• Tea Biz Podcast | Episode 22

    Hear the Headlines

    | Cold Brew is Trending for Iced Tea Month
    | DAVIDsTEA in Canada Settles its Debts
    | Kenya Exports Surge but Auction Prices Remain Low
    | PLUS Smith Teamaker’s Ravi Kroesen explains the company’s new plant-based café concept and Amy Dubin-Nath talks about the future of whole leaf Indian teas.

    Tea Price Report

    As India’s second flush gets underway, the mood is glum as the industry continues to deal with many challenges. Local media reports on rising imports of tea into India and in Darjeeling, producers have expressed concern about zero-duty imports from Nepal. Read more…

    Features

    Tea Biz this week travels to Columbus, Ohio to visit with Amy Dubin-Nath, founder of Janam Tea and an ad hoc India tea ambassador to the US.…

    …and then to Portland, Ore. where Ravi Kroesen, head teamaker at Smith Teamaker, explains the many uses of tea at the company’s recently opened plant-based café.

    Amy Dubin-Nath
    Amy Dubin-Nath

    India’s Spectacular Specialty Teas

    Amy Dubin-Nath sees a bright future for specialty teas originating in India, “but I don’t think it is going to be a quick flip where people are only after high end teas.” Instead, the process will be gradual, following a path similar to wine. “Do I want to see the spectacular teas of India keep selling at a high price?” she asks, “Yes, definitely, as that elevates the perceived value, making it something precious. I believe that message should be spread throughout the world — including in India.” Read more…

    Ravi Kroesen, Head Teamaker Smith Teamaker
    Ravi Kroesen, Head Teamaker at Smith Teamaker, Portland, Ore.

    A Plant-Based Café where Tea Reigns Supreme

    By Jessica Natale Wollard

    The intent of the new café concept, says Smith Teamaker Ravi Kroesen, is to “develop foods that really reflect our ethos of plants, as well as utilizing tea as an ingredient.” The new Smith Teamaker café sources locally with a menu that includes snacks, lattes and iced concoctions with full meals that demonstrate how tea and food can live in harmony from leaf to cup to plate. Read more…

    Cold Brewed Tea
    Cold Brewed Tea

    Iced Tea Month: Cold Brewed Teas are Trending

    By Dan Bolton

    The challenge of correctly steeping a delicate green to avoid bitterness disappears when the tea is brewed overnight in the fridge. “I’m cutting calories and want something more flavorful than water,” begins one Reddit thread. “Can you explain to a total cold brew newbie how to get the most flavorful green tea without additives.” The responses were enthusiastic and numerous, evidence that the technique rivals more traditional fresh-brewed, flash-chilled black tea.

    Whether boiling tea to pour over ice, or making cold brew, the tea to water ratio is critical. Begin with about twice the normal weight of tea, 6-8 tablespoons for 1.5 quarts (or 8-12 grams per 950 milliliters). Stale tea requires more leaves, quality whole leaf requires fewer. Make sure your vessel is airtight as tea will pick up the scent of leftovers.

    Allied Market Research estimates RTD tea generated $30 billion in 2019 and will grow 5.5% annually to $39 billion in 2027. Health-conscious millennials are driving sales. Mintel reports that 25% of new tea innovations are RTD. In China where 78% of consumers are frequent drinkers of freshly brewed hot tea, RTD enjoys 49% penetration, which is greater than tea bags, according to Mintel.

    Biz Insight – Cold brew coffee experienced remarkable five-year growth in both bottled ready-to-drink and foodservice. North America is the largest cold brew market globally with 66% market share, followed by Europe (17%) and Asia (11%). In the US – 2015 toles of cold brew coffee are expected to increase ten-fold from $110 million to $945 million in 2025, according to Statista market research. Three-sixty market research estimates the market globally will reach $2.8 billion by 2026.

    DAVIDsTEA Settles Debts

    A Quebec Superior Court approved the Montreal-based tea company’s plan to settle $118.2 million in claims for $18 million payable in July. A US Bankruptcy Court this week approved a similar plan for resolving debts owed by DAVIDsTEA’s US subsidiary.

    The settlements are a final step toward exiting a year-long reorganization precipitated by the closure of all but 18 of the company’s more than 200 locations. The settlement will be divided with $15.3 million going to Canadian creditors and $3.1 million to US creditors, according to PwC, Canada. The company has sufficient cash on hand to meet settlement obligations.


    Under the direction of CEO Sarah Segal, DAVIDsTEA has adopted a “digital first” market strategy for sales to consumers. Its wholesale products are now found in 2500 grocery and pharmacy outlets. The company reported sales of $40.2 million in fourth quarter 2020. Revenue from the fast-growing online and wholesale segment has increased from $42 million in 2019 to $97.2 million in 2020. Greatly reduced brick and mortar revenue now accounts for only 12.9% of total sales. Revenue overall declined 38% in 2020 leading to $55.9 million in losses.

