The Hindu Business Line : Goodricke firms up plans to sell branded tea; skip auctions

HIGH-QUALITY teas major Goodricke Group Ltd has firmed up plans to lay emphasis on sales of branded teas as opposed to sale of the commodity through auction mechanisms.

Over time, more and more teas from the company's gardens in Darjeeling, North Bengal and Assam would be sold in packets after value addition, according to Mr P.A. Leggatt, Chairman of Goodricke Group Ltd.

Addressing shareholders at the company's 28th annual general meeting held here on Monday, Mr Leggatt said the company was adversely affected in 2003 on account of depressed tea prices coupled with an increase in the operating cost of gardens. A slump in exports to West Asia consequent to the war in Iraq also affected company's operations. One major buyer cancelled orders even as the company was unable to access markets in Iran.

This year, however, the prospects of the tea industry appeared to be better. The year has opened with lower inventories and domestic consumption has gone up. Markets in Iraq and Iran, too, seem to be opening up once again.

On its part, Goodricke was focussed on increasing productivity and cutting costs. The idea now was to move away from trading in the commodity to marketing of branded teas.

Speaking to newspersons after the AGM, Mr K.S. David, Managing Director of Goodricke Group Ltd, said that, to get away from the "vagaries of the market", Goodricke was keen to move away from the auctions "as much as possible" and sell its branded teas after adequate value addition. Towards this end, a new marketing team has been put in place. The focus now was on augmenting its sales force and the distribution channels. The idea was to increase the company's share of the domestic market for branded teas "substantially" from around five per cent at present. In 2004, a corpus of Rs 5 crore has been earmarked for brand building.

Mr David said the future of Darjeeling tea was "not very bright". Clones from Nepal had affected the global market for Darjeeling teas while prices in post-unified Germany had gone down. The market in Japan, too, was not particularly bright. It has been proposed to hold a Darjeeling tea promotional campaign in the UK, Germany and the US. The proposal, which envisages an outlay of Rs 25 crore over a three-year period, awaits the approval of the Union Ministry of Commerce.

Goodricke's instant tea business has picked up, especially in Japan and the UK. The company has doubled its instant tea production capacity in view of rising demand for instant teas on account of the antioxidants present in such teas.

During the year-ended December 31, 2003, Goodricke Group Ltd's income from operations stood at Rs 183.89 crore against Rs 180.05 crore in 2002. In 2003, the company registered a net loss of Rs 8.14 crore against a net profit of Rs 55.26 lakh in 2002. For the first time in 28 years, no dividend was declared for the year gone by.