Rs 860 million spent on global tea promotion campaign wasted!

• The primary objective of the global advertising campaign was to implement this programme in seven identified regions 
•  A total of $2,260,000 was allocated for above-the-line and below-the-line creative and social media activities within the global advertising programme 
• The audit inquiry highlights that the relevant company tasked with advertising and promotions has caused a financial loss of 48,188,764 rupees to the Tea Board by not meeting deadlines 
• The matter is now under investigation by both the COPE Committee and the Criminal Investigation Department 

In 2011, the Sri Lanka Tea Board made plans to launch a media campaign to establish a global promotion and marketing programme for the Ceylon Tea brand. Strategies were formulated for the promotion of Ceylon Tea, in line with Cabinet Procurement Process /11/2080/531/021 dated 01.12.2011. Approval for the necessary proposals to implement these strategies was also granted as per the Cabinet’s decisions.   

In accordance with the Sri Lanka Tea Board Law No. 14 of 1975, it was decided to impose a tax of 3.50 rupees on every kilogram of tea exported, as per parliamentary regulations. This tax was intended to fund a robust promotion programme for Sri Lankan tea. Additionally, the Cabinet approved the execution of the proposed strategic plan to promote Sri Lankan tea over a five-year period; from 2012 to 2016. A Cabinet Appointed Negotiating Committee was established to select suitable agencies for implementing the strategy in various countries and regions, with the support of a Technical Evaluation Committee.   

The objective of this initiative was to establish the highest global quality standards for packaged pure tea from Sri Lanka by utilising funds collected through the Promotion and Marketing Fund. Plans were made to implement this process from 2014 to 2016. Consequently, a strategic plan was developed in 2014 for an international promotion programme targeting Sri Lankan tea. Within the selected countries, 20 distinct communication strategies were identified to promote Sri Lankan tea both globally and locally. 

 
In 2012, a call for proposals was made for the initial strategies among the multiple marketing communication approaches that were identified. Proposals were invited under three categories: Creative Strategy Proposals, Media Handling Strategy Proposals and Public Relations Strategy Proposals. A Negotiating Committee, appointed by the Cabinet of Ministers, was tasked with selecting the appropriate agencies to implement this plan across various countries and regions. Recommendations for this selection were provided in a report dated August 25, 2014. This was after receiving the cabinet approval for the Cabinet Procurement Process /15/0287/612/005-1TBR dated April 9, 2015 for the selection of an advertising agency to execute a global promotional marketing programme for Ceylon Tea.   

The primary objective was to implement this programme in seven identified regions: the Russia-CIS region, the Middle East-Gulf region, the African region, the Far East-Pacific region, the European region, the American region and the South Asian region. A total of $2,260,000 was allocated for above-the-line (ATL) and below-the-line (BTL) creative and social media activities within the global advertising programme, covering a 12-month period. This amount was awarded to an advertising firm. Additionally, another advertising company was paid $1,500,000 for public relations activities in the global advertising programme for the aforementioned seven regions during the first 12 months.   

The creative work, encompassing both high-level and low-level initiatives, along with social media activities in these seven regions, was to be completed within one year from the date of accepting the contract. Accordingly, the contract was awarded to the advertising company on June 25, 2015. The contract agreement was signed on November 6, 2015, by the Secretary of the Ministry of Plantation Industries and its directors on behalf of the company. As stipulated, the contract was set to terminate on November 5, 2016.   
The company awarded the contract was unable to fulfill its obligations as per the agreement. Consequently, the contract was extended on three occasions. The first extension was approved through Cabinet Procurement Process /171785/726/043, dated August 30, 2017, with the agreement signed on October 19, 2017. This extended the contract period from November 6, 2016, to November 5, 2018.   

The second extension was approved on February 6, 2019, via Cabinet Procurement Process/19/0102/117/002, with the agreement signed on February 22, 2019. This extension covered the period from November 5, 2018, to May 5, 2019.   

