English Tea Shop: creating shared value, the right way
Suranga Herath, CEO of the English Tea Shop, discusses the importance of sustainability, transparency and creating shared value at every level of the supply chain.
It’s rare to see a successful company, operating a tried and tested business model, turn around and completely reinvent itself. The old adage “If it ain’t broke, don’t fix it,” comes to mind; why subject your business to radical upheaval and the risks therein? Because it’s the right thing to do. “We wanted to find a model that empowered people,” recalls Suranga Herath, CEO of English Tea Shop. “We were a production house before English Tea Shop was born, a very ordinary tea business that packed all sorts of brands. It was that kind of a company because we thought business was simply about capability and maximising resources.”
In 2008, Herath’s company was packing 70 different brands of tea for exportation to the US, UK and Europe. In 2010, the company made the move from Sri Lanka to the UK. “That was the moment of truth for us,” says Herath. “Coming from Sri Lanka, a nation famed for its tea and spices, we had this huge passion for people, naturally, because it’s a very labour-intensive industry. We realised that the traditional tea industry didn’t empower the people at the bottom of the pyramid. That needed to change.” The right course of action was, for Herath, obvious and imperative, regardless of its challenges.
“The shift was very risky. It was a huge transformation from being an ordinary, conventional business, to leaving the auction system, leaving the large plantation companies that supplied us and moving to a very small number of small-scale suppliers of tea and ingredients, with the goal of becoming 100% organic, which we accomplished within two years,” says Herath. Nine years later, English Tea Shop has grown 65% annually over the past seven years, and last year reported revenues in excess of US$28mn across more than 50 markets. We spoke to Herath about his quest to empower people at every point in the supply chain, guarantee transparency and fairness, and transform the lives of thousands of small-scale farmers across Sri Lanka, India, New Zealand, South Africa and beyond.
“We enhance transparency and fairness along our value chain by creating shared value,” explains Herath. English Tea Shop’s model stems from the work of Harvard Business School Professor, Michael Porter. “This is the principle on which we run our business. In essence, this means that by being an ethically-minded business, we not only help improve the world around us but also help our business to grow sustainably,” says Herath in an interview with the Soil Association. He continues: “Which is why we work closely with the farmers who grow our organic tea, they provide constant inspiration as we see the challenges they face on a daily basis. Their hard work and dedication make us strive for success because as we succeed, they succeed.” Porter himself notes that “Shared value is not social responsibility, philanthropy, or sustainability, but a new way for companies to achieve economic success.”
English Tea Shop’s next step in creating shared value across its supply chain involves a partnership with the Soil Association, a certification non-profit based in Bristol. “They’re leading from the front and we’re helping fund their efforts to build a platform,” says Herath. “English Tea Shop is one of the pioneer brands that is going to be tested on the model. All our supplies, the entire value chain will be a guinea pig for a process that, hopefully, creates transactional transparency from farm to cup.”
Herath sees the increased transparency in his supply chain as an opportunity to simultaneously operate in a more ethical way and create value for the company. He notes that the rest of the market is taking note. “The rise of the CPO role, as well as the dramatically increased focus on supply chain management and the entire procure to pay process, has been elevated. And it’s in response to market demand, because the market is demanding prominence, authenticity, transparency. That’s what’s elevated the procurement function as a whole,” Herath posits. “Of course, for our business, it was just natural. We are, I think, a perfect example of how the procurement process has evolved.” Thinking back to the auction method that English Tea Shop used to use, Herath reflects that, “nine years down the line, what we now have is a very complex supply chain management system, a big team led by master blenders and procurement specialists, adopting new technology. I think the requirement was clearly for a process, leadership and people that create win-win solutions. It’s no longer just about going to the sources and buying tea. This is about finding better yields for both parties, achieving better quality, better efficiency, saving in every possible way for both sides, and knowing very well that we’re entering into long-term relationships.”
From the very beginning, English Tea Shop has cultivated its small network of growers by investing in technology and sharing knowledge, working to convince other growers to take up organic farming practices. “We had to inspire other people to buy into organic small farming to expand our supply base,” says Herath. “From the simplest things, like giving suppliers a long-term contract, to building big storage facilities to hold stocks because we didn't have the luxury of working off an auction that gave us weekly demand.” The process worked, and English Tea Shop’s positive impact on its growers’ lives has continued to spread. “In 2018, we launched a sustainability impact report. The results showed that we had impacted over 1,352 farmer families, in terms of investing in them, paying for their organic and Fairtrade certifications, paying for their new technologies, supplying them with irrigation solutions, and building and helping them develop regional schools.” Herath maintains that this sort of investment at the base of the pyramid is essential to the creation of shared value. “If you don't do these things, then our kind of model cannot be a success, because how do you expect small farmers to be planning or taking risks without that support? It so unfair,” he says. “We had to take the risk, we had to take the burden, and we had to build those growers’ capabilities to ensure they could be sustainable and the brand is sustainable.”
Looking to the future, Herath and English Tea Shop aren’t content to rest on their laurels. “We’re on a mission to improve upon our energy use and reduce waste. For 2020, we've set ourselves the goal of being completely free from single-use plastic. This year we’ve already completely revamped our core ranges; they’re now plastic free and non-GMO.” Herath concludes: “We want to be the leading independent tea brand, and be known for our own unique creating shared value model. We've just entered China, we got into Chile last year and we're working on Brazil now. We want to keep expanding, but we want to do it the right way.”