Masters degree/BachelorsNayomi Ekanayake | Marketing Executive summary Dilmah Tea aims on delivering new products for the consumers and tend to implement new strategies accordingly in order to be competitive with the current market. In this booklet the internal and the external environment of Dilmah Tea are taken into consideration. Competitive advantages are been updated with the latest technology. Additionally the SWOT of Dilmah Tea has been analyzed and has been suggested the most appropriate method to use and how to get the maximum of the strategy and to see how far the strategy will benefit the company. Future goals, suggestions and recommendations in order to succeed more has been stated at the end of the assignment. Table of Contents Executive Summary ........................................................................................ Error! Bookmark not defined. INTRODUCTION ABOUT MJF GROUP “Dilmah Tea” ...................................................................................... 4 1.1 The role of strategic marketing in the company in creating a global tea brand............................... 5 1.2 The processes involved in strategic marketing of Dilmah Tea.......................................................... 6 1.3 The importance of linking the strategic marketing to the overall corporate strategy ..................... 7 2.1 The models which can be used in strategic marketing planning and critically discuss the appropriateness of the selected models to the above context of Dilmah going global ............................... 8 2.2 The links between strategic market positioning and the marketing tactics ................................... 10 2.3 Critically analyze the usability of “Relationship Marketing” as a strategic marketing approach for “Dilmah” ...................................................................................................................................................... 12 4.1 Critically discuss the impact of the recent global changes on the MJF Group’s attempt to create a global tea brand .......................................................................................................................................... 13 4.2 Internal analysis to identify current strengths and weaknesses in the current marketing strategy 15 4.3 Propose strategic marketing responses to key emerging themes in a marketing strategy ........... 16 Conclusion ................................................................................................................................................... 19 Reference .................................................................................................................................................... 20 INTRODUCTION ABOUT MJF GROUP “Dilmah Tea” Dilmah Tea (PVT) Ltd Was started 1988 introduced lovers of fine tea to the concept of tea Picked, perfected and packed at origin. Being owned and managed by a tea producer, Dilmah is also a role model for producing countries. Dilmah presents an unmatched collection of teas, each tasted and selected with the benefit of decades of experience in tea, and most importantly with a passion for quality. Merrill J. Fernando, the founder of MJF Group - Dilmah tea, is an icon in the global tea industry. He is a man who revolutionized the industry which was dominated by multinationals, by bringing in quality and integrity into tea. An ordinary man of humble beginnings, his passion and vision for tea remains unchanged to date. He is a visionary who wanted to market his own brand of tea nearly four decades ago, when branding and marketing were dominated by the multinationals. Today, Dilmah has put Sri Lanka back on the global map as a destination, which grows the finest tea on earth, Pure Ceylon Tea. Dilmah is one of the eight global brands in the Medinge Group's top brands with a conscience. Merrill Fernando pioneered the concept of single origin tea and incidentally is the world's first genuinely Ethical Tea. The company remains Sri Lanka's number one manufacturer and exporter of tea bags, accounting for over 21 % of the country's total export of tea in bags. Dilmah is also the world's first producer - owned tea brand. The Founder had his initial training in tea tasting in London where most of the world's tea was consumed. It was England that tea was bought and sold in a country that cultivated it overseas, then imported and consumed most of the world's tea. It was England that he learned tea; a finished product carefully handpicked and produced in a traditional and time- honored manner in Ceylon, which was benefitting the middleman in Europe much more than Ceylon. He also learnt that this was a dysfunctional trade which was benefiting others and not the local farmers. This made him think of developing his own brand someday, with the intention of creating value for Ceylon tea and to the million or so workers, who made Ceylon tea possible. This was a triggering event in his life, which made him look at the tea industry from a different angle which, changed his outlook and eventually brought in new dimensions to Ceylon