Twenty distinct communication strategies were identified to promote Sri Lankan tea both globally and locally

Selected pages from the audit report

The third extension was approved on February 6, 2019, under Cabinet Procurement Process /19/2349/117/002-1, with the agreement signed on October 25, 2019. This extended the contract from May 6, 2019, to May 5, 2020. On May 2, 2020, the company in question sent a letter to the Tea Board requesting an additional three-month extension beyond the May 5, 2020 deadline. Subsequently, in a letter dated July 7, 2020, the Director General of the Tea Board extended the contract by three months. This extension was granted without Cabinet approval or the signing of a new, revised contract extension agreement between the Sri Lanka Tea Board and the company.   
Furthermore, a copy of the letter, stating that the approval of the Board of Directors was submitted for the extension period of the relevant contract, was not provided to the internal audit inquiry. The internal audit report indicated that the internal audit team had requested a copy of the letter in their correspondence dated November 30, 2023, under reference number PAL/D/SLTB/SA/info/2023-08, but this copy was never received. Internal Inquiry No. PAL/D/SLTB/2023/AQ 02, issued on February 21, 2023, regarding the Global Promotion and Marketing Programme for Ceylon Tea, highlighted that the concerned company had not properly completed the work as per the agreements. The inquiry revealed the same issues as outlined above.   

The audit query also pointed out that 37 tasks from the original agreement dated November 6, 2015, had been handed over to the Sri Lanka Tea Board on June 5, 2010. A payment of 94,103,303 rupees was made for these tasks, and it was noted that the payment was made without proper approval. Additionally, the company awarded the contract for design work, media handling, and public relations submitted as total cost an amount up to US$ 8,160,630 for all three functions.   

The audit inquiry states that according to the agreement, in the event of any delay in the work, 2.5 percent of the value of the work should be paid to the Board for every delay spanning15 days. Consequently, the audit inquiry has highlighted that the relevant company has caused a financial loss of 48,188,764 rupees to the Board by not submitting its tasks on time.   

Another audit inquiry, issued on March 3, 2023, under inquiry number PAL/D/SLTB/2023/AQ 03, indicates that Ceylon Tea paid US$ 100,000 per region to create websites for the seven regions identified to implement the global promotion and marketing programme. In total, US$ 700,000 was paid for the seven regions. The website www.pureceylontea.com was supposed to be translated into English as well as six other languages. However, the audit revealed that the main website was created only in English, and the adaptation involved only translation into six additional languages. This means that US$ 100,000 per website, totaling US$ 700,000, was spent on this project.   

Huge loss for Tea Board 

Payments totaling 143,721,240 rupees were made according to the dollar value at the time of the contract agreement on June 11, 2015. This amount also included a holding cost of 6,420,400 rupees. Additionally, a further 29,218,528 rupees was paid to the company as a retainer fee. As a result, the Sri Lanka Tea Board incurred a total cost of 172,939,768 rupees to create the website.   

Using Google Tag Manager and Google Analytics, the audit revealed that user access to the customer contact website, www.pureceylontea.com, is very low. Over the four-year period from January 1, 2020, to December 31, 2023, the website recorded 165,656 users across 25 countries within the seven regions. 73 percent of these users were from Sri Lanka, while the percentage of users from the other 24 countries in Region 7 was as low as 27 percent. 

Additionally, the website lists Ceylon Tea as being available in 35 countries through its “Visit Store” section. However, the audit found that no stores were available in 15 of these 35 countries selling Ceylon Tea. The website also provides facilities for the direct export and ordering of Ceylon tea from sellers. Despite this, from April 1, 2023, to December 31, 2023, only 1,638 user accesses were recorded for purchasing Ceylon tea—a figure that the audit deemed to be significantly low.   

The audit inquiry indicates that overall, international users are not being attracted to Ceylon Tea. Despite spending 172,736,468 rupees on the website created by the company, the global promotion programme has failed to achieve its desired objectives.   

