Watawala Pitches Single-Origin Tea From Waltrim As Their Next Saviour
A sharp turn southeast between Talawakelle and Nanu Oya on the Nuwara Eliya road takes you on to a rough dirt and rock path headed for the Tea Research Institute. Myriad cluttered junctions, buildings, lines of school children and a sharp bend later, the road suddenly drops on the left, revealing an endless expanse of blue-green tea stretching towards the Agrapatana mountain range. A hillock sits happily in the middle of the valley, the blessed recipient of ample sun and breeze, and the proud holder of the tea factory and its sign “Waltrim”.
Waltrim Estate and factory are the stronghold of a promise buried in the losses recorded by Watawala Plantations PLC, a subsidiary of Sunshine Holdings PLC. Prices at the Colombo Tea Auction have been falling steadily and alarmingly since January 2014 due to economic crises in the Middle East and Russia – Sri Lanka’s biggest buyers. Watawala Plantations recorded a loss of Rs42 on each kilogram of made tea they produced over 2014-2015, but Waltrim continues to produce relatively large quantities of high-quality tea that fetch some of the best prices at the Colombo Tea Auction. Considering the significance of Waltrim’s impact on the company’s top-line, Sunshine Holdings is holding up a single-origin product from Waltrim Estate as the company’ lifesaver, not as an overnight solution, but a long-term strategy for redefining “Ceylon Tea”. “Nobody can remake this,” Sunshine Group Managing Director Vish Govindasamy says. “It’s like the story of the single malt.”
Most of the tea available at the supermarket, even the branded “premium” stuff, is blended. This means that leaves plucked from a unique estate and processed at a unique factory are in the final production stages mixed with other such leaves to form a “blended” product. The guiding principle behind blending is consistency. Flavour, colour and aroma of tea are highly susceptible to changes in soil and weather conditions. This makes the production process incredibly difficult for producers interested in maintaining a loyal consumer base. Tea from a variety of geographical locations and climate conditions must be mixed together to create the familiar experience, and proportions are different every time. Hence, the importance (as in the case of wine and beer) of tea tasters to the industry.
But blended tea isn’t necessarily the only way to go. Most of the world’s producers of tea, including Kenya, China, India and Nepal, are now marketing their tea as single-origin teas.
In the global marketplace for tea, “single-origin” refers to the country of origin. In a micro-environment, single-origin tea can mean single-region or single-estate produce, but in the breakdown of plantation geography, a “garden” occupies the niche. A “garden mark” is the name given to a specific tea variant, claiming the finest distinction in taster-terms; what terroir is to wine. Single-origin tea also has sustainability appeal. For the environment and labour-conscious consumers, knowing where their tea comes from becomes an important factor in identifying the ethicality of its sourcing. While blending is traditionally considered another value-adding step in the tea production process, the quality of production and ethical practice, combined with strong branding as a premium product, often allows tea producers to charge higher prices on single-origin teas.
“The plucking is our only point of income. The quality of the final product depends completely on the quality of the plucked leaf.” Chandrasekara Devaranjan
“The plucking is our only point of income. The quality of the final product depends completely on the quality of the plucked leaf.” Chandrasekara Devaranjan
Some provincially located Chinese and Kenyan teas are able to fetch $40-50 and higher per 100g. Kenilworth, one of Watawala Plantations’ own garden marks, is sold by retailers in the US for $10 per 100g, more than 10 times the price regular dust gets on our supermarket shelves. Zesta Tea Boutique sells tea from Waltrim for $9 (approximately Rs1,300) per 100g as Zesta Luxury Loose Leaf Tea.
The Waltrim factory produced one million kilograms of made tea in the 2014-2015 financial year (later numbers were not available at the time of publication), a tenth of all their 10.31 million kilograms of tea. Echelon estimates that Waltrim’s premium prices have brought in approximately Rs500 million to Watawala Plantations – seven percent of its total Rs6.77 billion in revenue that year. But the striking fact is that Waltrim cultivated less than 400 hectares of land, a mere four percent of the total land Watawala cultivated that year.