tea. 1.1 The role of strategic marketing in the company in creating a global tea brand The strategy of providing fresh, ethically produced, high quality tea has made Dilmah one of the most popular tea brands in the world. As of 2011 the brand is sold in over 100 countries, is the second most popular tea brand in Australia, and is one of the most recognized international tea brands. Dilmah is Sri Lanka‘s most recognized international brand and is also the country‘s predominant tea exporter. On one of its largest estates, the company enjoys a production of approximately 10,000 kilograms per hectare. In 2009, Data monitor estimated that Dilmah was the sixth largest tea brand in the world. The company has also expanded into tourism by turning four tea estate bungalows dating from the late 1800s in central Sri Lanka into luxury guest houses known as Ceylon Tea Trails. This innovative concept absorbs the traveler into life on a working tea estate and teaches them everything they need to know about making the perfect brew. In 2011, Ceylon Tea Trails won the Traveler‘s Choice award from Trip Advisor, the world‘s largest travel website Dilmah uses several methods of marketing strategy for distribution in several countries. It operates in 93 global markets and it has its own distribution mode through its regional channels in certain countries and where as in other several countries it uses a native prominent goods distributor for their tea. In countries like Australia, USA, and European countries it uses its own distribution channels where the customers believe in manufacturer own brand and distribution. In certain countries like Jordan, UAE, etc. it uses a native goods distributor to distribute their tea since these customers buy the products which comes from their own distributors. To what extent culture of a particular market place has influenced the marketing practices of business corporate can be understood by analyzing each element of the marketing mix (4 Ps‘ i.e. product, price, promotion and place). Product: Dilmah Tea with value added tea Price: Premium Promotion: Sri Lanka Cricket, On Board Flights, etc. Place: Global Given the popularity and global appeal of tea, the importance of the hospitality sector's investment in the correct presentation of the tea and the appropriate selections to appeal to foreign patrons, cannot be stressed enough. The Dilmah range of Specialty and Boutique Teas, along with a wide range of tools to enhance the tea experience including timber t-trolleys and the tiers, are bound to demonstrate an intelligent commitment to excellence of service and enhance an establishment's reputation. 1.2 The processes involved in strategic marketing of Dilmah Tea In this it‘ll talk about the company‘s mission and marketing objectives and strategies that can be taken to achieve the company‘s goals. Mission The mission statement of Dilmah is to provide luxurious taste to every citizen of the country at an affordable price. The mission statement is the overall goal of the company that direct the company decisions, employees and other associates need some smaller goals which can be worked on for a short time span. Marketing objectives and strategies According (Macmillan & Tampoe, 2000), Strategic implementation requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that the formulated strategies can be executed effectively. Strategic implementation includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems and linking employee compensation to organizational performance. According to Macmillan & Tampoe ( 2000), One of the potential benefits of strategic management is it make sure that the organization only follows one direction or path towards the achievement of its business mission, objectives and success. (Marketing - Thinking Made Easy) Objectives 1. Dilmah and the companies of the MJF Group maintain honesty and integrity in every contact, with customers, with retailers, partners and everyone we have the pleasure of working with. 2. Dilmah is a brand with a conscience; a business established with the objective of going beyond business alone In seeking to make his Dilmah a matter of human service, Merrill became a pioneer in seeking justice in the world of tea. 3. Dilmah values our customer, maintaining consistency in quality and taste to be as loyal to our customer as we hope our customer will be to our brand. 4. Dilmah owes its success to the quality of Ceylon Tea. Our business was founded therefore on an enduring connection to the land and the communities in which we operate. 