Tea Branding Promotion by DeshanManoj


									                                    CHAPTER 1


1.1. Introduction

       In the real sense of the word, this is miracle-stimulating drink. The two leaves

and the bud that used to prepare this beverage and those are appreciating in every

household in the world. It is not considering just as a stimulating drink, but has

become a way of life to the majority of the people in all over the world. That is about

cup of tea. Preparing a cup of tea is easy task for the majority of the peoples in the

world, but unfortunately, most of them do not know about this plant and legend of it.

1.1.1. History of Tea

       "Camellia sinensis” is the scientific name of the tea. The tea originated in

Southeast Asia. The plant was introduced to more than 52 countries in all over the

world. The Chinese have consumed tea for thousands of years. China is the origin

country of tea and various kinds of legends also having in China regarding tea.

However it is in current scenario China is the biggest tea producer in the world

1.1.2. i Present situation of tea

       Ceylon tea is mainly divided into three groups: High or Upcountry

(Udawatte), Mid country (Medawatte), and Low country (Yatawatte) tea, based on the

geography of the land on which it is grown. Following table shows how the Srilankan

tea production according to elevations.

                      Table 1.1.2.i - Sri Lanka Tea production

Tea Production according to Elevations ( including Green Tea )

Elevation                               2009                             2008

High                                            5,454,943                         6,548,516

Medium                                          3,498,570                         3,850,429

Low                                            16,164,530                        16,341,391

Total                                          25,118,043                        26,740,336

                            Source: Sri Lankan Tea Board

1.1.3. Branding

        “Economic Benefit of Promoting Own Brand in Local Tea Industry”, It is

related to brand promoting. The word "brand" was derived from the Old Norse

brandr, meaning "to burn." It refers to the practice of producers burning their mark

(or brand) onto their products The brand can be define as follows, “At the heart of a

successful brand is a great product or service, backed by careful planning, a great deal

of long-term commitment, and creatively designed and executed marketing. A strong

brand commands extreme consumer loyalty” – “Brand Annual” magazine. This

definition is common for any kind of industry. When it is concerning about tea

industry, most of the time people in the tea industry were depending on the export.

Now they were moving to the local market too. Because it is profitable for them too,

and there was a less competition than global market. So moving to local market is less

risky than the global market. However, most of the tea companies haven‟t their own

brand, either in the local market or global market. They are depending on their tea

brokers‟ brands in locally, even globally.

1.2. Research Problem

        The research problem related with the tea industry in Sri Lanka, because tea

industry is one of hot debatable industry in this moment in Sri Lankan context, and

also high amount of foreign currency comes to Sri Lanka through this crop. So, most

of the peoples are highly interesting to this sector. In this scenario, research problem


“Measuring economic benefit of promoting own brand in local tea industry”

1.3. Research Objectives

The main objective of this research study is given below.

        01. Exploring for the opportunities of promoting own brand in local tea


Other than the main objective, this research study is giving to optimize following

objectives as well.

        02. Identify constrains affect for the promoting own brand in local tea


        03. Identify the modern trends and strategies in promoting own brand in

           local tea industry.

        04. Identify the attitudes of people regarding the own brand.

After this research, it hoped to fulfilled and achieved research objectives in it level


1.4. Chapter organization

       Chapter one was giving an introduction to the reader regarding the research. In

here it contain, introuduction of tea and brand, research problem and research

objectives. Under the Second chapter, it imply with theoretical background and

research findings. Third chapter indicates that data analysis part and data

interpretation part of the research.The chapter four coming with the conclusions,

suggestions and policy implication of the research. That is the way of capter


                                   CHAPTER 2

                        RESEARCH METHODOLOGY

2.1. Introduction

        This chapter consists of the methodology followed by the researcher to

conduct this research study. Under this chapter, it was discussed about sample, sample

distribution, sample techniques, population, data collection, data analysis and data


2.2. Subjects

        According to this research, gathered data from the six plantation companies

(according to the sample) and discussed with the relevant parties (CEO‟s and other

authorized parties) and got the information from them. In here, it was able to find out

their idea about promoting their own brand regarding their product. The secondary

data was collected from annual reports, other publications, articles of those

companies, reports that were published by Sri Lanka Tea Board, Publications of the

Colombo Tea Auction, Central Bank report of Sri Lanka etc. Additionally, it

discussed with tea buyers and brokers to get their idea regarding tea marketing and


2.3. Sampling Techniques

        Sample techniques means, how to sample the data set related to the research.