    Kenya surge
    Kenya tea exports surge during first three months of 2021

    Kenya Tea Exports Surge

    Despite upheaval at the factory level, Kenya exported much higher tea volumes this year. First quarter exports increased 18.9% compared to 2020, according to the national Tea Directorate. Volume topped 153 million kilos, up from 128 million during the same period in 2020.

    Smallholders that produce 65% of the country’s tea experienced variable weather conditions in 2021 creating an overall decline in production during the first three months of 2021. Growers, primarily in the far west, harvested 18 million fewer kilos since January compared to the same quarter in 2020. Auction prices are on the rise, reaching $1.84 per kilo last week but remain below the $2 per kilo threshold considered essential to cover production costs. Weekly prices so far averaged $2 only once in 2021. Tea prices averaged $1.80 per kilo in 2020, down from $2.05 per kilo in 2019.

    Biz Insight* – Kenya’s tea growers are benefiting from payment of 50% of the total due thanks to national reforms instituted this spring. Half the price for green leaves delivered within the month to Kenya Tea Development Agency (KTDA) factories, is paid by the 20th of the following month. The balance is paid in the fall at the end of the financial year. KTDA’s factories are owned by smallholders and managed by KTDA.

    *Corrected 6.20.2021

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  • Tea Biz Podcast | Episode 21

    Hear the Headlines

    | Inflation Dampens Enthusiasm Over Rising Tea Prices
    | India’s Tea Industry Under Duress
    | European Union Grants Rooibos GI Protection

    Tea Price Report

    While lockdowns continue, tea auctions in India resumed last week at all the major centers. In the Nilgiris, discussions on whether bought leaf factories can open are still underway.
    Read more…

    Features

    Tea Biz this week travels to Frankfurt Germany to discuss best practices in sustainable wholesale with Jan Holzapfel, owner of Ronnefeldt Tea, a 198-year-old company that is replacing its tea packaging this year with eco-friendly materials, embracing traceability, and reducing emissions by longer air freighting tea.

    … and then to London where Tea Biz Reviewer Kyle Whittington has a single word for INFUSED, a book by Rare Tea Founder Henrietta Lovell that describes her adventures in tea: “Wow,” he writes, “You really feel like you are sitting over a cup of tea with Henrietta as she regales you with her stories, the highs, the lows, and the off on a tangent.”

    Jan-Berend Holzapfel
    Jan-Berend Holzapfel, owners Ronnefeldt Tea

    Sustainable Wholesale

    Sustainable best practices at tea gardens are well established, but the rest of the supply chain offers significant opportunities to protect and conserve resources. Listen to the latest Tea Biz Newsmaker Q|A as Jan-Berend Holzapfel, owner of Germany’s Ronnefeldt Tea, discusses sustainable wholesale.

    Read more…

    Henrietta Lovell
    Rare Tea Lady Henrietta Lovell

    A Book to Re-ignite your Tea Flame

    You really feel like you are sitting over a cup of tea with Henrietta

    By Kyle Whittington | Tea Book Club

    Infused Adventures in Tea

    Wow! What a book! From start to finish Henrietta had me captivated, excited and enthralled by her world. A Tea Book unlike most, this is the very personal story of Henrietta’s adventures with tea in tea and all around tea. From her first fledgling sips out of dainty China Cups at Diana’s House as a child, we are taken along on a ride of reminiscence. With trips to far flung tea fields swathed in mist via the odd lightning strike or two we zip off to tea tastings with chefs at some of the best restaurants in the world, accompanied by her little yellow suitcase and strange meetings on trains. To name to mention but a few of her adventures. 

    Read more…

    Food Inflation
    Food Inflation

    Food Inflation Dampens Enthusiasm Over Rising Tea Prices

    By Dan Bolton

    In the US and Asia, an energetic post-pandemic recovery is underway. Demand is quickly rebounding as consumers spend down their savings and make up for the lost time. Consumers in the largest economies amassed $2.9 trillion in savings since March 2020, according to Bloomberg Economics.

    Now they are eager to spend.

    Retail sales in the US are projected to approach $4.5 trillion in 2021, according to the National Retail Federation. The NRF, which initially estimated 6.5% growth, increased its full-year GDP projection to 7%, the fastest rate in decades. In China, household income grew 13.7% during the first quarter of 2021.

    Widespread inflation is dampening that good news.

    The Organization for Economic Cooperation and Development (OECD) reports inflation in member countries is at the highest level since 2008. Globally, food prices rose for the 12th consecutive month in May, according to the United Nations Food and Agricultural Organization. The FAO’s Food Price Index was 40% higher in May 2021 when compared to May 2020. The Bloomberg Commodity Spot Index, which tracks price changes across a range of metals and agricultural commodities, has jumped roughly 60% in the past 12 months.