In an audit inquiry issued on May 6, 2024 (Inquiry No. PAL/D/SLTB/2023/AQ 05), it was revealed that US$ 795,452 was paid for the creation of television advertisements in 17 selected countries across seven regions. US$ 865,542 was spent to translate these ads into the local languages of seven countries, amounting to 146,755,166 rupees. Beyond this, a further 29,835,325 rupees was paid to the company as a retainer fee, bringing the total expenditure by the Sri Lanka Tea Board for television commercials to 176,590,491 rupees.   

Although the advertisements created in English were translated into Chinese, Japanese, Arabic, Ukrainian, German, and Turkish, the ads were never aired on television. Payment was made, but the basic objectives of creating these advertisements were not met. Similarly, a high-level advertisement was created for Germany in 2016, but no German-language version of the advertisement was produced; despite payment being made for a German translation of the TV ad.   

These paid ads were created over seven years ago, and the audit inquiry has questioned whether it is still possible to air them on television even today. Additionally, The advertising agency, which was responsible for advising Ceylon Tea on media surveys, media planning, and media procurement, failed to fulfill its duties concerning the 7 regions. The audit inquiry found that despite the recommendations and strategies provided for media plans in 10 countries, advertising and promotion through television weren’t executed according to these strategies. 

 
The audit inquiry also underscored that the television advertisements, created without proper media planning and with inadequate language translations, are no longer useful for achieving the intended objectives. As a result, the expenditure of 174,332,138 rupees was deemed an idle expenditure. Furthermore, the audit inquiry revealed that the design work, which cost 39,832,808 rupees, didn’t effectively contribute to the Ceylon Tea Global Promotion and Marketing Programme.   

A spokesperson for the Sri Lanka Tea Board confirmed that the model featured in the television advertisement was willing to appear, but did not enter into any formal agreement regarding payment. The spokesperson added that 10 million rupees have already been paid to the model. However, if the model was paid this amount, there should be a corresponding agreement in place. The Sri Lanka Tea Board, however, lacks any documentation related to this transaction.   

Internal auditors at the Sri Lanka Tea Board have raised concerns, suspecting that the payment may have been made either to an actual model or potentially to a model generated through AI technology. The matter is now under investigation by both the COPE Committee and the Criminal Investigation Department. A senior official of the Sri Lanka Tea Board, allegedly involved in these transactions, is currently on compulsory leave while an internal investigation is conducted. Additionally, another high-ranking official, who also played a role in this campaign, is approaching retirement. The Attorney General has been consulted with regard to taking appropriate disciplinary action, according to a spokesperson of the Internal auditors at the Sri Lanka Tea Board. The spokesperson further disclosed that the Sri Lanka Tea Board’s audit inquiry revealed that the total amount paid by the Tea Board to the advertising company that secured the contract amounts to 860 million rupees.   

 “I will provide the necessary information”-Niraj de Mel

This newspaper made inquiries from Niraj de Mel, Chairman of the Sri Lanka Tea Board, regarding this controversy. He said, “The Sri Lanka Tea Board has numerous audit reports. I’m not sure which specific report you are referring to. If you bring the reports you have, or inquire in writing, I will provide the necessary information”. 
When this scribe made inquiries from the senior officer who was placed on compulsory leave, she refused to comment on the matter. 

Kuluna Ranasinghe, the Internal Auditor of the Sri Lanka Tea Board, also responded to inquiries made by this newspaper and said: ‘I am accountable for this audit only to the chairman of the Tea Board. I cannot disclose information to third parties. However, I have submitted four audit reports on these matters to the chairman, and I have signed each of them. I am responsible to the chairman for these reports”. 

Commenting on the matter, the chief executive officer of the advertising company responsible for the promotion process stated, “We are unaware of any of that. We do not know whether there is any involvement with the COPE, and even the Sri Lanka Tea Board has not informed us of anything.”