Under this topic, it discussed population, sample Selection, and discussed sample

distribution of this research.

2.3.1. Population

       In Sri Lanka, there are mainly 23 plantation companies were listed. Within

those plantation companies, only 21 companies are producing tea in Sri Lanka. Other

2 plantation companies (Chilaw Plantation Limited and Kurunagala Plantation

Limited) were not producing tea. However, According to this research; it selected

only 21 plantation companies as the research population. Therefore, the population

was 21 plantation companies, which are engaged with the plantation sector.

2.3.2. Sample and Sample Distribution

       Generally when it is conducting a research, researchers are not in a position to

accessing all the population, which related to the research. Therefore they have to

select sample from the population. According to this research, it is also have to follow

same procedure. So, within those plantation companies, it was selected 6 plantation

companies randomly as the sample. Those companies are given below.

       1. Balangoda Plantation Limited

       2. Bogawanthalawa Plantation Limited

       3. Kelani Valley Plantation Limited

       4. Madulsima Plantation Limited

       5. Maskeliya Plantation Limited

       6. Watawala Plantation Limited

2.4. Data Collection

       The direct interview method was used mainly for the purpose of collecting

information. To the supportive purpose it used questionnaire also. The direct

interview method was selected, because of that is the most appropriate method to

getting more and accurate information from related parties and also it was helping to

identify actual idea of the relevant parties which regarding to this research. Other than

that for the secondary data, it used annual reports of the plantation companies and

annual publications of the Tea board.

2.5. Data Analysis and Interpretation

       According to the research objective, it has to prove the research objectives.

For that purpose, it has to use most suitable and effective method. According to the

main research objective, it was “Measuring economic benefit of promoting own brand

in local tea industry”, to that purpose, it used profitability, Income and brand loyalty

to measure economic benefits of the brand. However, according to this research, it

followed descriptive method to interpret the data set. Under that method, it used

graphs, tables mean like tools to interpret the data set.

                                   CHAPTER 3


3.1. Introduction

       Data interpretation and analysis is the most important part of the research,

because it is highly related with the final solution of the research. This research is

going to follow a descriptive analysis. Mainly it based on, commence on the

plantation companies which were in the sample. Using those commence this chapter

illustrate interpretation of their responses. To the analyzing purpose six plantation

companies denoted by using numbers. The denoted numbers and plantation

companies are given below.

                        Table 3.1- Selected Plantation Companies

           Denoted Number                              Plantation Company

                    1                         Balangoda Plantation Limited

                    2                         Kelani Valley Plantation Limited

                    3                         Maskeliya Plantation Limited

                    4                         Watawala Plantation Limited

                    5                         Bogawanthalawa Plantation Limited

                    6                         Madulsima Plantation Limited

3.2. Planting capacity

       Under this part it discussed planting capacities of the plantation companies.

       The following table shows, the amount of the hectares cultivated by the

responded companies.

             Table 3.2. - Average Planting Capacity of the companies

                         company                Average Tea Hectare

                            1                          5033.18

                            2                          4042.00

                            3                          5705.27

                            4                          8284.27

                            5                          7652.20

                            6                          5013.18

                          Source: Last 5 years annual reports

       According to the above chart Watawala plantation was having high amount of

tea cultivating hectares than other plantation companies. It was 8284.27 of hectares.