    Food prices, including the cost of tea, are rising on demand. Tata Consumer Products, Nestlé and Unilever all announced price increases across their ranges in response to commodity inflation.

    Rooibos plants
    Rooibos Plants, South Africa

    EU Grants Rooibos GI Protection

    The European Union this week awarded Rooibos, which is also known as Red Bush tea, status as a protected geographic indication affording the same protection to products such as champagne and Irish Whiskey.

    The registration allows South Africa’s Rooibos industry to display the EU Seal if the tea consists of 100% Rooibos that is either cultivated or wild-harvested from local municipalities of the Western and North Cape provinces.

    The South African Rooibos Council welcomed the news. Council Chairperson Marin Bergh said that while it is important that nobody else use the name Rooibos “it also gives a certain status about quality, reliability, and sustainability – all those things that go together with a GI.”

    India’s Tea Industry Under Duress

    While the peak of the horrific second wave has passed, India’s tea industry remains under duress as the coronavirus simultaneously strikes down workers, limits plucking and processing, halts inter-district transport, and forces the early-day closure of restaurants and beverage stalls.

    The government estimates more than one million workers, mainly women, are losing productive days and wages due to the pandemic and inclement weather with the arriving monsoons.

    The delivery of 235,000 doses of vaccine this week halted a steep increase in Coronavirus caseloads in Assam’s tea gardens. Daily average infections in June are now 4,000 per week, down from almost 6,000 per week in May. Positivity rates remain high, forcing an extension through June 16 of lockdowns and a daily curfew from 1 pm through 5 am. Shops and restaurants must close by noon and inter-district transport is prohibited. The state reported 450,000 cases and 3,600 deaths. The seven-day average for new cases is 7,400 in West Bengal and 9,000 in Kerala.

    India reported fewer than 100,000 cases for a fifth day and while daily death totals are high at 4,000, this average is expected to decline as the drop in new cases continues. During the peak of the spring infections, from April 1 to May 6, India recorded 926,000 news with a positivity test of 26%. Testing continues at the same pace, but positivity has declined to an average 4%. Active cases are now at 1 million, according to the Union Health Ministry.

    Buyers at auction are finding it difficult to arrange for transport despite the fact tea is listed as an essential commodity. Drivers are in short supply and enforcement of restrictions that prohibit inter-district transport is inconsistent. The immediate impact is a spike in retail prices above records set in 2020. Buyers at auction are spending an average of INRs211 per kilogram in Assam and INRs125 per kilo in Tamil Nadu.

    Biz Insight – There is no slack in demand for tea. Tata Consumer Products reports that revenue from its beverage segment (which includes coffee) grew by 59.6% during the period January-March 2021. Volume was up 23% largely due to an increase in at-home consumption. India’s packaged tea market is estimated at $2.26 billion. An additional $1.3 billion is spent on tea from unbranded suppliers, according to ICICI Securities.

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  • Adapting to Climate Change

    New study recommends motivational campaigns, demonstrations, training, and extension work to encourage growers large and small to adapt to climate change.

    Rosekandy Tea Estate
    Reservoirs conserve rainwater harvested at Rosekandy Tea Estate. Photo courtesy Rosekandy TE.

    Tea Garden Managers in Assam Confront Climate Change

    The threat of climate change looms large in tea. “There is increasing evidence that climate change will strongly affect tea cultivation,” concludes a study of growers in Assam, the world’s top tea producing region.

    Garden managers in Assam are responding to the threat with adaptive measures that growers will find useful in many tea lands. These include rainwater harvesting to enable irrigation during dry spells, reforestation, conservation of biodiversity, soil mulching, and the creation of wind barriers that combine to mitigate the threat.

    To better understand the seriousness of the situation and to discover local adaptations, two scientists at the Tocklai TRA (Tea Research Association) in Jorhat sent questionnaires to growers in four regions of Assam – Upper Assam, South Bank [of the Brahmaputra River], North Bank and Cachar. Combined, these regions produce about 12% the world’s tea, supporting the livelihood of 1.2 million workers.

    The study Perception of Climate Change and Adaptation Strategies in Tea Plantations of Assam India analyzed tea growers’ awareness of climate change, its impact on tea, adaptive approaches undertaken and future strategies. The study was recently published in Environmental Monitoring and Assessment, a peer reviewed, scientific journal published by Springer. The work was authored by Dr. Pradip Baruah and Dr. Gautam Handique at Tocklai.

    The scientists note that climate change is a global concern with impacts that vary at the farm level. The majority of respondents were aware of changing climate conditions and the effect on tea production. How farmers respond to climate change needs to be precisely understood if the government, policymakers and researchers are to effectively support adaptive and mitigative approaches for the tea crop. Data was received from 83 tea estates.