Unfavourably dry weather and Waltrim’s new policy of not accepting smallholder tea have resulted in lower production of 760,000kg made tea over 2015-2016, but management is positive about hitting a per-hectare yield target much higher than 2,000kg (which is the mid-country minimum) in the years to come. These numbers clearly show that, provided the weather gods are happy and market conditions do not worsen, Waltrim is likely to keep performing exceptionally well. So much so that Govindasamy expects the 7% Waltrim contributed to Watawala revenue last year to grow to 20% within five years.
Sunshine Holdings isn’t looking to Waltrim, Kenilworth or any of their other garden marks to change their financial status overnight. What they are planning for, nevertheless, is the single-origin product to add immense brand value to the company, with time.
Premium tea products, particularly those that come from prestigious garden marks such as Waltrim, are not always sold at the Colombo Tea Auction. Buyers interested in the distinct qualities of a mark- or estate-specific tea may purchase the product privately at a previously set premium, with the approval of the Tea Board. If the agreement is Rs10 per kilogram above the auction price week-on-week for 1000kg of a particular grade tea over the next three months, then over those three months the 1000kg is withheld weekly, while the remainder is subject to the bidding process. Once the auction is closed, the Tea Board compares samples of the auctioned product versus the withheld product and, if there is a reasonable resemblance between the two, authorizes the private purchase of the withheld amount at the premium of Rs10 higher than the auctioned price. Depending on the season and demand, the premium over the auction price can be as high as Rs100 per kilogram. Waltrim could be not too far from contributing the projected 20% of Watawala revenue based on two variables. First, the estate must effectively increase its kilogram yield per hectare. Second, Watawala Plantations must successfully brand Waltrim as a single-origin tea, acquiring private buyers paying high premiums. Both variables are very achievable.
The strategy isn’t new to Watawala. They are on a bid to become “everyone’s cup of tea” and “sustain market leadership in Sri Lanka”, and segment-specific branding has become a big part of their longterm game plan. Since privatization in 1998, the Watawala strategy was high- and medium-grown leaf targeting local consumers in the form of the Zesta brand. BOP (Broken Orange Pekoe) and BOPF (BOP Fannings) from Zesta gained Watawala strong ground in the middle economic rungs of the local market, claiming over 25% of the market share in just six years since its launch. In 2002, Watawala launched Watawala Kahata, a stronger full-bodied tea, targeting consumers from the lower economic segment, while in 2005, another brand, Ran Tea, was launched as the “plain tea” product. In 2010, Watawala Plantations handed over the branding business to Watawala Tea Ceylon, a 100% owned subsidiary then known as Watawala Marketing. Although Zesta, Watawala Tea and Ran Kahata were all doing well, in June 2013 Ran Tea was rebranded as Ran Kahata so it could take over the tea shop and plain tea-consuming lower-income segment of the market. The product continues to be marketed as an “economy brand” capable of producing 20 cups of plain tea with just one 20g packet. Six months later, in January 2014, Watawala Kahata was rebranded as Watawala Tea – clearly the product for the middle-economic segment. Now the ground has been cleared and systems put in place for the “light and bright” Waltrim to take over as the international premium brand.
As former CEO of Watawala Plantations Dan Seevaratnam puts it, this is not a quickly hashed out device of the eleventh hour, but a “dream” that was always in the works.
Once upon a time, what is now one Waltrim Estate used to be four: Waltrim, Kowlehena, Lindoola and Maria. On 28 April 2008, the wooden structure of the Waltrim Estate tea factory was burnt to the ground by a fire that is yet to be explained. The 80-year-old factory was the most productive of the Watawala factories at the time, manufacturing around 25,000kg of tea a day and making one million kilograms of black tea a year. Dan Seevaratnam was the Manager at the time.
