September 2018
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CENTRE STAGE

In this edition of Swire News, we talk to Guy Chambers, Group Managing Director of Finlays, about some of the changes and challenges taking place within the global tea industry. We find out how Finlays is evolving to meet changing customers' tastes, and how it is turning to technology and innovation to try to drive the industry to new heights.



Finlays has serious heritage. Its origins stretch back to 1750 and the company's history is closely entwined with the global tea trade. For example, a Finlays vessel visited Guangzhou as early as 1817 to explore business opportunities – including direct sourcing of tea! In 2000, John Swire & Sons Limited took over sole ownership of Finlays. Even more recently, Finlays has expanded its non-tea businesses, principally around coffee, which has included the purchase of two coffee extraction businesses based in the United States: Autocrat in 2014, and the Aspen Beverage Group in 2017.

Today, Finlays serves as a trusted supplier of tea, coffee and botanical extracts to beverage brand-owners around the world. Unlike other suppliers, Finlays is in a unique position because it operates a vertically-integrated global supply chain – primarily for tea. It owns and operates tea estates, sourcing offices, extraction facilities (for tea, coffee and botanicals), packing facilities and R&D labs, all spread out across four continents.

Guy Chambers Group Managing Director of Finlays
Guy Chambers
Group Managing Director of Finlays

'One Finlays': changing boundaries, changing minds

The broad scope of Finlays' scale, geography and diversity presents many operational challenges. In order to ensure that the sheer size of Finlays is a strength and not a weakness, the company has recently embarked on a transformation journey under the banner 'One Finlays'. This is an integrated framework which is designed to allow the organisation to leverage the strength of its diversity and reach, so it can operate as one global company to support its major customers.

Guy Chambers explains: "Historically, Finlays was made up of lots of separate parts, each operating fairly individually. A lot of our customers expect us to operate more seamlessly. They also look to us to provide differentiated products. The aim of our 'One Finlays' transformation is to ensure that we act and speak in a unified voice to address these issues for our customers."

Bringing a full spectrum of tea to the world

Within the global beverages industry, customer preferences have changed. Understandably, consumers are now looking for trusted products with provenance, as well as healthy choices containing fewer, more recognisable ingredients. This gives Finlays a natural advantage, as Chambers asserts: "We have a fantastic position within the industry because we are already very trusted. We've been producing and supplying tea for over a hundred years. We have a footprint in tea growing, sourcing, buying and packing, which brings that trust. We actually know where our tea comes from and are not just the middleman."

Traditionally, Finlays was involved with the growing, processing and sale of black tea. But as tastes around the world change, Finlays aims to be at the forefront of bringing new offerings to customers. For Chambers, this change in tastes is a great chance for Finlays to introduce more varieties of tea globally by tapping into the huge portfolio of teas available in China. "Outside China, many consumers' definition of tea is primarily black tea. That's a bit like watching a black-and-white television. Inside China, a consumer's definition of tea is very broad because of the long history, strong culture and wide variety of tea grown and consumed. In China, the choice of tea is like watching full-colour, high-definition television." The aim is for Finlays to become the trusted supplier of this library of teas, and work with brand-owners around the world to help introduce more consumers to a full spectrum of teas.

Harnessing innovation to drive growth

Finlays' US-based coffee extract producers, Aspen and Autocrat, both have a large and fast-growing portfolio of cold-brew coffee extracts. The rationale behind the acquisition of these companies was twofold. Firstly, cold-brew coffee is a major growth area in the global market, presenting Finlays with opportunities to increase its share and expand Finlays' growing business supplying beverage brand-owners. Secondly, and crucially, both Aspen and Autocrat possess technology to produce cold-brew coffee in a better way than many other industry players.

Chambers elaborates: "People ask, 'Is Finlays just a tea company or are we a tea and coffee company?' Our definition is that we supply tea, coffee and botanicals. We are primarily known for tea, but these acquisitions around coffee extracts are really about technology and making really good, natural products." It is precisely this approach to producing excellent natural products that will be beneficial to the tea industry. "I envisage we will see a cross-over in the technology used for tea and coffee extraction. I would not be surprised to see some of our cold-brew coffee technology used for cold-brew tea within the next few years," he says.

