water dispenser.

At lunch the possibility of the choice may increase from fruit drinks to the colas to the carbonated waters to green tea. On the way home friends may gather at the favourite café and the choice of beverage increases to add on the possibility of a bear, flavoured tea, a glass of wine and so on.

At home for dinner is it a bear, wine or a stronger drink. Relaxing after dinner before bed could it be a soothing herbal drink? The sporting kind carries the bottle of water in hand and goes for the energy drink. Dining out, the choice of her drink is wide.

The focus of beverage marketers is on increasing their share of throat by making available different product offerings for the different share of throat opportunities. Tea marketers are caught up in this competitive situation. The higher the share of throat captured by the company the higher the market shares of the beverage company.

As Frost & Sullivan Research Services note, the functional beverage market has developed beyond being a niche category of drinks meant for better health and well-being. . New functional beverage (such as sports drinks, ready-to-drink tea, and designer water) have added a new dimension to the earlier definition, with an increased emphasis on convenience, novelty, fun, and image while maintaining their status as a “health drink”.

It is therefore not surprising that the per capita consumption of tea in the United Kingdom, which was 4.55 kg in 1958, had declined to 2.3 kg by 2009. The fact that by 2003 the non-mainstream tea sector (specialty teas, herbal teas, green tea and infusions) had captured 36% of value of the Australian tea market is evidence of how traditional tea is losing out to non-mainstream teas alone infusions alone taking 12% share).

Despite the very creditable effort by Dilmah in promoting the Ceylon tea story the competitive nature of the market is reflected in the shares by value by corporate entity (Lipton 35%, Twining 17.7%, Tetley 15.1%, Valcorp of Dilmah 12%, Nielson market snapshot in 2003 MAT 9/11/03).

So, where to, from here?

Reviewing this scenario some may attempt to take comfort on the premise that the larger share of the Sri Lanka tea business is business to business (B to B) rather than being direct to the consumer (B to C). However, be it B to B or B to C success will depend on one’s marketing strategy that ultimately delivers a competitive advantage to the consumer. Let us review the picture emerging in the Russian and Middle Easter markets:

Russian market

The decline in traditional tea consumption in the developed world is well recognised. Even in the Russian market, as the AGINKY Consultancy Group report (December 2008) on the Russian Tea Market states: ‘Consumer awareness of the health benefits of tea and premiumisation (a growing trend towards premium and specialty brands) have been the growth drivers of the tea market recently.’ Reporting on sales of tea by sub-sectors in Russia they note that there is a growing demand for premium specialty and healthy tea. Between 2007 and 2012 black tea was estimated to grow by 6% whilst green tea and fruit and herbal tea were forecasted to grow by 36% and 48% respectively.

The Middle East

The share of consumption pattern for tea bags does not show any dramatic shift over the study period (73% – 2003 to 74% - 2005); while share of consumption for traditional coffees like Arabic/Turkish have declined from 61% (2003) to 57% (2005), with corresponding increase in modern/branded coffees like instant coffee (19% to 25%) and exotic coffees (Cappuccino, Mocha, etc) from 1% to 7% with the opening of international brands like Star Bucks (USA), Second Cup, etc.

This suggests that like other parts of the world, the Saudi lifestyle too is undergoing a change – from traditional to modern. In 2003, hot tea had an 81% incidence of consumption and more than a third (37%) of the share of beverage consumption occasions (excluding water). The incidence of hot tea consumption has reduced by 4% (78%), while the share of consumption occasions has decreased to 30% in 2005.ii

It’s not a new challenge

The reality relating to these emerging trends was pointed in 1990 in the Kenneth Abewickrema & Associates report with which I was associated. However, the question is; is there a mindset change and appreciation of this reality? Yes, several individual players within the industry are no doubt marketing value added teas in several markets, but is there a national awakening to the challengers and an overall nation strategy into the future to meet this challenge? Or, on the contrary are we still fire-fighting?

Global leaders have changed their game plan

The global leaders have recognised these trends and made important changes to their business structures. Coca Cola and Pepsi recognising the increasingly health consciousness of the ‘new consumer’ and the apparent decline in the consumption of their traditional sweetened drink products have entered several other segments of the global beverage market.