“Waltrim was special,” he reminisces, “it was home.”
There were questions raised, some not answered, about the fire, and about re-building and relocating the factory.
The final decision was made to locate the new factory only 100 meters away from where it was before, to protect the pride of Waltrim if nothing else. And they would make it state-of-the-art.
“We didn’t want to build a run-of-the-mill factory,” Seevaratnam explains, attributing the bold measure to the foresight of the then top management, including Govindasamy. “The kind of investment we made, no man will do in today’s prices.”
Watawala plantations spent nearly Rs350 million on rebuilding the only complete tea factory built upcountry in 40 years, making it a much-talked-about and cutting-edge facility. Discarding old-school wooden structures, designers opted for a concrete, fireproof building. Roughly 60% of the investment went towards equipment, which was mostly sourced in Sri Lanka although some parts were imported from India and Malaysia, in order to comply with high food and safety standards. The structure of the building was changed significantly to make it more eco-friendly, and the manufacturing processes arranged so as to minimize time spent, physical handling (resulting in damage to the leaf and the product) and operational costs. Waltrim, Kowlehena, Lindoola and Maria were made divisions of one Waltrim Estate. Money, time, energy and a lot of expectation were invested in Waltrim.
Current Senior Assistant Manager Chandrasekara Devaranjan is a young planter approaching his first decade in the game, but he is clear about the work cut out for him.
“The plucking is our only point of income,” he says. “The quality of the final product depends completely on the quality of the plucked leaf.”
A jovial ruggerite with a gruff voice, and the height and breadth of one-anda-half healthy men, Chandrasekara understands and constantly reiterates the importance of the plucker. He is proud of the Waltrim staff who he is confident know what they are about and take their work seriously. While two-leaves-and-a-bud is preached across the island, it is not always practiced, but both Seevaratnam and Chandrasekara insist that Waltrim pluckers stick to the code because “they understand the need for two leaves and a bud”.
“At Waltrim, there has been a lot of worker training,” Seevaratnam explains. With the construction of the new factory, pluckers were given access to see how tea is processed in the factory, and then taken to the auction where they witnessed the bidding process and the prices the different teas fetched. “They understood.”
Pluckers working from 8am to 4pm are expected to bring in a norm of 18-20kg of fresh leaf over three plucking sessions each day. Shears are applied to 30% of the cultivated land to reduce damage to the leaf. The original factory structure was a four-storied building that required staff to carry the plucked leaf up numerous floors of the factory from weighing point to withering troughs. To reduce the damage caused by this extensive handling, designers reduced the new structure to two floors. Leaf is brought in through a receiving window and placed on a monorail, which carries it towards the further end of the factory where staff unload the leaf into troughs for the next stage in the process: withering.
The factory is designed to take maximum advantage of its location. From the top of the relatively isolated hill, mesh and glass walls that replaced traditional aluminum allow the wind and light to flow directly through the building, to be harnessed for withering.
“The place used to be dark and dingy,” says Sunshine Group MD, Vish Govindasamy, and the air was “stagnant,” Seevaratnam adds.
Now, no artificial lighting is necessary for much of the building during most of the day, and the old artificially powered fans have been replaced with energy-efficient ones that use a combination of the breeze coming up from the valley and hot air diverted upwards from the boiler/dryer room. Management estimates energy bills at the Waltrim factory to be 25-30% lower than before.
The boiler itself is located outside the factory walls, ensuring that no smoke contaminates the leaves during the withering process. The production line has also been altered slightly, the rollers, rotor vanes and sieves placed strategically to reduce processing time and product wastage. Once the leaves are rolled and passed through rotor vanes for cutting, they move through sifters fitted with 15,000 gauge magnets to remove any metal, grit or sand from the leaf. Automation of the whole process means that 26,000kg of green leaf can be processed at the factory each day with the intervention of a mere 55 staff members spread across two shifts. The old factory required 60 staff working each shift to process the same amount of green leaf.