1.3 The importance of linking the strategic marketing to the overall corporate strategy A company is diversified when it is in two or more lines of business. Strategy-making in a diversified company is a bigger picture exercise than crafting a strategy for a single line-of- business. A diversified company needs a multi-industry, multi-business strategy. A strategic action plan must be developed for several different businesses competing in diverse industry environments. (Strategies for Managing a Group) PESTLE Analyses, contributes to the Dilmah‘s co-operative strategy. Setting corporate strategy objectives means setting those measures of actions and methods which will help the company to achieve its overall mission in a certain timeframe. Corporate strategies are the most basic planning tools underlying all planning and strategic activities. Through sharing its value Dilmah establishes strong relationships with its stakeholders that have led them to have an encouraging feedback on the latest annual report about the audit conducted on ethical trade. The corporate mission of Dilmah is as follows: Sourcing products efficiently. Making packages to attract customers. Using local employees. Focusing on the most popular trends Buying in volume Not spending heavily on advertising. (Introduction - Providing consumers with ethically sourced) In order to facilitate such corporate strategy with strategic marketing plans, Dilmah has devised such marketing schemes that are: 1. Low in budget and effective As it doesn‘t want to spend high amount of money for advertising its products, minimal money will be spend in this department. 2. Merchandising Properly combining colours, styles and visually displaying new season products to catch passers - by attention. 3. Bulk purchasing Buying product in large quantity will be cost effective as the cost of producing one Tea packet will be low. Also, the supplier will be happy to work with Dilmah in future and maintain a strong relationship bond of work with them. 2.1 The models which can be used in strategic marketing planning and critically discuss the appropriateness of the selected models to the above context of Dilmah going global Every company operates differently and would have to adopt the tool that best suit their company marketing strategies. Dilmah more favors the PESTLE (Political, Economical, Social-Cultural, Technological, Legal and Environmental and the SWOT Analyses (Strengths, Weakness, Opportunity and Threats. The identification of these tools has helped Dilmah to adapt to the changing environment and the continuous changes in human needs and behavior. According to (Hawes & Crittenden, 1984), states that as a brand, loyalty bond get stronger and they are able to expand more and create more demand of their products in the market. Dilmah strategy is to keep their customers by keeping their prices premium with so much of different varieties for each customer’s needs. The major role of strategic marketing starts from planning, analyze, interpreting, implementing and evaluating. PESTLE Political, Economical, Social-Cultural, Technological, Legal and Environmental 7Ps Marketing mix Product, Price, Place, Promotion, People, Process, Physical evidence SWOT Strength, Weakness, opportunity, Threats Porter 5 forces theory Supplier Power, Buyer Power, Competitive Rivalry, Threat of Substitution, Threat of New Entry Dilmah has been using these two tools for more than 10 long years in the market. Above – the - line There are a number of approaches to promotion that are open to organisations. Above-the-line promotions use mass media methods. This type of promotion focuses on advertising to a large audience. It includes print, online media, television and cinema advertising. Below – the - line Below-the-line methods are very specific, memorable activities focused on targeted groups of consumers. They are under the control of the organization. These techniques can be used to target clearly defined consumer groups rather than a mass audience like its above-the-line activity. The purpose of these activities has been to develop the brand by creating awareness and building a brand profile. Below-the-line methods include: sponsorship sales promotions public relations personal selling Direct marketing. In Marketing, many below-the-line (BTL) activities are carried out, such as sales promotions, seminars, workshops, brand activations to name a few. There is a perception that BTL activities are more cost effective than ATL activities. This may not be the case! All BTL activities must be carefully evaluated in terms of effectiveness. Cost reductions should be carried out based on effectiveness, such as elimination of unproductive sales promotions and other activities. Certain BTL activities should not be conducted, because competitors are doing so! All BTL activities must be justified based on costs and benefits. (Cost benefits analysis). I have also observed that many marketers develop point-of-sale-material (POSM) without considering the appropriateness, effectiveness and cost of same. If marketers and sales personnel think creatively, more effective and cost efficient POSM can be developed. Don‘t simply think of standard POSM such as posters, danglers and streamers. 