Strategies for Competitive Advantage in Value Added Tea Marketing

Topics: Tea, Sri Lanka, Tea production in Sri Lanka Pages: 12 (5836 words) Published: October 15, 2014
Tropical Agricultural Research Vol. 22 (3): 251 - 262 (2011)

Strategies for Competitive Advantage in Value Added Tea Marketing H.M.U.N. Herath and S. De Silva1*
Postgraduate Institute of Agriculture
University of Peradeniya
Sri Lanka
ABSTRACT. At present the world tea market is rapidly growing with emerging customer needs. The importance of a change from bulk tea exports to value added tea products is highlighted in literature to face the challenges in an increasingly competitive beverage market. Firms failing to address the competitive forces by developing their marketing strategies will lose out to competitors. Thus, marketing strategies adopted by the company leaders, directing their firms towards gaining competitive advantage in the value added tea industry are discussed in this paper. Data were gathered through interviews with the founders of nine firms using an interview guide and using records at the Sri Lanka Tea Board and the Sri Lanka Customs. The results revealed that brand building, niche marketing, product differentiation, cost leadership, and customer focus were the most prominent strategies adopted by the firms. Opening up new markets abroad, fair trade, environmental sustainability, and faster delivery were identified as important strategies that differentiated firms from competitors and placed them among the market leaders. It was also revealed that the strategic decisions could be attributed to vision of the leaders, risk taking, their enthusiasm and commitment. Identifying marketing strategies depending on the firm’s capabilities and innovations, is therefore, found vital for the value added tea export firms to achieve business success as well as to make substantial contribution to the Sri Lankan economy.

Key words: competitive advantage, innovation, leadership, strategies, value added tea INTRODUCTION
The story of Ceylon tea can be traced back over 200 years ago, when the country was a British colony. Ceylon tea as a beverage has been enjoyed by people all over the world for generations. It still has the value and interest as a beverage with many health benefits. Over a significant period of time, Sri Lankan tea industry has made progress in expanding the value added tea products. At present, Sri Lanka’s value added tea exports include instant tea, tea bags, iced tea, flavoured tea, green tea, and organic tea. Hot and cold water soluble instant tea, have become an important ingredient in the making of tea mixes. The range of natural drinks is widening all the time, and are available in unsweetened, zero calorie/carbohydrate, Ready to Drink (RTD) bottled, green or black teas, mixed with kiwi and pear, berry and plum, cherry, orange and spice, ginger and peach, blackberry and sage, raspberry and quince, mango and mint (Modder and Amarakoon, 2002). While catering to the needs of the conventional Ceylon tea lovers, Sri Lanka has to face the challenges in an increasingly competitive beverage market as the variety of teas in the world is now increasing while consumption of unbranded tea is declining (Wanninayake and Disanayake, 2006).

*
1

To whom correspondence should be addressed: saliyades@pdn.ac.lk Department of Agricultural Extension, Faculty of Agriculture University of Peradeniya, Peradeniya, Sri Lanka

Competitive advantage in value added tea marketing

However, according to the statistics of the Sri Lanka Tea Board (2010) more than 50% of the tea exports are still in the form of traditional bulk tea. Present Sri Lankan value added tea exports are around 40 to 45% of total tea exports. According to Table 1, it is apparent that all kinds of value added tea products fetch a higher price than bulk tea exports. Table 1. Ceylon tea exports and prices in February 2010

Category

Quantity (kg)

Percentage

Avg. Price (Rs./kg)

Tea in bulk

25,699,961

58.00

443.91

Tea in packets

12,515,485

28.01

459.36

2,789,410
229,768
669,285
2,771,661

6.24
0.51
1.49...
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