    The impact of higher temperatures, erratic and often torrential rains are evident, according to Dr. Baruah, monitors weather and growing conditions and regularly shares his findings and advice online like in this March 15 tweet: “Rainfall has been quite scanty so far this year in Assam tea areas. Irrigation is still on in a Golaghat area tea estate today, which is mid of March.”

    Rainfall has been quite scanty so far this year in Assam tea areas. Irrigation is still on at a Golaghat area tea estate today, which is the mid of March. – Dr. Pradip Baruah

    The study revealed that most respondents (85.5%) were ‘deeply concerned’ about climate change, 9.6% were ‘somewhat concerned’ and only 4.8% were ‘unconcerned’ regarding climate change.

    Three quarters of respondents (78.3%) reported a decline in productivity while 12% were uncertain. Only 9.6% of the respondents suggested that tea production was not vulnerable to climate change. Respondents from gardens along the South Bank of the Brahmaputra River report the greatest impact, followed by North Bank growers and those in the Cachar region. A majority in every region confirmed that climate change, visible as spikes in temperature, drought, and variations in rainfall, was significantly affecting their crop production.

    Tea depends greatly on rainfall for optimal growth. Leaf productivity and the bushes are harmed by either an excess or shortage of water. Respondents said adverse conditions such as prolonged drought during winter and/or periodic heavy rainfall in recent years pose a threat to the sustainability of the crop. 

    The study pointed out that rains have become unpredictable with some regions suffering from prolonged dry spells, while other experience incessant rain particularly during the monsoon months. Respondents said climate change has also led to an increase in insect and disease infestation.

    In July 2020 the Brahmaputra River inundated around 26 districts, driving 2.8 million from their homes and killing 123. 

    Assam recorded 1,164mm of rainfall compared to a normal monthly average of 894mm during July 2020, an excess of nearly 30% (see map). The catchment areas of nearby states, Arunachal Pradesh and Sikkim also received excess rainfall 16% and 45%. – NASA Earth Observatory

    “As future management strategies, tea growers have opted to gradually replace synthetic fertilizers with organic manures and pesticides, construct anti-erosion measures along river sides and embankments, and generate awareness programs” according to to the study.

    Adaptive Measures

    The Rosekandy Tea Estate in Cachar in South Assam anticipated the local impacts of a changing climate as early as 1982.

    Ishwarbhai Ubhadia, general manager at Rosekandy TE, told Tea Biz, “We have created rainwater harvesting ponds all over the estate. We now have a 100 hectare area under water,” he said. “Wind belts have been created and we have maintained 500 hectares of reserve forest to maintain micro-climate and ecological balance,” he said. Installation of 70- kilowatt powered solar plant is underway. The generator will be commissioned by April, he said, adding that hunting of birds and animals on the land is now prohibited. 

    Garden managers expressed optimism in applying strategies to mitigate climate change. Rainwater harvesting and irrigation are now common in Upper Assam and along the South Bank, North Bank and Cachar. Adaptive measures like reforestation programs and the creation of wind barriers were mostly implemented in Cachar as compared with Upper Assam. Cachar and South Bank gardens are more likely to practice of soil mulching compared with the North Bank.

    In-situ water conservation largely consists of constructing artificial ponds and lakes and developing existing natural water bodies such as streams, rivulets, swamps, and low-lying areas. “Rainwater harvesting increases the amount of water per unit in cropping areas, reduces drought impact and enables the use of run-of beneficially,” according to the study.

    Rooftop harvesting at Heeleakah Tea Estate is low cost and effective. Water is stored and used for consumption, tea tasting, dehumidification, etc. In the garden, rainwater ponds and reforestation programs establish a microclimate ideally suited to growing tea. Photo by Dr. Pradip Baruah.

    Photo by Dr. Pradip Baruah.

    Mulching conserves soil moisture, reduces surface runoff and soil erosion and lower soil temperature. To minimize the impact of wind speed, respondents are constructing wind barriers to deflect high velocity of winds that increase evapotranspiration and desiccation, lodging in young tea plants, uprooting of shade trees, etc.

    Dr. Baruah says the impact of climate change is readily evident. “The first and second flush tea is getting affected. More needs to be done with regard to ecological micro-management by planting various types of trees,” he said.

    “Climate change is dynamic, impacting all but it needs a total approach at global and local level,” writes Dr. Baruah. “The good thing is that the tea estates have the capability of doing it to a great extent in different topographical and agro-climate conditions. Results are absolutely visible in Cachar area tea estates and in other areas of the state,” he says. “It is never too late but trying to adapt and mitigate the effects of climate change is the only way ahead,” he said.