3.3. Cost structure

       The following table shows how the cost structure behaved in a selected

plantation companies. Cost structure include learn the average cost, average sales and

average profit or loss of the company.

Table 3.3.1 – Monthly Average net sales, Average Cost of Production and Profit

             or Loss per 1 Kg of tea

        Company          Net Sales        Average Cost of        Profit or

                     Average(Rs.1kg)       Production for          Loss

                                              (Rs.1kg)           (Rs.1 kg)

             1            202.47               206.80             (4.33)

             2            232.05               208.40              23.65

             3            233.40               194.32              39.08

             4            234.40               226.42              7.98

             5            257.80               253.86              3.94

             6            228.16               222.73              5.43

                 Source: Data related to Last 5 years annual reports

     According to the above table, Company 1 was having Rs. 4.33 of loss.

However, other all companies made profit. Company 2 made Rs.23.65 of average

profit for 1 kg of tea powder. Company 3 made Rs.39.08 of average profit for 1 kg of

tea powder. Company 4 made Rs.7.98 of average profit for 1 kg of tea powder, and

also company 5 made Rs.3.94 of average profit for 1 kg of tea powder. Company 6

made Rs.5.43 of average profit for 1 kg of tea powder. According to the above table,

it indicates that Balangoda plantation was having Rs. 4.33 of loss in last five years.

However, according to their annual reports, they were having Rs.11.01 of loss for 1

Kg of tea powder in year 2008. But in 2007 they have profit of Rs. 7.48 for a 1 Kg of

tea powder. As a reason they mentioned that, drought and high labor expenses were

badly affect to the increasing their cost of production.

3.4. Branding

                  The research reveal that majority of plantation companies are not having their

own brand in local market. Only 2 companies indicated that they were having their

own brand. Those 2 companies are Bogawanthalawa Plantation Limited and

Watawala Plantation Limited. Other 4 companies indicate that, they were not having

their own brands. Those companies indicated that they are based on their parent

companies brand names or broker‟s brand names, such as “Stassen”, “Laojee” and

“Lipton Ceylonta”. However, following bar chart is indicating the result of that


                               Having Own Brand to Sell Product





                                 0                                1
                                            own Brand
                                          0= No, 1= Yes

                             Figure 3.4.1 - Having Own Brand to sell product

When it concern about profitability of branded companies, following table shows

how it behaved in last 3 years in tea industry.

   Table 3.4.1- Branded Companies Profitability of Tea last 3 years (Rs. „000)

           Company          2008/09     2007/08     2006/07      Average

           4                (261778) 18404          (24377)      (89250.33)

           5                29770       24153       (8048)       15291.66

      Source: Annual Reports of the Watawala and Bogawanthalawa Plantations

       According to table Watawala plantation made 89250.33 (Rs. „000) of average

loss for 3 years from tea. However, Bogawanthalawa Plantations made 15291.66 (Rs.

„000) of average profit for last 3 years. Below line indicate the result in graphically.

However according to their annual reports Watawala having 79985 (Rs. „000) of net

profit from 2009/08. In the case of Balangoda plantation, they were having 227905

(Rs. „000) of loss in year 2009/08. The following chart indicates that result in

graphical manner.


                         1         2            3

        -100000                                             Watawala

        -150000                                             Bogawanthalawa




            Figure 3.4.2 – Average profitability of branded companies

3.5. Income Generation

      The following table shows the monthly average total sales income.

                  Table 3.5.1 – Monthly Average Total Sales Income

              Company                           Monthly Average Total Sales Income

                                                             ( Rs. Mn )

                     1                                         134.37

                     2                                         128.85

                     3                                         174.52

                     4                                         157.38

                     5                                         185.00

                     6                                          95.9

                   Source: Data related to Last 5 years annual reports

         According to the data company 6 (Madulsima Plantation Limited) was having

lowest monthly average total sales income. However according to the above table,

company 5, means the Maskeliya Plantation is having height monthly average total

sales income.