2.2 The links between strategic market positioning and the marketing tactics According to (Wise geek, 2012) Market positioning is the manipulation of a brand or family of brands to create a positive perception in the eyes of the public. If a product is well positioned, it will have strong sales, and it may become the go-to brand for people who need that particular product. Poor positioning, on the other hand, can lead to bad sales and a dubious reputation. A number of things are involved in market positioning, with entire firms specializing in this activity and working with clients to position their products effectively. When a product is released, the company needs to think beyond what the product is for when it comes to positioning. It also should think about the kind of people that would wants to buy the product. Dilmah Targets Dilmah marketing targets are health conscious customers in any age. They mostly target middle income earners, health conscious people and also customers from all over the country. Demographic Targets 60% of Dilmah sales revenue comes from outside Sri Lanka. Most of Dilmah‘s customers are from Asia Europe and the Arab Nation. Dilmah has positioned itself very well in the mind of the customers and the consumers; over the years Dilmah has been converting more and more consumers into customers. In order for any business to survive they first need to understand their competitors and the market they are competing in. A number of tools can be used to access the market and understanding the competition better the company has to use the tool that best fit them. Tools SWOT, PESTLE, 7PS, PORTER 5 FORCES PEST The above mentioned tools are vital and will help Dilmah maintain a very strong position in the near and for future. A successful company like Dilmah must use effective marketing strategies to deliver what the customers want; the strategic positioning enables Dilmah to analyze all the factors of the market and continue to be the market leader for Tea products. Dilmah has a lot of big competition competing with them; these big players would like to gain better market position. Dilmah is trying to control the market by flooding it with their large variety of products; their competitors are unable to keep up with Dilmah pricing method. The Dilmah team has to be on top of the new market trend and stay focus on the strategies they have set. Dilmah tea positions them mostly by promoting their brands in various ways. Such as, Dilmah Tea on Board Tea on board has a whole new meaning with the Dilmah Travel Tea Experience. Uniquely selected for their appeal to the sophisticated commuter, the travel tea experience will have a choice of traditional, eclectic or luxury teas covering a range of infusions from robust to zesty to contemporary. Offered in a variety of presentation options and on a route or regional basis, this is unquestionably the most elegant in flight tea service. Dilmah Tea sponsoring the cricket team In Sri Lanka, the relevance of tea to the game of cricket extends further than that of a twenty-minute break that separates lunch and the end of a day’s play. And, while tea to the Western world is but a tiny item in a crowded shopping trolley of groceries, in Sri Lanka, it is the trolley itself. 2.3 Critically analyze the usability of “Relationship Marketing” as a strategic marketing approach for “Dilmah” Relationship Marketing According to Zeithaml and Bitner (2000) Relationship marketing is a philosophy of doing business, it's a strategic device that focuses on keeping and improving current customers whole acquiring new customers. According to Coviello's (1997) states, Relationship Management is an ‗integrative activity involving functions across the organization, with emphasis on facilitating, building and maintaining relationships over the time. Relationship marketing is a new phenomenon which is a step ahead of traditional marketing. The emphasis here lies on ‗Relationship' between a customer and a product, a customer and an organization (b2c), an organization with other organization (b2b). The overall purpose of Relationship Marketing is to facilitate and maintain customer relationships, which leads to changed focal points and modification of marketing management process. RM tends to provide a superior relationship between a customer and an organization which in return gives an organization competitive advantage. Dilmah is a Major tea industry and is a part of an even bigger organization ―MJF GROUP‖(MJF) there are a lot of products listed under the MJF group of companies and Dilmah is the most successful and the major company listed with MJF. Dilmah has to have a good relationship with their suppliers to ensure consistent quality, service, deliveries on time, and other inward and outward logistics. 