    The study says coal and natural gas are extensively used in tea production and can be gradually replaced with new, cleaner technologies. “However, the cost economics, availability and energy efficiency standards of such ‘green energy’ will have to be properly worked out before essentially implementing in tea plantations. Similarly, the gradual replacement of synthetic fertilizers and pesticides with organic ones will be a welcoming step, but at the same time, one has to look at the practical feasibility and cost economics of such implementation” the scientists involved in the study say. 

    Plan of Action
    The proportion of tea plantations proposing future strategies like planting of tolerant/resistant tea cultivars and awareness and training programs among workers and associated people is higher for South Bank and North Bank as compared with that of Upper Assam. The  proportion of tea plantations proposing future strategy of awareness and training programs among workers and associated people were in favor of South Bank and North Bank, respectively.

    Scientists say the present study will be helpful to make more informed future strategies regarding best practices for tea cultivation under a changing climate for tea-growing regions all over the world.

    The Way Forward
    During a virtual International Tea Day panel discussion last year, FAO Director-General, Qu Dongyu, cited the importance of achieving greater sustainability in the tea sector. Panelists agreed on the need to develop strategies for climate change adaptation and mitigation, promote market transparency and sustainability of the tea value chain and develop policies for sustainable tea production benefiting, first and foremost, smallholder farmers. FAO has since launched projects to develop carbon-neutral tea cultivation (see below).

    FAO’s Intergovernmental Group on Tea when it last met formally in 2018, warned that tea cultivation and production globally is facing climate-related challenges which need to be addressed. Delegates concluded that “Climate variability, incidents of frost and prevalence of pests, also have an influence on tea production, and are beginning to affect productivity.”

    The Assam study calls for motivational campaigns, demonstrations, training and extension work to encourage adoption of climate change. “The implementation of long-term policies for climate change by the government needs to be strengthened so that the benefits reach every tea plantation and if necessary, subsidiary schemes can be developed by the government to encourage more adoption of such techniques” the study says.

    Rainwater harvesting
    Developing rainwater catchments creates a micro-climate ideal for growing tea. Photo by Dr. Pradip Baruah.

    FAO Launches Carbon-Neutral Tea Project in Kenya

    The Food and Agriculture Organization of the United Nations is working with tea growers in Kenya to pioneer carbon-neutral tea.

    The program attempts to sequester carbon dioxide from the atmosphere and reduce greenhouse gas (GHG) emissions at each stage in the tea value chain.

    The project will use carbon-neutral tea production methodologies developed in China by the Chinese Academy of Agricultural Sciences (CAAS) as well as new technologies to tackle climate change through energy efficiency, tried and tested in the Kenyan tea sector by the German Development Agency (GIZ).

    Scientists will prioritise energy and resource efficiency in tea factories through technology transfers, implementation of effective monitoring management, green procurement guidelines and factory automation.

    The project will also address the first stages of the tea value chain and the cultivation of tea bushes using low carbon practices including the reduction of fertilizers and pesticides, the support of carbon sequestration and soil conservation.

    Energy Live News

    Resource Links

    International Trade Center
    Mitigating Climate Change in Tea Sector (2014)
    Chinese Academy of Agricultural Sciences
    Carbon-Neutral Tea Production in China (2019)
    FAO Intergovernmental Group on Tea (23rd Session)
    Fostering Sustainability in Tea Production (2018)


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  • Q|A Narendranath Dharmaraj

    Assam
    Assam Tea Garden

    Narendranath Dharmaraj has spent nearly five decades in plantation and agribusiness management. In this conversation he talks about the viability of the Indian tea industry and in particular the outdated nature of the plantation model. Dharmaraj has proposed an alternative where he recommends that estate owners distribute land-ownership in favor of the plantation employees and buy back the raw material through a co-operative outfit. Here, we speak to him on how this model will especially address the issues of labour and wages that have hit an impasse.

    A conversation with Narendranath Dharmaraj

    What in your opinion, are the main problems affecting the Indian tea industry that have prompted the need for a structural change?

    Dharmaraj: As in any other business, the three fundamental tenets of business are production, in this case, crop production, the sale price and the cost. What is unique about this business is that crop production is rather weather dependent, increasingly so in an era when we are well and truly feeling the impact of climate change. Tea is a rain-fed crop largely and in the recent past, the rainfall pattern has become very erratic. No longer are growers able to control the crops and even predict it with any degree of accuracy. So crop – not that it ever was – is increasingly out of the control of the management. Price, it’s a commodity and depends on the global supply and demand, particularly after WTO* has come in. Prior to that we had a protectionist kind of market, particularly, the south Indian teas had a captive USSR market as part of the rupee-rouble agreement. I remember the joke those days used to be that an Indian student going to study in the USSR was expected to take a container of tea with them. That’s how good it was.

