The ground conditions in the Sri Lankan plantations industry are beginning to change at a more rapid pace as an aging industry grapples to find new footing in a drastically altered global marketplace. With production costs rising and commodity prices falling, it is becoming increasingly clear that the future for Sri Lanka’s plantation economy lies not in volumes but in quality, innovation and niche markets and industry veterans like newly appointed Watawala Plantations PLC CEO Binesh Pananwala are now actively working to build a new vision for the Sri Lankan plantation sector.
By bringing itself into closer alignment with the visionary approaches of its parent companies – Sunshine Group and Tata Global Beverages, which together manage Watawala Plantations as a joint venture – the company has been able to revitalize its business through the emulation of strategies focused on quality and strategic diversification.
Perhaps you could begin by telling us about your background and your own special connection to the company and the Sri Lankan plantation industry in general?
I started my career during the period of nationalization under the Janatha Estates Development Board (JEDB), on an estate which was later absorbed into Watawala Plantations following the privatization in 1992. Having got my start as an executive in the company, I have had first-hand experience working in every division of Watawala Plantations for the past 24 years, gradually working my way up from Trainee Assistant Manager to the post of Deputy CEO, which I held for the past one and a half years, before rising to the rank of CEO with effect from September 1, 2016.
The majority of my career has been spent in the area of tea plantations and in that time I’ve seen all the different phases of our operations and phases within the industry itself. I believe this knowledge combined with the guidance and strategic vision of the Sunshine group has played a vital role in honing and refining our own strategic framework for Watawala Plantations.
Could you provide us with a general outline of the current positioning of Watawala Plantations?
At present we manage a total extent of approximately 12,438 hectares. The cultivated extent comprises of 4,465 hectares of tea, 3,157 hectares of oil palm and 450 hectares of rubber plantations and approximately 67 hectares of cinnamon. As is the case with the wider industry in the more recent past, we have been facing some depressed international prices in both tea and rubber segments. However, these losses have been significantly mitigated through our diversification into palm oil. This is a very promising new sector and we are already working on acquiring new land in order to scale up palm oil production even further. Additionally, we are also moving into the production of Ceylon cinnamon and we are now in the process of adding value to this process through the establishment of our own cinnamon peeling centres and cinnamon oil extraction units. This is another area of opportunity and Watawala Plantations has already started the process of seeking out new markets for cinnamon-based products.
Watawala Plantations itself has been the largest producer of tea and palm oil for the past 24 years. While we do have the highest quantum of production, the downturn that we are seeing in these markets is something which we expect to continue as part of a larger global trend with the rise of cheap, large-scale production in competitor nations.
What are some of the responses that Watawala Plantations has developed to cope with these changing conditions?
Even during these times of low international commodity prices, we have been able to secure top-notch prices at the local auctions. This is part of a definite strategy on our part to scale down production and redirect our efforts towards a comprehensive focus on quality in order to reduce losses in the tea segment.
We have also worked very hard to implement a much leaner, streamlined operation. More specifically, we are implementing new systems and processes that will further reduce wastage. Similarly, we have also placed significant emphasis on development and optimization of human capital with a view to improving productivity. In essence, we are focusing on getting the basics right, from management down through to every single aspect of production.
Aside from international market conditions, what are some of the key challenges that the company is facing in terms of the ground situation?
One of the most concerning areas for Watawala Plantations and for the wider plantation industry is a continuous reduction in the strength of the plantation sector workforce or associates. When the company was acquired by the Sunshine group in 1996, we had a very strong associate workforce of about 14,000 employees. However, over the years we have seen a gradual migration of associates out of the plantation sector as the Sri Lankan economy has grown and so today we have associates of just over 9,000.
In addition to our direct workforce of associates, the company is also responsible for the livelihoods of an extended community of about 55,000 people comprising of approximately 13,500 families and about 53 percent of our associates are female. This is a responsibility that Watawala Plantations takes extremely seriously and we remain fully committed towards supporting and sustaining the well-being of each and every member of this vital community and their dependents from womb to tomb.
In that context, what we see as the main challenge is growing our associates. What we find is that as new opportunities for growth are being cleared within the Sri Lankan economy, people are more easily able to secure white-collar jobs and so it is now up to us to look for new solutions to such issues while maintaining and bettering our quality parameters. We are confident, as I stated before, that the impacts of these changes to our associates can be mitigated through improvements to raw material inputs and improvements in harvesting techniques and in that regard, we have already brought in a large amount of sheer harvesting in order to maintain quality, while reducing the amount of effort it takes to harvest.
We are also implementing several initiatives to improve the status of our associates. This is being done in a variety of ways from simple steps like reclassifying their roles from simply ‘workers’ to associate-level positions and adopting improved productivity incentive structures in order to share our successes with our associates, making them partners in the progress of Watawala Plantations.
Climate change has in more recent years been a serious issue for us. Especially during this past year, we experienced frequent extreme weather conditions. Throughout the year there were spells of torrential rains, which drastically reduced the quantity of tea that the sector has been able to produce.
The final key challenge is one of cost. It is imperative that we develop solutions to mitigate our high costs of production in order to ultimately deliver a stronger bottom line. In this regard, certain government policies such as the blanket ban of glyphosate-based weedicides and the lifting of fertilizer subsidies have created serious challenges for the industry.
What is your vision to overcome such challenges?
Watawala Plantations has been at the forefront in developing new mitigation strategies organised around principles of lean management and reduction of waste. From our experience as part of the Sunshine group, we have also learned valuable lessons about the transformative effect that a stringent focus on quality can have across an entire business model. This has helped our products to capture niche markets - it is an area that we will continue to work on in the coming years. We also took radical decisions on managing our crop. In some cases we had to put whole fields under the knife in order to reduce quantity and improve on quality.
Similarly, from a production standpoint as well, we have been driving consistent improvements to our facilities and factories to the point where today, all of our factories are ISO 20000 certified. While these certifications are vital to driving practical improvements to the condition and status of our tea estates, they are also vital to securing top-quality brackets for our teas – this is something that international buyers are paying increasingly greater attention to.
What are some of the recent quality certifications that Watawala Plantations has been able to secure?
We have Rainforest Alliance certification across all our estates and we are also going in for RSPO (Round Table Sustainable Palm Oil Producers Organisation) certification – this is a first for any Sri Lankan company and we are currently carrying out a comprehensive biodiversity survey in order to achieve this certification. We have already identified areas for targeted improvements and working with a fresh cadre of undergraduates. We are now going through the stringent processes required to achieve this prestigious certification.