4.1 Critically discuss the impact of the recent global changes on the MJF Group’s attempt to create a global tea brand Although the global tea industry suffered from a weakened international economy and adverse weather during 2008 – 2010, Dilmah has been able to leverage itself with its strong brand name and remain profitable. In 2010, the company reported a post tax profit of 537 million Sri Lankan Rupees (Rs, approximately US$ 4.9 million), up from Rs 487 million (approximately US$ 4.5 million) in the previous year. Sales have also remained healthy, as turnover improved in 2010 by an increase of 11.6% over the previous year. Dilmah‘s strong brand name and innovative and successful promotion efforts have developed it into one of the world‘s most popular tea brands and ensured its continued success. Dilmah Tea was hit by weak dollar “We were affected pretty badly, in that there was massive devaluation in all of the key markets that we were operating. That impacted us very badly. Tea is not an expensive product, not that people will stop drinking tea but the biggest issue we faced in markets like Russia, Ukraine, then in Australia was the substantial currency devaluation. Dilmah as an imported product competing against brands packed in that country makes us very expensive. “ Some questions and answers Q: It appears that your main challenge is external and not one in Sri Lanka. But if you look at challenges here which of these is most important? The first is the macro economic situation which is interest rates, inflation etc or else is you more concerned about the tea industry in general about plantation wage negotiations, about productivity. Which occupies most of your time? A: They both have a bad impact. Obviously having a strong rupee has had an impact on exporters. So that has been a disadvantage for us because other competing countries Kenya and India have had significant devaluations which to a certain extent have countered the devaluations in the importing countries. In our case the rupee has strengthened. But fundamentally if you look at it in the long term it’s the industry which is of serious concern to us, because being an exporter of value added Sri Lankan brand you can’t ignore what’s happening to your upstream production side. We’ve had a drought for five or six months, tea prices are at an all time high, yet the plantation companies are not making money because your volumes are down 30 to 40 percent, so it’s a very difficult situation. So fundamentally exporters and brand owners will ride through the situation but plantation companies have been struggling for the last 15 or 20 years. I think that’s an area which policymakers are not focusing on, possibly because the industry does not speak in one voice. The support and concern has been for the smallholders because they are considered the voters; largely the Southern Province. But there has been ill treatment and total ignorance of issues that face the plantation companies, because the plantation companies were bought from the government. The industry was vibrant in the early 70’s. After nationalization it was in a fairly week condition after that. State control also led to unionization because you were looking at one single large employer. Earlier unionization was not so rampant. As a result you are now have a situation where workers are living in not ideal conditions, whose housing needs improvement. They (workers) do a very arduous job. Productivity is low. Our wages are double those of our competitors. The companies don’t have funding to invest, to upgrade the HR standards of the workers and basically look to the future. This is a real tragedy, because the government - quite correctly - wants to be self sufficient in food. Q: The industry has been slow towards branding. Dilmah stands out as an exception for the scale it has achieved and the global presence. Why do you think the rest of the industry hasn’t followed in the same scale? A: It’s not easy for a start. It depends on what motivates you. You’ve got to have a very long term view. In the case of Dilmah my father (Merrill J Fernando) had a vision thirty years ago that he wanted to do this because he was a large exporter of bulk tea. He felt the pulse of this market. He realized that unless he creates his own brand his business would be at risk. You’ve got to have a vision. Different people want different things. I mean persistency is really the key. And if you have a 20 to 30 year time frame then it can be done. Of course it’s much harder now than when we started out. Retailers have consolidated. And it’s so much harder for new brands to enter the market than before and the focus now is not necessarily on premium products but on price, on economy products and so on where Ceylon tea maybe at a disadvantage but there’s room for many others. Q: You are talking about margins for niche products diminishing and retailers consolidating in your major markets. Has that changed your marketing strategy? A: No. What is happening now is a temporary phenomenon. Twelve months from now it’ll go back, because ultimately, as I said, tea is inexpensive and people appreciate good tea. One of the highlights of my day is when I go to work to see four or five letters or e-mails from consumers who say ‘we’ve just tried Dilmah and we love it. It’s the taste we used to know 20 to 30 years ago’. Ultimately it’s a high quality product which is nicely packaged. 4.2 Internal analysis to identify current strengths and weaknesses in the current marketing strategy Strength Specialist marketing expertise Financial strengths Location of business Healthy Organic. Rich taste and flavor. Unique aroma. Good packaging. Good advertising. 