    But with the disintegration of the USSR and the advent of the WTO when quantitative restrictions were lifted, there was global movement of commodities. Consuming countries were able to source cheaper teas from southeast Asian producers like Vietnam, Indonesia etc. This impacted the Indian price very much. Our exports suffered. The year 2000 was a watershed year, since then the industry has been seeing a downslide.

    Going back, the crop is not in your control, the price is not in your control, and that leaves only the cost. What is unique about our tea industry is that 65% of its cost is wages. That is, as you know, completely usual. In any business, the max will be 15% as the load of manpower cost. Here you are talking about 65%.

    Having done operational plantation work for four decades, I am convinced that the only really controllable factor in this business is the cost, namely the employee cost. And employee cost is increasingly getting largely out of management. Because disposable income in the country and the world as a macro scenario is going up. Much as planters claim that although cash wages is less, we are giving them other benefits like housing, schooling and preschool, childcare, medical help etc., ultimately with the exposure that people are having through media and social media, they are comparing what they earn with the cash wages that the other industries are paying or that the urbanites are getting. There will be aspirational demand for increasing cash wages and of course, the one which is typical to plantation, the wage-related social and welfare cost will continue to remain. So wages are also beginning to be an aspect beyond the management control. You cannot run a business like that, where the three fundamental tenets of the business are completely beyond your control.

    Everyone will recommend that branding is the panacea for all ailments. If you look at branding history in tea in particular, you will find that the packers and branders are not the producers. Packing and branding and retailing does give good margins but it’s not the producer doing all that. When producers did that by forward integrating, like what the Tatas did with Tata Tea and Tetley, and what Unilever did by backward integration by merging Tea Estates India and Doom Dooma India Limited with Brooke Bond, in either case they quit from plantations. I call this the “When milk is cheap why own a cow” syndrome.

    When you can source teas cheaper from the market why bear the cost of having to produce it. So branding as a panacea, value addition, moving up the value chain, in my mind, unless it is done by the producer, it doesn’t make any sense. What happens is that when producers become successful in that, they say, ‘Well. I don’t have to necessarily produce.’ 

    N. Dharmaraj
    At work in the garden

    All this makes one think what is the economic and socially sustainable model for the plantation industry, for both owners and the large number of workforce dependent on it. The industry is unique in that it employs hundreds of thousands of people, the rural population, in a manner of speaking. Therefore the model has to be such that it supports them from the social and economic standpoint and gives economic sustainability to the owners. As I said, wages will continue to rise, living conditions will continue to be under pressure. In today’s world, everyones looking for transparency in the value chain and thanks to block chain technology etc. consumers want to know the share that each stakeholder is getting, working backwards from the consumer price. 

    What this means is further pressure on the business. It’s already in trouble and these troubles will make it worse. In terms of data, taking 1985 as the base year, wages have gone up by 8 times in real terms, whereas prices have gone up 2 times. This is a huge disparity between wage increase and price increase and that gap is going to widen. The other standard response by producers is to increase volumes. In a business with 65% of its cost of production on wages any increase in volume also comes with a huge cost. Additional volume doesn’t always give you the contribution of a positive bottom line. So to my mind the standard response of trying to increase volumes is not going to help.

    Ultimately we need to look at a model which is self sustaining, which is holistic in terms of how it will take care of the interest of the growers and the workforce. What we are looking at is a model, when I recommend distribution of land and ownership in favour of the workforce, We are looking at something similar to a Bought Leaf model. Bought Leaf business never loses money because you work backwards from the End Price. (End Price – Cost) – Margin = the price you pay the producer for raw material.

    We are suggesting a model where existing employees become owners of the land, become smallholders who will supply raw material to the body corporate who will then process and market it. 

    In 2004-05, Tata Tea exited its plantations in Munnar, transferring ownership to its employees creating the Kannan Devan Hills Plantations Company Pvt. Ltd. (KDHP) But it hasn’t been without its share of problems. What would you say didn’t work here?

    Dharmaraj: The KDHP model was an evolution in this direction. With KDPH, the Tatas diluted shareholding in favour of employees with the primary objective, I’d imagine, to create a greater sense of participation and accountability. But, taking a ringside view of it, I don’t think that purpose got served at all. For a couple of reasons: it was not backed by adequate sharing and communication because again, drawing from my own experience dealing with the workforce, unless you explain the scenario, that going forward if they don’t increase the output, the costs will escalate, the business will suffer… that kind of awareness was not brought. The employees thought that suddenly the company has become very generous and are giving them shares. So the sense of accountability didn’t really come in. 

    Even here, in the new model, it will be a big challenge because there is a mindset issue. If I say ‘brainwashing’ it will be a bad word but I am using it to convey the flavour of what I have in mind. They (Workers) have to be told that if this model continues the way it has been continuing there will be pressure on wages. More wages brings pressure on margins, which means more estates will close down, more estates will lose money… the same vicious circle will go on.