They are in bottled water, iced tea, health drinks, energy drinks, fruit drinks, sports drinks and even coconut water drinks segments of the global beverage market. Capitalising on wider awareness of health benefits of tea they are in active collaboration with Unilever and Nestlé’s in globalising their brands of ice tea and recently their coconut water brands.

‘Tata Tea’ transformed to ‘Tata Global Beverage Limited’

An article posted in www.theequitydesk.com/forum of 30 June 2007 reports how Tata is transforming itself to become a beverage behemoth. After buying Tetley, Good Earth, Eight O’ Clock Coffee, Himalayan Water and selling 30% stake in Glaceau for a handsome profit, Tata is likely to bid for US drink arm of UK based Cadbury Schweppes As it reports, after having sold its plantation business, the company is focusing itself to become a large player in the beverage space globally. It has been acquiring companies globally like its peers in the Tata Group.

Another value added

The marketing magazine of 17 February 2010 reported how the world’s second largest manufacturer and distributor of tea has committed to purchase all of the tea for its branded teabag and loose tea products from Rainforest Alliance-certified farms. This they state will mean that Tetley branded black, green and red (rooibos) tea, including flavoured and decaffeinated products, will carry the logo by 2016.

The Tata Beverage Group Chief Executive Peter Unsworth is reported to have said: “Our consumers will be able to enjoy their favourite Tetley blend knowing it has been produced in a way that represents the environment and tea growers and pickers”. Another approach to adding value to their Tetley brand. Equally important is as to how Sri Lanka supplies fit into this equation?

In October 2010 it was reported that PepsiCo and Tata Global Beverages had signed a joint venture agreement in the area of non-carbonated ready-to-drink beverages, focused on health and enhanced wellness. The vision of the joint venture was reported as to develop the business in India and internationally focusing on health and wellness beverage products. As for tea Tata Global Beverages mission is stated as:

A global business on a mission to lead the world on ‘good for you tea’.

Whilst the Tata Global Beverages vision is today an integrated beverage business that has set on a journey to become the global leader in branded “good for you” beverages.

We believe passionately in making the world a better place through life-enhancing sustainable hydration – and its mission to make this a reality.

What do we mean by ‘life-enhancing sustainable hydration’?

Put simply – beverages, which taste good, are good for you, good for others and good for the planet.     

Tata in the USA

In the Kenneth Abeywickrema & Associates study of 1990, mention was made of the developing ice tea market in the US. It was proposed that either in collaboration with the Lipton’s instant tea project or with another possible partnership Sri Lanka moves to build itself to benefit from this emerging opportunity.

In September 2005, a Tata report stated that Tata had products for all three segments of the US tea powder market and that they were the leading supplier of 100-per cent tea in jars for private label brands in the US. For the iced tea and RTD segments they report supplying some of the leading brands.

At that time they sourced about 3.5 million pounds of tea powder from the Munnar plant of which 35 per cent was for the RTD segment. Thus though Tata did not have its own brand of tea in the US market they were a large supplier of raw material for the leading produces in the US. This is a classic example of the manner in which they had tailored their strategy to make best use of an identified product opportunity when it would have been prohibitive to go on an up-front brand contest with powerful brands in the US.

Strategy?

As the eminent marketer Michael Porter points out the essence of strategy is to get a competitive advantage, developing value to be unique verses competition. Considering the various interpretations given to two important terms used in business discussions of this nature it may be beneficial to develop an interpretation of these terms as used in this discourse. These two terms are ‘strategy’ and ‘marketing strategy’.

Strategy appears to be a magic word in today’s business vocabulary. If one attends a business seminar it would be interesting to count the number of occasions the word strategy is used by various speakers. Equally, various definitions and interpretations are being thrown around. It is also observed that many individuals even at senior levels tend to operate with an incorrect interpretation of what a strategy is. This appears to be a global problem.

Michael Porter discussing the subject ‘What Is Strategy’ brings one to focus on a key issue we face when it comes to the development of strategy, be it corporate strategy, a marketing strategy or any other strategy. Porter refers to mistakes businesspersons make when they make statements like, my strategy is to globalise my business, and my strategy is to outsource my production and so on.

As he emphasises, they may be relevant and important actions to be taken, but they are not strategies. Similarly therefore continuing the Ceylon Tea road or adopting the tea hub road are by themselves not ‘strategies’. Whatever alternative course of action is taken must necessarily be based on a carefully crafted marketing strategy.