100% Pure Ceylon Tea Strong Brand Heritage Imported Brand Premium Quality (Two Leaves & a Bud) ISO 900 & HAACCP Certified Weaknesses High Price. Rural areas are under used. Advertises for a certain class of people. Climate changes 4.3 Propose strategic marketing responses to key emerging themes in a marketing strategy Businesses operate in an ever-dynamic environment. They adjust and adapt to environmental dynamism through a variety of strategic orientations. Strategy, therefore, is instrumental to the survival of the firm. Health concious Nowadays consumers are more health-conscious when they buy, taking more care to read nutrition labels and seeking out products with health benefits, according to a new survey. They also want the food/drink labeling to be much clearer with details. Tea has the ability to relieve stress, improve heart health and potentially prevent cancer and Alzheimer‘s disease, it can be prepared in many ways, and taste is up to the brewer. Tea, the world‘s second most popular beverage behind water, has soared in popularity during the past 10 years. Dilmah tea already has a selection of natural Green Teas including Green Tea with Jasmine Flowers, Moroccan Mint Green Tea, specialty Ceylon Green Tea and Sencha. Produced respecting a 5,000 year old tradition Dilmah Green Tea is 100% pure and natural. They can also innovate a variety of healthy tea for different people such as diabetic patients, cholesterol patience, heart patients or a selection of teas for everyone to consume. As for Sri Lankans Dilmah can come up with these kind of flavors as the majority of the people now are more towards their healthy side. Such as, 1. Kohomba Tea 2. Kottamalli Tea (Coriander) Etc. Going Green The demand for ethically produced, ecofriendly products has been gaining steam for years and is expected to grow at a faster pace. Values drive the behaviour of today's socially and environmentally conscious consumer, who increasingly believes that the fastest way to make an impact on the environment is to buy green. Ecofriendly purchases are a great way to make a change for the better — a healthier you and a healthier environment. Dilmah Tea will have to look beyond adapted or customised products, short runs and premium pricing. Now is the time to get closer to consumers, embed sustainability early in the innovation and design process and put in place the operational capabilities to meet market demand at scale and profitably. With eco products there has to be a quality of confidence verging on aloofness about the product. Very simple packaging, very simple aesthetics to the whole product. I would be tempted not to focus on the environmental values of the product but include a website address on the packaging where consumers can obtain information about the environmental impact of the product. It therefore becomes a given that the product is environmentally conscious. In summary, let consumers form their own opinion that it is a superior product (pricing, simplicity), allow consumers to decide for themselves why it is superior and finally appeal to intelligence by offering supporting information about the environmental aspects of the product and again let consumers reach their own conclusions. Marketing is an affair that involves a skillful analysis of how the perception builds-up with the consumers about what they are offered as a "product". So if our product is eco-friendly, which should make-sure the consumer notices it at the very first sight of the product. 1. Eco-packaging should be seriously considered.Biodegradable packaging or Virgin plastics. 2.Importance of eco-friendly products and their effects on the environments should be highlighted on the packaging. 3.Marketing strategy could also involve creating some special offers. Say, like giving away "Green ambassador" badges as a token of appreciation. Conclusion Today‘s global market has seen immense competition from companies on a global scale, companies are fully aware of competition and technological advancement. With the help of marketing strategy, Dilmah tea has strategically positioned themselves as the Ceylon‘s market leader for Tea products. Abiding corporate objectives, Dilmah tea has strategically utilized these as their internal strengths. As the Ceylon‘s leading supplier of Tea, Dilmah tea was able to corner the market through various companies, these companies are offering their products under the Dilmah tea umbrella. Dilmah Tea success is due to strategically positioning themselves as the market leader for Tea manufacturing and their ability to convert more customers into consumers by offering them on unbeatable price for their products without compromising the quality of the products Reference Annual Report (2007/8) Ceylon Tea Services PLC Beverages and Wine. (2002. August) Food Australia, p.344-345 Beyond the tea garden, (2007. September) Asian Enterprise, p.30- 38 Cream of the crop, (2008. October) Foodies, p.47-50 Dilmah and Its initial struggle, (2007. October 14). The Sunday Times, Financial Times http://sundaytimes.lkl071014/FinanciaITimes/ft309.html Fernando D.C. (2008). Passion, Talking tea, The Journal of Dilmah tea Gunawardena, N. (2006. June) The Dilmah Story. 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