    The KDHP model didn’t really work. I believe that Tata companies were not able to pay dividends beyond 2015 because the industry itself was in trouble. 

    As much as the workforce needs to be informed and educated, what would be the producers response to this model?

    Dharmaraj: Before we address employees we need to address the producers. My own experience so far, of being a propounder of this concept, is that there have been some progressive employers who are looking at it positively, as a holistic and sustainable way forward. A lot of them will be skeptical about it. For the simple reason that they all think that this land is an asset. To my mind this land is no longer an asset. These lands, across India in tea growing areas, these large land holdings were exempt from Land Ceiling Act (LCA) because they were large organised industries. About five plantations, including tea, coffee, rubber, cocoa, were exempt from the LCA and were allowed to be held in land banks. The original ownership pattern differs from state to state. Kerala and West Bengal are leasehold lands while Tamil Nadu and Assam are freehold lands. Irrespective of what the title is, one stipulation which has made them qualify for the exemption from land ceiling is that they are mandated to use it only for plantation. In other words, you cannot alienate it for real estate or any other purpose. An asset gets its value only when it’s transactional. When it’s not transactional and when you can’t monetise it, where’s the value? It’s only on paper. So I think it’s a bit of a fallacy. I know it’s a mindset issue. People need to be made to look at stark reality. I am convinced the going forward plantation has to simply survive on operational margins. Gone are the days when you can say you are a landowner and give it a value and put it on your balance sheet… It’s a mirage, it’s no longer valid. 

    Land ownership is increasingly under a cloud. And also the ownership pattern. Before the 1970s these were pure line plantation companies. They made money, they put it back in plantation business, it grew like that. Today, after the FERA rules and ownership shareholding was mandated to be diluted, especially the English held, sterling companies changed ownership and became part of Indian multi business groups. To them, it’s yet another business and ultimately it will work on which business in their portfolio gives the highest returns. Even the management structure of plantations has undergone change, and therefore there is a crying need for a sustainable model. 

    How will the model you propose impact quality and therefore pricing?

    Dharmaraj: Therein lies the challenges. It’s important to form a cooperative unit, ideally a group of estates supplying raw material to a factory becomes a cooperative unit. Now that cooperative unit is necessary in order to maintain the organised cohesive nature of this business enabling economies of scale, economies of efficiency, which tend to get a little diluted when there is fragmented ownership. Safeguards have to be built in. The technical guidance and supervision of these holdings should continue to remain with the body corporate so that they control the output, control the quality and provide a price incentive for better quality leaves, which even today is being done in the Bought Leaf business. Many factories give extra money for better quality leaf. Those to my mind are manageable issues. I am not taking them for granted but with proper agreements in place I think those can be achieved.

    What about labour itself? The other recurring concern is shortage of labour. How would this model address that?

    Dharmaraj: Just the other day I was checking about the workforce in Kerala. We were under the impression that the workforce was 3-4 lakh (300,000-400,000). I was surprised to get the number as 40,000. That’s how much the number has dwindled in time. That’s because the younger generation don’t want to work in plantations. Even if they were to get lesser earnings elsewhere they would prefer to work in white collar jobs than in plantations.

    Shortage of labour is a huge issue. But I imagine the decentralised model will itself address the issue. Drawing back on my experience, when you frame them over a 8-hour period, the output is restricted mentally. When I was a young manager, once – without permission from the management and I got rapped on the knuckles for doing so – I said I am giving you flexi time. In an estate of 500 hectares with x number of workers, you can plan how much has to be covered each day. So I said, “As long as you harvest the fixed area, you can go home. They started going home by 3 o’clock, 2 o’clock and at one point, they were done by mid day. They are physically and mentally capable of higher output. You need to create the right working conditions for that. You can give people two types of incentive – money or time. In this case time was given as incentive. And it was working. Women could go look after their children. They have a kitchen garden and they had time to work on it. When you are owners you put in heart and soul in work you deliver.

    In this model, in a way, a flexi working time will come because they are no longer employees governed by labour laws. They are their own owners, masters of their time. They know that green leaf of only a certain quality will be accepted or that this is the quality that will give them X+. They will adapt to it. It’s a spinoff benefit of this scheme that is driven in terms of leading to greater worker output.

    How realistic is the adoption of this model?

    Dharmaraj: Like all changes, everyone is not going to dance with joy. A lot of homework needs to be done. I have been speaking to progressive companies on this. Some are very keen to see this taken forward. There are many questions to be answered but there are progressive companies are willing to look at it carefully. It’s possible to find volunteers, and I have suggested doing this on a modular basis, maybe select a geographical area, establish the working principles of such a model. 