Core of your strategy

As Robert Kaplan et al. points out, the core of any business strategy – connecting a company’s internal processes to improved outcomes with customers – is in the “value proposition” delivered to customers.

The value proposition they note determines the market segments to which the strategy is targeted to and how the organisation will differentiate itself, in the target market relative to competition. Equally, as they observe a clearly stated value proposition provides the ultimate target on which the strategic themes of critical internal business processes and infrastructure are focused.iii

Value proposition and competitive realities

In a competitive market place a value proposition does not exist in a vacuum. Thus the value proposition to be of any use must deliver a competitive advantage to the customer. In the absence of a relevant, credible and differentiating value proposition one could end up as ‘me too’ in the market place with no strength of competitive sustainability.

Marketing is not advertising

When one speaks of marketing or developing a marketing strategy, it is noted that some put up their hands raising the issue that we don’t have the money to compete with the big players. However, the reality is that this is because the term ‘marketing strategy’ is often misunderstood.

A marketing strategy becomes even more important when funds are an issue. Because marketing in the public eye is associated with advertising and promotions many assume that this is marketing. As Sergio Zyman, one time the Chief Marketing Officer of the Coca Cola Company states, marketing is not a combination of advertising and a whole bunch of other stuff added in, such as packaging, and promotion, and market research, and new product development.

As he states, those are marketing tools. But the tools are not marketing. Marketing is uses the tools. … Clarifying this further he points out that it’s as if you have a hammer, a saw, a box of nails, and some lumber. But you still need the carpenter to come in with the thinking and the skills to build a table, and you need to decide if what you want to build is a table, or a chair. Thus he identifies marketing as strategic activity and discipline focused on the endgame of getting more consumers to buy your product more often so that your company makes more money.

Zyman points out the importance of understanding that strategy is a key element in what you are supposed to be doing and that understanding that changes how one goes about performing the tasks. As he points out its marketing that positions a product, defines expectations and does so in a way that you can over deliver on these expectations and delight the customer so they keep coming back for more.

Therefore, be it business to consumer marketing (B to C) or business to Business marketing (B to B) the marketing strategy becomes the core around which all other activities must reside. Given this reality in this the 21st century it is time to do away with the very term ‘tea trader’ because that function today in a holistic sense is business-to-business marketing. Such a change could contribute to a better appreciation of the role and the mindset of those in that function.

What is the Sri Lanka tea industry’s marketing strategy?

Given this business reality the logical question one should ask is – ‘What is the Sri Lanka tea industry’s marketing strategy?

Be it focusing on building the competitive advantage based the ‘Ceylon Tea’ concept or importing teas from other markets for blending, or adopting a combination of both, the conclusion reached must be based on the most appropriate marketing strategy for the marketing of Sri Lanka tea – a ‘strategic activity and discipline focused on the endgame of getting more consumers to buy our product – not just for today but in the longer-term interest of the industry.

In either case our strategy should also defines our value proposition and competitive advantage – that is the value proposition that will place Sri Lanka tea at a competitive advantage – giving the reason why a consumer/customer should buy ours in preference to another country. Adopting the proven process of ‘strategic marketing’ and in the process being required to find answers to key questions contained therein, supported by factual reflection of the competitive situation and consumer expectations, could better serve the cause of determining the more advantageous strategy for the Sri Lanka tea industry.

Whist emphasising again the importance in the need to research the concept of ‘Ceylon Tea’ in both developed and developed markets within the framework of a comprehensive national discourse on the tea industry the following example shows how a blended tea with relevant, credible and differentiating brand positioning could be a strong value proposition to the consumer.

Converting blended tea into a positive value proposition

Though some may consider blending tea from different sources could be a disadvantage a review of the Lipton Web page provides a good example of how such a practice has been adapted to build a very compelling and positive story to the consumer. Lipton builds a positive value addition to the fact that there’s a blended tea. As they say, “…in one Lipton tea bag, there may be as many as 30 different types of teas. Blending teas is an art-form”. They not only make that claim but also provide the story to add value to their proposition. Here are some parts of that story:

‘More than 100 years of innovation has enabled Lipton to bring tea enjoyment to many people in the world than any other tea company. Sir Thomas would be proud. But he wouldn’t let us stop here. In that spirit of tireless inventiveness, research and discovery, Lipton is helping to shed more light on the exciting health benefits of brewed black and green tea, including the goodness of tea flavonoids.

