EBRD and Kazakh government help improve business processes
When the owners of Tea Center approached the EBRD in 2017, they had a rapidly growing but comparatively unstructured tea production business. The family-run company operated in a cluttered warehouse with no clear development plans and a product portfolio that was too large.
Two years later, thanks to an international advisory project with the EBRD funded by the Kazakh government, Tea Center had developed a detailed strategy, a new budgeting system and a leaner production facility for their rebranded products. As a result, sales increased by 35 per cent and profit grew by over 50 per cent.
Tea Center was founded in 1998 by Toleugazy Serikbayev in the Almaty Region of Kazakhstan, a country where tea is the most popular hot drink and annual consumption ranks among the highest in the world. The company uses tea leaves imported from Kenya, India, Sri-Lanka and China.
“As owners who are heavily involved in day-to-day operations we used to learn by the slow method of trial and error. The EBRD arrived at just the right moment to accelerate our learning process,” says Bektur Toleugazynov, the founder’s grandson, who manages the business today.
One of the lessons learned was that, besides the products and their cost, the company’s financial success depended on many factors, such as the wellbeing of staff and a comfortable working environment.
With the help of industry experts recommended by the Bank, Tea Center implemented Kaizen – a Japanese business improvement philosophy – to achieve lean manufacturing processes, resulting in an increase in productivity of 30 per cent. Kaizen principles transformed piecemeal production that heavily relied on manual labour into a seamless and mostly automated process. This allowed the company to cut back on an entire working shift, despite the continuous increase in sales it experienced.
“At first our workers were a little hesitant to change. People love what they know. Once they got used to it, however, our workforce satisfaction rate grew and we became a more attractive employer,” says Bektur.
Another aspect that required change was budgeting. The experts suggested using a rolling forecast, which is a financial model based on quarterly planning with monthly updates. It is often used in unpredictable economic climates and highly volatile sectors where many external factors can disrupt production. Tea Center deals with organically grown raw materials, the cost of which depends on natural and variable factors like the weather, so the model fits the business perfectly.
Rolling forecasts came in handy when global and local markets were hit by the Covid-19 pandemic. At that point, Tea Center’s budgeting was already quite flexible and it was easier to plan for potential delays in supply.
Transformation of the sales and marketing departments led to an increase in profits. Training, initiated by the advisers, encouraged sales staff to work closer and build more meaningful relationships with distributors. Tea Center also consolidated some brands and worked on the branding and positioning of their flagship products, including the Tabo and Altyn Kese Kenyan granulated teas and the Indian loose leaf tea, Bodrost.
“Even the sound our packaging makes was important,” says Bektur.
Finally, a new three-year strategy was created to structure the company’s development aspirations. It takes Tea Center’s vision and mission statements and makes them more practical, providing step-by-step instructions to achieve desired outcomes and scorecards to assess intermediate performance. Market research showed that consumers will move from loose leaf tea to tea bags in the coming years, so the strategy includes upgrading factory capacity for tea bag products.
Today, Tea Center produces over 2,500 tons of tea annually, but the company’s plans and dreams do not stop there. “We export to Russia and the Kyrgyz Republic, but until recently we still didn’t think we could compete globally,” says Bektur. “Working with international industry experts showed us that we have a lot more to offer.”