Biscuit Wars

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THE COMPETITIVENESS PROGRAlVI (TCP) A Sri Lankan Case Study of Firm-Level Competitiveness Ceylon Biscuits Limited Shehara de Silva & Christine Dias Bandaranaike SUBMITTED TO USAID/Colombo IN RESPONSE TO PCE-I-0098-00016-00 Task Order No. 841 SUBMITTED BY Nathan Associates Inc. J.E. Austin Associates Inc. June, 2006 A Sri Lankan Case Study of Firm-Level Competitiveness Ceylon Biscuits Limited Colombo, Sri Lanka June 2006 Prepared by: Shehara de Silva Christine Dias Bandaranaike A study prepared for The Competitiveness Program (TCP) - a US Agency for International Development (USAID) funded project in Sri Lanka, implemented by Nathan Associates Inc. and J.E. Austin Associates Inc. 1 Acknowledgements The authors would like to thank Mr. Mineka Wickramasingha Chairman Ceylon Biscuits Limited for allowing CBL to serve as our second case study under this project. Mr. Sunil Costa. was very helpful in coordinating the scheduling of interviews at CBL. We thank the CBL board members and staff for cooperating with our efforts. All our interview candidates (See Appendix) gave of their time most generously and spoke to us frankly of their experiences. We are also very grateful to our external interview candidates who helped us immensely by providing sometimes both an outside view and an historical perspective of the company. We would also like to express our gratitude for the support of the staff and consultants at The Competitiveness Program (TCP). Finally, we are indebted to Jagdesh R. Mirchandani of TCP for critical reading and logical guidance towards the finished product contained herein. In all respects, this study would not be in the form it is in today without Jagdesh's support. 3 Contents Executive Summary ..................................................................................................... 7 1 Background ........................................................................................................ 15 2 Case Study Goals and Methodology ................................................................ 18 2.1 Objectives .................................................................................................... 18 2.2 Methodology ................................................................................................ 18 3 Competitiveness Context ................................................................................... 20 4 Cultural Context ................................................................................................ 22 4.1 Family Businesses ....................................................................................... 22 4.2 The Wickramasingha Family ....................................................................... 24 5 Company History ............................................................................................... 26 5.1 The Beginning ............................................................................................. 26 5.2 The Early Years ........................................................................................... 28 5.3 The Open Economy years ........................................................................... 30 5.4 Strategic Company Reforms ........................................................................ 32 5.4.1 Portfolio Diversification ...................................................................... 32 5.4.2 Product Leadership .............................................................................. 32 5.4.3 Distribution .......................................................................................... 34 5.4.4 Customer Intimacy .............................................................................. 34 5.4.5 Image Building .................................................................................... 35 6 Competitiveness Behaviour .............................................................................. 36 6.1 The Biscuit Wars ......................................................................................... 36 6.1.1 The Tikiri Marie Campaign ................................................................. 36 6.1.2 The Lemon Puff Battle ........................................................................ 38 6.1.3 The Cream Cracker Assault. ...................................... : ......................... 39 6.1.4 Recent Advances ................................................................................. 40 6.2 Business Expansion ..................................................................................... 40 6.2.1 Ritzbury ............................................................................................... 40 6.2.2 Pancho Snacks ..................................................................................... 42 6.2.3 Lanka Soy ............................................................................................ 43 6.2.4 Tiara Cakes .......................................................................................... 44 6.2.5 Other Snacks ........................................................................................ 45 6.3 Export Markets ............................................................................................ 46 6.3.1 Entry into India .................................................................................... 46 6.3.2 Other Indian Ventures ......................................................................... 48 7 Ceylon Biscuits Today ....................................................................................... 50 7.1 Manufacturing Operations ........................................................................... 50 7.2 Business Unit Contribution ......................................................................... 51 7.3 Group Performance ...................................................................................... 53 4 7.4 Path Forward ................................................................................................ 57 8 Key Findings ...................................................................................................... 62 8.1 Impact of Government Policy ...................................................................... 62 8.2 Management Style ....................................................................................... 64 8.2.1 Leadership Profile ................................................................................ 65 8.2.2 Leadership Diagnostic ......................................................................... 67 8.3 Shared Values .............................................................................................. 68 8.4 Strategy ........................................................................................................ 69 8.5 Workforce Development ............................................................................. 70 8.6 Information Management ............................................................................ 71 8.7 Corporate Social Responsibility (CSR) ....................................................... 72 9 Benchmarking and Analysis ............................................................................. 73 9.1 Comparison with Similar Previous Studies ................................................. 73 9.2 Operational ExcellencelEFQM Template .................................................... 79 9.3 SWOT Analysis ........................................................................................... 85 9.4 CBL Strategy In Context of Porters Five forces .......................................... 86 10 A Competitiveness Example ......................................................................... 91 10.1 Ritzbury Chocolates .................................................................................... 91 APPENDIX ................................................................................................................. 97 AI. Corporate Structure ........................................................................................... 97 A2. Case Study 21 Ceylon Biscuits Limited. (CBL) ................................................ 98 A4. List of Interviewees ........................................................................................ 102 A4. Company Milestones ...................................................................................... 103 A5. Company Data Sheet ...................................................................................... 105 5 List of Figures Figure 1 Family Structure ............................................................................................ 24 Figure 2 Current CBL Business Units ......................................................................... 50 Figure 3 Group Revenue and Growth .................................................................... 53 Figure 4 Profit after Tax and Growth ...................................................................... 53 Figure 5 EPS & Dividend Payout ............................................................................ 54 Figure 6 ROE & ROCE ............................................................................ 54 Figure 7 Capital Employed .......................................................................................... 55 List of Tables Table 1 - EFQM Performance Matrix .............................................................................. 80 Table 2 - Munchee EFQM Performance Evaluation .................................................. 82 6 Executive Summary This is a classic tale of a market war that must surely go down into the annals of marketing history in Sri Lanka and