The following table shows how the gross profit behaved in the tea sector in last 5


         Table 3.5.2- Average gross profit margin of the companies (%)

Company         Year                                                AGP (%)

                2007/08   2006/07   2005/06     2004/05   2003/04

1               4.35      10.84     2.05        1.76      6.34      5.07

2               14.70     19.80     18.70       13.7      17.5      16.88

3               12.37     9.63      17.25       12.65     9.30      12.24

4               12.65     10.43     10.53       9.45      5.86      9.78

5               7.57      (0.38)    5.15        5.61      4.68      4.53

6               (7.09)    2.0       (2.95)      (13.7)    0.6       (4.23)

         According to the above table it emphasis average gross profit margin of the

companies in last five years. According to the sample, Watawala and Bogawnthalwa

having their own brands. The average gross profit margin of those two companies is

7.15%. The average gross profit margin of other 4 companies is 7.49%. Other 4

companies not engage with the local market. So, according to the data it indicates

overall average profit margins of other 4 companies are higher than overall profit

margin of other 2 companies. The following bar chart indicates that results in


                                     Average Gross Profit




                             1           2        3             4     5         6


                      Figure: 3.5.1. Average gross profit margin of the companies

3.6. Customer Base

       Customer base is a one of most important part of this research. However, the

questions regarding customer base, related result were show in following table.

                                       Table 3.6 - Customer base

                                 How the Customer Identify the Product

         Answers                              Companies                    Percentage

                      1                           1                          16.67

                      2                           1                          16.67

                      3                           0                           0.00

             4                              1                        16.67

             5                              3                        50.00

                                          N= 6

1=Brand Name, 2=Company Name, 3= Estate Name, 4=Brokers Brand Name,

5= Other

       The above table shows that how the customer identifies the tea producer in the

market. It clearly shows that majority of identify by “Other “ways. It percentage was

50%. In here the “Other” means, Buyers names, retailer names, etc.16.67% of them

are said customer identify their products in Brand Name, Company Name and

Brokers Brand Name. Nobody mentioned that their product identify estate names.

3.7. Importance of Local Market

       Research reveal that some respondent believe that local market is important

which other believing that it is not important.

       According to research findings, four companies believe that local market is not

important to them. That percentage was 66.67. They are having more profit from the

foreign market rather than doing operations in local market. Local market portion is

not wide when it is comparing global market. Two companies believe that, local

market is important to them. That percentage was 33.33. Those companies believe

that they can work with their own brand in easily in the local market. According to

them, they are having more profit and more income because of the own brand.

However most of the responded parties accepted promoting their own brand need

huge amount of funds. Therefore, according to the findings, it said that most of the

plantation companies not consider about local market. The result indicates graphically

using pie-chart. That chart was given below.

                        Importance of local Market


                                                          67%                Yes

                          3.7.1. Importance of Local market

3.8. Local market customer base

        According to the research findings only 2 companies are providing tea to the

local   market.   Those    companies    are    Watawala    Plantation   Limited    and

Bogawanthalawa Plantation Limited. According to those companies, they mentioned

that, Watawala Plantation Limited is having 28% of market portion and

Bogawanthalawa Plantation Limited is having small amount of market portion.

According to their marketing section it is fluctuate with 4% - 5%.

3.9. Bottle necks for Marketing Campaign

        Most of the plantation companies are not in a position to do marketing

campaigns. But some organizations like Unilever spend lot of money for the

marketing programs. However it is, there can be some bottle necks can be seen in the

conducting a marketing programs.

3.10. Promoting programs for local market

        Regarding the promoting programs for local market, respondent mentioned

that different types of programs. Mainly they indicate that following programs.

1 Seasonal campaign

2. Eco tourism places

3. Sponsorships

4. Retail outlet

5. Media promotional campaign

3.11. Competitive rivalry

        The study reveals that the major competitor and the market leader is Unilever.

