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Success in a crunchy business
By Ruwanthi Herat Gunaratne
Excruciatingly hot. That's what it was. Six lengthy steel rectangular shaped ovens ran parallel to each other emitting enough heat to bake a biscuit in five minutes. The area following was a hive of activity.

Packaging Munchee Lemon Puff. (Inset) Ceylon Biscuits chairman Mineka P. Wickramasingha

At the very edge of a little dirt road by the side of the High Level Road in Pannipitiya is a set of large buildings. All interconnected. Giant trees decorate the walkways and the possibility of losing oneself within the precincts is quite large.
As you walk in your senses are aroused. The scent of freshly baked biscuits hit you. These buildings house the factory, packaging plant, distribution centre and the board of Ceylon Biscuits Limited, the makers of "Munchee Biscuits".

A brand not alien to any one of us Sri Lankans. It's no shocking revelation that you've at some point of time bit into a Milk Shortcake with a cup of tea or served a Cream Cracker with a slice of cheese to guests. The task that befalls us as consumers is simple. Buy the pack, rip it open and munch. But few are aware that biscuits have a long history.

Way back in 1968 the then government approved a law. Each school-going child was to be provided with a freshly baked bun and nutritious glass of milk free on a daily basis. But the barriers had already been erected. The complications with the distribution seemed endless.

The buns had to be delivered on a daily basis. But by the time this was done the buns were hardened and the children preferred to bash them at each other to consuming it. Hygienic packing was required. And that was quite expensive. A solution was deemed necessary.

Simon Wickramasingha saw potential. Working at William Biscuits he saw the manner in which these convenient snacks were gaining popularity.

Introduced during the colonial era, biscuits had now become a day-to-day affair. Could it substitute buns as a nutritious yet convenient alternative? "It could," affirms Mineka P. Wickramasingha, the son of Simon Wickramasingha and the present chairman of Ceylon Biscuits.

"We forwarded a proposal to the government and it was confirmed. Hygienically packed nutritious biscuits would supersede the bun production. The shelf life of a pack of biscuits being quite long proved to be an added bonus."

But there was a clause. No production could get underway until the company could confirm that it would tap the export market too. Done. The project got underway with the participation of CARE and the Ministry of Education.

Like old times: Biscuits and tea
Ceylon Biscuits has also ventured into fields such as tea. Begun in 1998 CWL Impex is still a comparatively young business in the tea world. "We began with just one customer - a Scandinavian," recalls Senarath Udugama, the Director of CBL Impex. It wasn't to stop there.

That one Scandinavian customer grew to a multitude of Europeans, Americans and Canadians. Before long CBL Impex was exporting to Middle Eastern markets and providing a major airline catering service with all their tea requirements.

The winner of the National Chamber of Exporters Gold Award for Small Industry in Value Added Tea, CBL Impex has grown within a space of a few years. "We export tea mainly to private companies and we found that during different seasons new packaging techniques were introduced. Ceylon tea would be packed together with an assortment of Australian Preserves, a piece of China and presented as a gift idea," says Udugama.

Here was the ideal market. CBL Impex took over the packaging operation and introduced a new concept to the Sri Lankan export market. "This year we propose to incorporate that same idea but to exclusively use Sri Lankan products," says Udugama.

"Thereby we'd not only encourage competitiveness but also help some of the other companies to break into foreign ground."

CBL Impex produces a range of 40-45 flavoured teas in its packaging plant in Homagama. An innovative product they've introduced is a method of flavouring tea using not the conventional methods but the introduction of dried fruit pieces into your cup of tea. "We were unable to use local fruit since we do not have adequate facilities to complete the dehydration process."

Handmade treats
Ritzbury, a subsidiary of Ceylon Biscuits Limited, is

established in bar chocolates and daily treats such as Chocolate Fingers. But a speciality section dedicated to handmade chocolates is also housed in the CBL buildings at Pannnipitiya. It has 12 workers who are headed by Anusha Perera, a veteran "Chocolatier".