We know it because we grow it

What makes Lipton’s expertise so unique is that the company not only buys tea on the open market, but also has had its own plantations since 1890 when Sir Thomas Lipton bought his first tea estate in Ceylon.

Lipton only uses the top leaves of the tea plant. These are the youngest, most tender and most flavourful leaves that produce the best – quality cup of tea. But how do you get the best leaves? At Lipton we grow our own. We have our tea estates in Kenya and Tanzania. We also conduct extensive research programs at our own tea estates, to growing and harvesting practices so you enjoy a dependable delicious cup. With our own estates, we’re able to sustain Sir Thomas Lipton’s mission of constantly seeking new and improved ways of delivering the best tea experiences.

We also source teas from as many as 35 countries to ensure a consistent taste and an uninterrupted supply. These teas have to be the best of the best to satisfy our tea experts.

The art of blending

Everyone has their favourite tea, appreciated for its unique taste and aroma. The secret of consistent high quality lies in tea blending.

Blending tea gives it subtle tones and flavours. In fact, in one Lipton tea bag, there may be as many as 30 different types of teas. Blending tea is an art-form. No two teas are ever the same, even if they are from the same estate. Tea plucked and manufactured on a wet day, for example, are different from that produced on a dry day. As result, it is not unusual for a tea garden to produce teas of different qualities throughout the course of a single season.

Like wine, the quality of tea varies enormously according to country of origin, weather conditions, altitudes and the structure and quality of the soil.

At Lipton, we have a team of fully trained Tea Tasters skilled in the art and science of tea. It is the role of the tea taster to make sure teas are blended perfectly to meet our standards of quality.

Lipton quality black is blended on specialty tasting rooms in seven regional tea tasting hubs scattered all over the world – by a small group of professional Tea Tasters, who collectively have over 150 years of tasting and blending experience.

Source: www.lipton.com.au Printed 30.04.12

There is no doubt that within a corporate entity like Lipton it is possible to develop a single-minded brand strategy where as a country like Sri Lanka would have with several industry stakeholders operating with their individual company strategies, the possibility of developing a unified umbrella positioning would be a different challenge.

If one studies the web pages of the individual Sri Lanka tea brand marketers one observes the different angles the ‘Ceylon Tea’ or ‘Pure Ceylon Tea’ aspect has been taken, each aiming at a niche in their core markets with their individual positioning strategy. As for the Sri Lanka Tea Board web in a marketing sense, the less said the better.

Given this scenario, there is the urgent need to bring in the concept of strategic marketing to design its ‘corporate positioning strategy’ so that the individual brand marketers from Sri Lanka could align their individual brands marketed under that umbrella to build a beneficial Ceylon Tea ‘brand architecture’ into the future.

Tea is still alive and kicking – but?

The current trends do not mean the demise of tea. However, the claim that it is still the most widely consumed beverage, in the world after water must be placed in context. With just India and China alone making up around forty percent of the world population and their strong tea drinking culture such picture is not a surprise. The reality in the developed world and emerging trends in the developing world could however be very different.

In this context a paper presented by Alastair Hicks an FAO Regional Officer of April 2009 is of interest. (Ref: AU J.T. 12(4): 251-264) Based on the paper in volume terms domestic utilisation of producer countries within the period 2006 – 2017 is estimated to grow by 30%. In comparison during the same period, the utilisation of black tea in developed countries is forecasted to grow by 15% and that within the developing countries by just 1.7%.

If these forecasts still hold it could mean that producer countries such as India and China would have export constraints due to increased local consumption and therefore place the Sri Lanka exporters at an advantage. This is probably the picture Merrill Fernando is reported to have brought up in the recent discussions.

It is of vital importance that those responsible for formulating strategy review the latest available information on this potential future scenario in considering future strategy for the Sri Lanka tea industry. The important fact is to recognise the game change and develop a sustainable future strategy for the industry.

Recognise the game change

Though there is potential for tea into the future what is important is to accept the reality that the ‘game’ cannot be plaid according to outdated thinking and practices. As the marketing guru Phillip Kotler continuously reminds us – in this globalised, increasingly competitive world where the consumer is king the future will belong to those who adopt strategic marketing as its business philosophy. The changes in the market discussed earlier are supported by research on tea consumption as well.

