Spicing up sri lanka’s export market

Spicing up sri lanka’s export market

Sri Lanka-based Rathna Producers Cinnamon Exports Pvt Ltd. plans to enhance its local export business and also source spices from other countries and sell to its clients in the world market. In the process, it aims to record a turnover of US $27.5 million by 2015     

MADHUMITA PRABHAKAR

RAVINDU PRIYANTH RUNAGE, MANAGING DIRECTOR, RATHNA PRODUCERS CINNAMON EXPORTERS PVT. LTD.

For Piyutissa Runage, the initial capital for setting up Rathna Producers Cinnamon Exports Pvt. Ltd. (earlier known as Rathna Producers and Exporters) came after years of waiting tables at restaurants and chopping wood. In 1985, he founded this business and built its business model around collecting goods (spices) from a nearby area and selling at the next shop. Later, it evolved into selling goods to spice collectors who toured Colombo and finally, to directly selling to exporters at Colombo. “We exported our first container in 1999, and it was the biggest breakthrough in our business. At that time, the container was worth our whole assets, yet, we weren’t afraid to take that first step because we knew it would be successful,” reminisces Ravindu Priyanth Runage, the current managing director of the company. The junior Runage actively joined the family business in 2005, after earning a management degree from the University of Durham at the U.K. “Post 2005, we rebranded the company, created a corporate identity, setup an online presence and established overseas operations in U.K.,” he adds.

Today, Rathna Producers Cinnamon Exports (Rathna) is the leading exporter of cinnamon and the sole supplier of sesame seeds in the country, with an annual export capacity of 2, 500 tonnes and 1, 000 tonnes, respectively. Moreover, it is the fourth largest supplier of essential oils in the country. Apart from this, it also supplies a considerable amount of black pepper, cloves, areca nut, garcinia rings, desiccated coconut, black tea and gems  to the export market, manages vegetable and paddy fields (under the brand name of Runage Plantation) and, owns two boutique hotels in the country. The company recorded a turnover of US $20 million in FY13 and aims to reach the US $27.5 million revenue mark by 2015. Rathna currently exports its spices to countries such as the U.S., Eucador, Chile, the U.K., India and Hong Kong, to name a few.

According to the Sri Lankan Export Development Board’s report, the spice export market in Sri Lanka has consistently grown in the last five years. Between 2008 and 2012, the export value increased from US $152 million to US $236 million (a 55 per cent growth) and, in the first nine months of 2013, the export value has already reached the 2012 figure of US $236 million. “Owing to the current pace of growth, our vision is to become a market leader in Sri Lanka’s spice export market and to diversify into other promising businesses in the coming years,” shares Runage.

Competing with world markets

Today, some of the challenges confronting the spice market in Sri Lanka are low production capacity, lack of skilled labour, poor food safety standards and inadequate marketing and branding of spices, which result in the export companies losing their competitiveness to major export markets. Adding to this, Runage states that managing supply chain is also a tough task. In a move to address these challenges, Rathna has taken several measures. “Keeping in mind the final human consumption of our products, we ensure that stringent quality control is maintained throughout the production process. Moreover, our cinnamon processing and packaging centres have a high turnover to meet the demands of the international market,” says he. Rathna has also setup a lab and employed quality assurance teams to ensure consistency in the quality of spices exported.

Owing to the current pace of growth, our vision is to become a market leader in Sri Lanka’s spice export market and to diversify into other promising businesses in the coming years.

Runage states that the Government is also playing an important role in tackling these issues. “For one, it has developed infrastructure to improve accessibility across regions, thus saving on time. On the other hand, organisations such as the Export Development Board and the minor export crop ministry are playing an active role in helping companies market their products better,” he says.

Creating socio-economic development

Rathna holds many laurels to its stride. Firstly, it is one of the leading foreign exchange earners for its country and contributes significantly to the growth of the spice exports market. Secondly, it aids in the economic and social development of the region by providing employment opportunities to the local community. “Until today, we have created 1, 000 direct and 15, 000 indirect employment opportunities. In the coming years, we plan to increase this number by 15 per cent each year,” adds Runage. Lastly, as a member of organisations such as The Spice Council and National Chamber of Commerce, the company’s board helps Sri Lankan traders grow their business in the export market.

Though the company faces stiff competition from within and outside the country, Runage reinstates that Rathna’s export business is based on a simple belief; to supply only what they can, when an order is placed. “We collect the spices directly from the source, which ensures that the best quality is delivered at a better price. In other words, the suppliers get the full benefits of our products,” states Runage.  He believes that the differentiating factor for the company also lies in its carefully built supply chain, and the high risk taking ability of its employees. “Apart from this, a good client network and rapport, active participation in conferences and trade shows and, an eye on competitor moves in the world market helps us stay ahead of the competition,” he states.

Runage indicates that in order to increase its export share in the coming years, Rathna will move beyond bulk supplies and develop value added products such as those of medicinal value, to its product range, to cater to a new cluster of buyers. On the other hand, he strongly believes that treating every client as family, expanding its client network by meeting new people and gaining more exposure in this industry will help enhance exports.

CAAYE Partnership

When asked about how beneficial the CAAYE partnership has been, Runage opines, “The partnership has given me access to a lot of young entrepreneurs in the region, and, I believe sharing our knowledge and experience is the best way to learn. Their effort is remarkable because it has given me an opportunity to build my entrepreneurial career.”

Way Forward

Going forward, the company plans to focus on two key aspects; expanding its local export business and, acquiring spices from other countries and supplying to its clients in the world market.  “Apart from this, we aim to become a key player in the essential oils segment. We’re in the process of developing oil distillation units with newer technologies,” adds Runage. Lastly, the company plans to invest in setting up Sri Lanka’s first sesame seed processing factory, in the near future.

“In all, we want to ensure success in every aspect of our business and become the market leaders in each of these segments in the coming years. In other words, we would prefer to lead by example rather than being led by it,” quotes Runage, on an ending note.


Snapshot

Managing Director: Ravindu Priyanth Runage

Year: 1985

Country: Sri Lanka

Revenue in FY13: US $20 million

Future Plans: Expand local export business, acquire spices from other countries and supply to existing clients, enhance market position in essential oils segment, setup country’s first sesame seed processing factory


Disclaimer: The Smart CEO is media partner for the Commonwealth Asia – Alliance of Young Entrepreneurs forum and we’ll feature member entrepreneurs from time to time. Quotes and views are personal and not views of The Smart CEO magazine, its editor or writing staff.