Over the past 12 months, Finlays has invested time and effort in searching for new ways to improve the way tea is processed. Unlike other beverage industries, such as wine, beer and dairy, the way tea is made has remained unchanged for many decades. Part of Finlays' longer term ambition is to explore how to use 21st century knowhow to upgrade the traditional tea-making process to help make better teas in a better way.

Investing in a sustainable future for all

Watch Finlays' story: Roots in the Future.

Watch Finlays' story: Roots in the Future.
Finlays places great emphasis on operating in a sustainable way to ensure the success of its ventures. Michael Pennant-Jones is group head of sustainability at Finlays. "In the last few decades, the scale and pace of change around us has been accelerating," he says. "The rise of the digital world, social media, climate change, population, consumer pressures and water availability are impacting on us. This led to our first sustainability strategy in 2008."

An example of Finlays' environmental sustainability efforts is how the company is helping to regenerate the 400,000-hectare Mau forest in Southwest Kenya. This forest is vital to tea operations because it plays a key role on the region's microclimate, rainfall patterns and water storage, all of which affect the quality of tea being grown. Pennant-Jones explains how challenges around conservation can be overcome: "If we are to protect and enhance the Mau Forest in Kenya – the climate regulator for the region, which we rely on for water and biodiversity – then we need a broad group of stakeholders to work together." In 2015, Finlays joined forces with the IDH, the Kenyan government and other organisations to launch the South West Mau Sustainable Landscape Project. Within this organisational framework, Finlays has, to date, contributed to regenerating 12.5 hectares of forest, funded two new guard posts and financed a livestock intensification programme that will reduce grazing pressure on the forest, among other measures.

Empowering communities

While protecting the environment is crucial to the success of Finlays' operations, so too is investing in tea-growing communities so they can prosper. One such initiative sits under Project Maotai. This programme enables tea farmers in less developed parts of China – the world's biggest tea producer – to access new markets. Finlays has focused on Guizhou Province in the southwest of the country. Currently, local farmers pick their first crop in April and it sells for high prices domestically; but they rarely pick for the rest of the year, because there is no local market for tea picked later in the season.

"Over the last few years, we have been working with the local government in Guizhou to establish direct relationships with tea farmers. We have now started work on building a processing facility in Sinan, Guizhou. Next season, we plan to help farmers process and sell their teas to our customers both domestically and abroad. This will help the farmers generate valuable additional income at the same time as providing our customers with the clean, traceable tea that they require," notes Chambers. Crucially, by helping to increase income for Guizhou farmers, Project Maotai also has the potential to assist wider local communities in the years to come.

Finlays' global network of operations

Partnering for growth

Finlays has formed strategic relationships with industry partners to help drive new or popular products. One such organisation is the Chinese firm Damin, in which Finlays holds a 50% interest. Damin is the world's largest producer of tea extracts, and serves major tea brand owners in the region, including Master Kong – one of the most popular producers of iced tea in Mainland China.

Similarly, Finlays has entered into a partnership with Harada, one of the largest tea producers in Japan, to find effective ways to grow Japanese-style varietals in Argentina that can cater to increasing consumer demand for distinctive styles and flavours. Says Chambers: "We recognise we can't do everything ourselves, and that there are other players in the industry around the world which have strengths in certain areas. We work with them and cultivate good relationships so we can create new markets together by combining strengths from different companies."

Indeed, combining strengths and harnessing innovation are the two factors that will ultimately help ensure Finlays continues to thrive as it evolves as an organisation. However, that is not to say that Finlays' long heritage will be forgotten. It is a history of integrity, respect for culture and for the communities in which it has operated for generations. Like Swire, Finlays is committed to finding smarter ways to look after the environment and support the communities in which it operates. In doing so, the Finlays group is working hard to drive changes within the tea industry and to sustain its success long into the future.
Swire News 2018 September Issue
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