Each chocolate has its own specific mould. Once it is brushed with a mixture a light coat of chocolate is sprayed in. Then begins the hardening process, after which each mould is filled in using a paper nozzle and its specific filling. Once that is done each chocolate is sealed individually. The frills appear then. Around 4,000 chocolates are completed here each day.

"What's special about handmade chocolates is that they can be tailor made to suit your needs. If a company needs a set of chocolates for an opening ceremony we design it specifically for them. The colours are added according to their own

preferences," says Nishka Wickramasingha, Director Chocolate and Wafers at CBL.
The fillings include exquisite liqueurs and an assortment of nuts. "Most of the chocolates are available in leading supermarkets around the country. But they can also be purchased at the Ritzbury Speciality Shop at Crescat Boulevard."

At around the same time Ceylon Biscuits Ltd hosted a grand dance at the Galle Face Hotel. It was themed "Munchee Night" - "I cannot remember as to exactly who it was that came up with the suggestion but it stuck and Munchee Biscuits we became," says Wickramasingha. The foundation thus laid CBL moved away from its parent company - William Biscuits - to conquer new fields on their own.

Ceylon Biscuits has now linked up with the former Hong Kong agent for Nabisco Biscuits, the largest biscuits maker in the world, and is trying to market Lemon Puff and a coconut biscuit called Coconut Crunch, known here as Munchee Hawaiian Cookies, in China and Hong Kong.

Among the first biscuits to pass through the Munchee assembly line were Milk Shortcake, Munchee Nice and Munchee Cream Crackers. They were instant hits and are available island-wide even today.
What of the promise to hit the export market? "That we did - grand scale," laughs Wickramasingha, "I still remember going to Dubai in order to introduce the biscuits and sitting on a long bench drinking Broken Orange Pekoe tea and arguing over one American cent. Those were the days. Dubai has progressed since then and Munchee Biscuits too has moved forward."

After the initial exports to the Middle East way back in 1968 business flourished. Munchee was soon exporting to countries such as Canada, the U.K. and Australia. But it was not under their own brand name.
"We are a Third World country, still in the development stage and we are a country known for tea, never biscuits which is a European feat," says J. F. Rubera, the Export Manager.

"The biscuits that are exported to the Middle Eastern market carry our own label in a distinctly different packaging but the biscuits that are supplied to Australia for example go under private brand names. But the biscuits are manufactured and packaged over here."
This poses a question. Is there then a difference in the biscuit that is available to the locals and the one that is exported? "No," comes the definite answer.

"All the biscuits rush off the same assembly line and are packed by the same people. There are no exceptions to the rule. Only the packaging differs."

And that it does. The packaging, which is manufactured here for export, is on par with foreign products.

"It was the discount stores that we first hit when we went to Australia, we've now elevated ourselves to the supermarkets - David Jones being one of our customers."

Time had now come to venture into other areas, "One of them being snack food," says Wickramasingha. Pancho and Catch Me were born. The Soya products firm, Lanka Soy, was acquired in April 2000 and a variety of health products were launched, among them being "Malu Soy" and "Chiko Soy".

Then came a Rs 600 million expansion under a Board of Investment project that included chocolates and biscuits. Ritzbury, so named to provide a moment of reflection regarding its namesake, had come into being some time before. But chocolates and biscuits seemed a new and innovative idea.

All the sections of CBL are housed at Pannipitiya. The only difference in the factory buildings being the temperature and the constant buzz of activity. Calculated mixtures are poured into large containers.

Mixing takes place and mechanical rollers spread the dough out on a constantly moving apparatus. The selected cookie cutters are put in place on a daily basis and this separates the biscuits. Any residue of the dough runs through the identical process once again.

On then to the excessively long ovens. Once the baked biscuit leaves the oven it starts a cooling process.

