Financial Times

JKH withdraws from branded tea market
John Keells Holdings has decided to pull out of the branded tea business just over a year after it entered the market with two new products. The conglomerate's decision to exit the value added tea trade, handled by the wholly owned subsidiary Gordon Frazer and Company, was made because it was not profitable enough and is part of the group's strategy of focussing on its core business, company officials said.

"Branded tea does not provide the kind of profits desired by shareholders," an official said. "The company does not see it as a core business." JKH has said it wants to focus on its core business and might pull out of other areas under a strategic restructuring of its operations.

The group has six core businesses - leisure, transport, food and beverage, plantations, information technology and financial services. JKH subsidiary Gordon Frazer launched its value added tea products in October 2002 and at that time said it wanted to establish itself as a significant player in the domestic and overseas markets and was in for the "long haul of brand building". It launched a flagship brand called 'Fresh Thoughts' meant for the top end of the local market and for possible exports. This followed the launch of the brand called 'Ran Kahata' meant for the mass market.

Gordon Frazer said that there was plenty of room in the market for value added teas because 80 percent of the local market is served by the sale of loose tea. JKH has said it is looking to diversify further to reduce its reliance on the local economy and on cyclical businesses such as plantations and tourism.

The launch of branded value added teas was seen as a major initiative aimed at increasing revenue from overseas. JKH was recently successful in raising massive amounts of cash through a rights issue for its completed and planned acquisitions. Its most recent acquisition was Asian Hotels Corp.

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