    This model will be particularly useful in reopening closed estates. There are many in Kerala and West Bengal. They are in bad shape, in the sense they are in economic and social disarray. What has happened here is that local power groups have taken over. In a way what we proposed is happening there by default but not in an organised fashion. Employees have taken over the land because employers have not been paying wages, they have stopped production, they have abandoned plantations. But what has happened is that some local leaders, or trade unions or local mafia become the controlling point. They make money, and the real reward and price don’t go into the hands of the workmen. 

    We are talking about a model that is deliberate, that is preplanned, that is blessed by the body corporate, that is blessed by the government, that is blessed by the workforce and trade unions who represent them. I am sure the government and trade unions will see this as a great step forward. 

    The plantation model is outdated. It still has a colonial ring to it. The dwellings of workers are called lines… I know that owners give them facilities. Many companies provide what they are mandated. But with all that, it still gives the idea of being a labour camp. Whereas give them a facility to create a dwelling for themselves, with an area earmarked for growing vegetables, then there is an emotive connect to the whole thing. It’s very difficult to quantify that kind of emotive connection. I think these are the things to be sold to the workforce. Someone asked, why should they opt for this when they are assured of wages? This is where information sharing and communication becomes important. If we continue the same way, more estates will be abandoned, companies will be unable to meet obligations. If we don’t check it with a disruptive model, five years down the line the industry will be in shambles, if not already, as portrayed by parts of Kerala and West Bengal. 

    It’s a reality we are looking at, and not just in India. The plantation business is in trouble in Kenya and Sri Lanka also.

    On my part, I feel I owe it to the industry that has sustained me over four decades. It needs a breakthrough and if I can contribute to that, I will be gratified. 

    *India became a WTO member in 1995

    EDITOR’S NOTE:

    K. Mathew Abraham, managing director at Kanan Devan Hills Plantations (KDHP), asked that Tea Biz post this rejoinder.

    Abraham writes that “Contrary to what is stated in the interview above, we would like to clarify that KDHP is one of the most successful large tea plantation companies in South India with an annual production of 25 million kilos of tea.

    “Proof of this can be seen from KDHP’s performance since its formation more than 15 years ago. KDHP has been continuously generating profits, barring two years and KDHP has paid dividends every year.

    “As further proof of the success of the model, we would like to highlight that plucking productivity has increased by more than 70% since inception, which is a clear indication of the involvement of the employees in this success story. In 2015, KDHP was ranked No. 1 for employee participation and involvement by Great Place to Work Institute India.  

    “Most interestingly, the communication cascade undertaken during formation of the company resulted in more than 98% of the workforce voluntarily becoming company shareholders with an employee director and a staff director nominated to the Board — probably the first of its kind in the industry.”


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  • Plastic cups out, clay cups in at 400 Indian train stations

    BENGALURU, INDIA—The Indian railways is the largest rail network in Asia. Every day 12,617 trains run along the length and breadth of the country covering 7,172 stations. On a normal, non-Covid day, they would collectively ferry 23 million passengers.

    A month ago, the Indian Railways announced that they would replace plastic cups with the kulhad, as an attempt to reduce single-use plastic and replace it with the eco-friendly kulhad. The project is being launched at 400 railway stations to begin with.

    Indian potter making small pot or Diya for Diwali with clay on potters wheel in his small factory. Manufacturing traditional handicraft with clay.

    A kulhad is quite simply a terracotta clay cup, unglazed and without any handles. Replacing the plastic cup with the kulhad offers a more eco-friendly alternative. But it can generate employment and income to potters across the country – said to be potentially in the range of 2 million potters. And it is viewed as bringing back something inherently Indian – terracotta utensils that date back centuries!

    But this is not the first time that the kulhad has been considered in place of plastic cups. Nearly 20 years ago, then railway minister had introduced the kulhad for the same reasons. It fizzled out rather quickly. Reasons were that it cost more, many customers didn’t find it appealing or hygienic, and finally, demand outstripped supply.

    Still, something’s got to be done. Because even if every passenger drinks only one cup of chai on a train journey, that’s a mind boggling amount of plastic!

    Jaya Jaitley, politician and an expert on handicrafts, was quoted in the Guardian as saying, for the idea to work this time around, the government must allow for the design to vary across the country, ensure a steady supply of clay to potters, and provide feeder centres near major railway stations.

    However, the kulhad is not without detractors. They argue that it, too, is a single use cup, and that terracotta can take decades to degrade. So unless reused, the kulhad too will add to the landfill.

    Tea and trains in India, are one of those classic pairings. What remains to be seen is if the kulhad endure and add to the charm of a cuppa on the train? And if it really is the alternative to plastic.

    Aravinda Anantharaman reporting, Bengaluru, India

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