Funding constraints

Individual stakeholders of the Sri Lanka tea industry may not be in a position to compete on par with the large multinationals as regards investment in extensive medial advertising. However, as referred to earlier advertising is only a tool of marketing. In some circumstances the selected marketing strategy may specifically exclude direct consumer advertising and adopt other media for communicating the message.

Tata captured the market leadership in the powder tea supply segment of the USA with direct B-to-B marketing. Equally several local value added brands have already established varying market strengths in their core markets with limited spend. Within this scenario the challenge in developing a marketing strategy is no easy task.

However, an experienced marketer equipped with relevant market information and working closely with all stakeholders, using the wealth of knowledge and experience within the industry itself should be able to develop the options available to the industry in its challenge into the future.

With a transparent review such options hopefully an overall marketing strategy and a brand architecture for the industry that is best capable of delivering optimum commercial benefits for all concerned could be developed. Thus there is the possibility that each local organisation could by aligning itself to an overall Sri Lanka Tea value proposition benefit from such an approach.

Another possible scenario

In this context I must hasten to add that the results of the findings from a consumer research study on the consumer awareness of and or value they add to such attribute will be an important factor in the deliberations to develop an appropriate marketing strategy.

Consider for instance if with the generational changes that have taken place the value of the attribute Sri Lanka tea is not recognised by the new generation or that the trust builder with the consumer is more the brand of tea irrespective of the source of supply of the tea itself. That would create an entirely different scenario to the challenge. If that trend appears among the younger generation in developing markets too, the danger signals will be even greater.

Marketing skills gap

The 1990 report pointed out the fact that administrators with no knowledge or experience in marketing could not be called upon to take strategic marketing decisions. It was therefore recommended that a marketing structure with appointments at Assistant Director level be established to form the core marketing team for the then Tea Promotion Board. Obviously administrators can’t be tea-tasting specialists on whose recommendations decisions worth millions of dollars may be take.

With such a reality and the competitive nature of the market described it is unimaginable that marketing has not been taken seriously. As we stated in the 2009 report, promotion is very important, however, if it is not based on a marketing strategy it loses its purpose. It is interesting to note that advertisements have recently appeared calling for applicants for the selection of marketers to constitute a marketing cell within the tea board.

I would request readers to Google the Tata Global Beverage Ltd. and review the background of the directors on that organisation. Every one of their directors irrespective of their individual specialisation has a marketing background and or experience.

In a world where product differences are blurring, the winners will be those that work with the consumer to fashion their brands ‘competitive strategy’. The road ahead would depend on the answers to the following questions:

=How do we define the contours of an evolving and changing industry structure and, therefore, the rules of engagement in a new and evolving game?

=Within such a scenario, what would the most advantageous competitive marketing strategy for Sri Lanka tea?

=How will we then design the future business structure including our supply chain to meet deliver on the agreed marketing strategy?

=What action plan will we adopt to ensure a realistic transformation from today’s business structure to what is planned to serve the future?

The million-dollar question is therefore much more than ‘Ceylon Tea’ or ‘tea hub’ – It is: How do we formulate a sustainable competitive future for the Sri Lanka tea industry?

Footnotes:

i Rama Bijapurkar, Winning In The Indian Market, John Wiley & Sons (Asia) Pte, Ltd. Singapore, 2008 p115

ii Consulate General of India, Jeddah, Commercial Section report of June 2006 on the tea market in the kingdom of Saudi Arabia (No. JED/COM/201/4/6)

iii Robert S. Kaplan and David P. Norton, The Strategy Focused Organisation, Harvard Business School Press, USA, 2001, p26

(The writer is a Fellow of the Australian Institute of Management and an Associate Fellow of the Australian Institute of Marketing; records an extensive international management career. Having retired as the Regional Director responsible for the SmithKline Beecham Int. (GSK) operations in East Africa he continued to serve them as their management consultant for South East Asia. Prior to leaving Sri Lanka he was the Managing Director for Mackwoods Winthrop (GSK Sri Lanka) and was responsible for one of the most successful international OTC brand launchers in building Panadol’s brand leadership in Sri Lanka. Starting his career with Unilever, he served as the Marketing Director for Reckitt and Colman. He is a founder member and past President of the Sri Lanka Institute of Marketing and a Director of STING Consultants. He can be reached via [email protected].)