The rollers take the biscuits up to a higher elevation and back down until it's just the right temperature for packing.

Plastic measurements select the amounts and the biscuits are packed and stacked for delivery. It takes just 20 minutes for the entire process.

The making of cream biscuits is slightly more complicated. One line sends the biscuits in, face upwards; a square of cream is stamped on before the other half falls smack upon it. An impressive thirty five million biscuits a day.

"Even though the export market is vital for the well-being of the company, the local market is our lifeblood," says Wickramasingha.

"The prices of ingredients fluctuate and various labour laws cause many problems. A flood of Indian biscuits is expected to appear in the near future, but the "Munchee Pirisa" is confident. We are vigilant, innovative and value quality above all." That is the winning recipe. Crunch.

Scrapping government pensions may create problems
Scrapping government pensions under the country's economic reforms could create problems, says a pensions expert.

These comments were made by Dr. Ravi P. Rannan-Eliya, an associate fellow at the Institute of Policy Studies (IPS) whose research unit has been working on ageing and pensions since 1996. Speaking at a recent ILO Workshop on "Security after Retirement: Risks and Challenges Ahead." Dr Rannan-Eliya, who discussed issues related to pensions reform and Public Servants Pensions Scheme (PSPS), focused on the criticism of the PSPS.

The PSPS had been abolished in the 2002 budget, following discussions between the government and the IMF. It was replaced by a contributory scheme, for which details are not currently known except that the employee will make a 20 percent of salary contribution, he said.

Dr Rannan-Eliya made the following points:

o The previous pension is worth a 75 percent contribution rate

o A 20 percent contribution rate means that future civil servants will have their pensions cut by two-thirds

o Sri Lankan civil servants are already badly paid by international standards and this will further affect the public sector

o Sri Lanka does not have the highest ratio of civil servants to population in the world as frequently claimed. The World Bank's own data shows that Sri Lanka's civil service is average sized and in fact smaller than that in most western countries.

Dr. Rannan-Eliya explained that it was not well understood in Sri Lanka that the World Bank's pension reforms strategy released in 1994 is not widely accepted (even within the World Bank) and that there is a broad consensus in western countries that it is not supported by economic theory or evidence.

The 1994 proposals have been refuted by pensions experts of the IMF in Washington, DC, who have publicly disagreed with them, and have been criticized by the then World Bank's own Chief Economist, Joseph Stiglitz, as being ideologically biased and based on bad economic analysis.

He said the IMF has gone on record that pay-as-you-go (PAYG), defined-benefit pension systems, similar to that of Sri Lanka's PSPS, should be the main pillar of any pension system in countries. But these criticisms are often not known to IMF field staff who tend to follow World Bank recommendations when dealing with countries.

The main element that was emphasized in the World Bank's reforms is a shift to a funded system, where workers make payments into a personal account. Dr Rannan-Eliya explained that economists have known for a long time that this change will not reduce the burden on taxpayers. Under the current system, pensions must be paid by future taxes, but under a funded system, increased salaries must be paid now to workers to make the contributions affordable.

This means that taxes must increase today. In the long run there is no difference. Funding will also not give a higher return in the long run. The only benefit of funding is to fund managers but he asked whether pensions are to provide income security for workers or to provide income to fund managers.

The IPS official raised serious concerns that cutting civil servants compensation in this way will add to a deterioration of the public service and in the long run this will damage economic growth. He pointed out that successful Asian economies such as Hong Kong SAR, Taiwan, Korea, Japan and Malaysia have depended on a well-paid civil service to ensure a good business environment.

If the government was better informed, it should have questioned the World Bank and IMF about their policy conditionalities, Dr Rannan-Eliya argued.

A better and more necessary reform would have been to increase the retirement age gradually as is being done in western countries. If this is done it would be possible to continue to guarantee civil servants their pensions without increasing future government expenditures.

This demonstrated the need for the government to develop a better analysis of pensions policy, he said.

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