They have 53% of market share in local tea market. But, they are not a plantation

company. They are the one of giant buyer in the tea sector. They were introduced

various brands to the world, but in Sri Lanka it having mainly 2 brand names called,

“Lipton Ceylonta” and “Laojee.” Those two brand names are most popular among the

customers. Second place goes to the Watawala Plantation Limited. According to the

tea sector people Watawala Plantation Limited is the most emerging plantation

company in the local tea market, because, they were having 28% of market portion in

the local market. Other brand can put in to same category. The portion of them are

approximately 19% According to the “Brand Annual” magazine “Dilmaha” is the

only brand in most popular 100 brand in Sri Lanka. According to ranking it is in the

34th place of “most valuable brand”. But it is not having higher market share in the

local market. According to the respondent, the main reason for that is they are

supplying tea to the selected places only (Super markets). And special thing is the

portion of the local market can be fluctuate small amount of percentage in each year.

But in averagely this is the current portion of the parties who engage with the local tea

market. This was shown by the following pie chart for better understanding.

                     Propotion in the Local Market



                      Figure 3.11 – Portions in the Local Market

3.12. Obstrucal for removing procedure

       In above questions it indicates that this operations having following type of


1. Increasing of the cost of production

2. Climate changes

3. Disposable tea supply to the market

According to research findings, to overcome those challenges the plantation

companies has followed following strategies.

       Cut down unnecessary cost

       Maintain effective labor force

       Use modern technological machines and instruments

       Use quality raw materials to the production process

       Conducting proper internal control system

       Increased the promotion program

                                    CHAPTER 4


4.1. Conclusions

        Most of the people believe that promoting own brand is profitable in local tea

industry. But according to these research findings, it was slightly difference. Actually

it was depending on the financial position of the company. If any company that

financially sound, they can promote their own brand in locally. But concerning

current context most of the plantation companies were facing some financial

problems. Under this situation nobody is going to promote own brand to the local tea

sectors. And another thing, the most of the companies were not concerning about

local tea market. They always consider and setting strategies to increase their export

market than other companies. The pathetic situation of this scenario is brokers and

other intermediaries are earning high profit by selling tea in local market.

        Majority of companies do not consider local market as an important place.

“Unilever” is a dominant player in the local market. They are a one of the biggest

buyers in the tea market. There is close challenge by “Watawala Plantation” within

the relative issues increasing cost of production, climate change and disposal tea

supply to local market are the major concerns.

        When it consider about sample as average company have 5955 amount of

hectares. It record minimum level of hectares 4042 while reporting maximum level of


       According to findings average company have Rs.231.38 amount of average

net sales income per 1 Kg. It record minimum level of average net sales income

Rs.202.47 per 1 Kg while reporting maximum level of Rs.257.80 per 1 Kg.

       The study reveals that average company have Rs.218.76 amount of average

production cost per 1 Kg. It record minimum level of average production cost

Rs.194.32 per 1 Kg while reporting maximum level of Rs.253.86 per 1 Kg.

       When it consider about sample as average company have Rs.12.63 amount of

average profit per 1 Kg. It record minimum level of average profit Rs. -4.33 (Loss)

per 1 Kg while reporting maximum levels of Rs.39.08 per 1 Kg.

       The Average Companies have 658.9 (000‟Kg) amount of average total

production. It record minimum level of average total production 443.5 (000‟Kg) while

reporting maximum level of 820.1 (000‟Kg).

       The study reveals Average Company have Rs. Mn 146 amount of average

total sales income. It record minimum level of average total sales income Rs. Mn 95.9

while reporting maximum level of Rs. Mn 185.

       In the case of entire consideration around 20% of customers identify product

by brand. Rest of others are not identify in the brand within them. Majority identify

brand through other way.

4.2. Suggestion

       It has found that most of customers identify product by other ways than their

brand. So it is better to distribute the product through other marketing channels, rather

than building own brand in local tea industry.


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