On the upper floor of the factory, in the long and bright withering room, there is a slight hint of tea in the air as moisture from the leaf evaporates into the atmosphere. On one end of the room is a wide-mouthed chute, down which the withered leaf is poured into the roller on the ground floor. Here, the air is filled with the pungent aroma of fermenting tea. A Hindu priest visits the factory at the beginning of each month, performing simple rituals and marking the roller, the rotor vanes and the sifters with colourful signs of the gods. It seems he doesn’t pay much attention to the simple wooden fermenting benches piled neatly with 2.5-inch-high cakes of warm moist tea lying quietly between the great masses of noisy metal, because they have no markings. Where there is no god though is where the steaming aroma rises from, and this is where Muthukarupan Paramasivam reigns.
Paramasivam is a senior executive at the Waltrim factory who has been in the tea trade for 36 years. His understanding of the tea experience is organic. In the six years since the factory reopened, the 58-year-old factory executive in charge of its entire operations has been sniffing and tasting every batch of produce before it leaves the factory, daily, ensuring that it meets a high standard of colour, aroma and flavour. On his haunches, he digs violently into a cake with both gloved hands, collects a good heap of the fermenting tea in his cupped palms. Raising it to his nostrils with eyes closed, he breathes in deeply.
“You have to get a good smell to have a good taste and colour,” he explains, shaking his head as he throws the tea back in the cake for an associate to rearrange. He is not easily pleased, but he is proud to be part of what Waltrim produces.
If Paramasivam is happy that the tea conforms to Waltrim’s high standards of unique flavour and aroma, the cakes are broken up and moved onto conveyor belts that carry it through a hole in the wall to the boiler/dryer room. Here, the tea dances in 260-degree Farenheit air blowing from the floor-rise dryer to the hum of powerful fans, becoming lighter and lighter. Nearly 75% of the final product is BOPF (Broken Orange Pekoe Fannings) and Dust 1, both of which fetch Rs500-550 at the auction. A large part of the rest is BOP. On the other side of the boiler room is the packing area, where large paper bags holding 48-60kg tea are piled row on row, proudly displaying Fair Trade, SLS, organic and Rain Forest Alliance certification. From start to finish, Waltrim is purely Waltrim. Maintaining the consistency of a single-origin product is notoriously difficult, even to tea industry legend Seevaratnam. The key, in his books, is attention to detail.
“Whatever we were told to do 100 years ago has not changed,” he points out. But the market conditions have changed quite a bit since then. “In the good old days, it was always quality over quantity. Today, you have to have a sizeable quantity to lower your cost of production, so you have to strike a fine balance in order to run your plantation at a profit. Any self-respecting manager will maintain quality. Having done that though, the final price is beyond the superintendent. You make a cracker tea, but Russia is not buying, and nice tea costs money to make. These are tough management decisions. More successful managers read the scenario. When it comes to the fasting period [Ramadan], the Middle East won’t buy so prices of these grades will drop. Come September, Russia will start buying before Christmas and the heavy snowfall. Much more than just the rainfall at Lindula, the manager needs even to know about the snowfall in Russia!”
Chandrasekara and Paramasivam stand firm by the quality of their product. The uniqueness of the Waltrim leaf has not changed, in Watawala management’s opinion, but the ergonomic effect and hygiene levels are very different since the new factory was built, they say.
Waltrim, Kenilworth and a number of Watawala’s other tea plantations claim prestigious garden marks, which fetch relatively high prices at auctions, but Watawala has managed to show a marginal increase in revenue only by selling more; their profits remain deep in the red. Watawala Plantations claim a diversified portfolio of products including palm oil, and their tea comes from the up, mid- and low-country regions. The variety of their investments and focus on quality as opposed to cost have allowed them to ride out crashing tea prices and keep their nose above the surface in an industry where every player is flailing for air. Sunshine and Watawala are re-doing what they have so far been good at in order to redeem the industry.