The Hindu Business Line : Tata Tea, HLL focusing on packaged tea biz

During the last one year, India's two leading tea producers, Tata Tea and Hindustan Lever, have started the process of exiting the tea plantation operations. They, however, continue to dominate the domestic packet tea market.

Tata Tea started its divestment programme by floating Kanan Devan Hills Produce Company, which is located at Munnar in Kerala.

In April, this year, the company handed over the management control of 55,529 acres of tea plantations to this company. All 12,770 workers were shifted to the new company's pay roll.

In May 2005, Kanan Devan made its maiden public offering exclusively for the employees who now hold 74 per cent stake in the company. Tata Tea over the years had increased its earning from the branded packet tea business to around 80 per cent of its income. With the latest restructuring, the share of its bulk tea revenues has come down further.

Industry sources said that the company is contemplating a similar move for the North India operations too. However, no formal announcement has been made yet. While Tata Tea was basically a plantation company that went into packaged tea and made a success of it, Hindustan Lever branched into plantations after tasting success in packaged tea.

Now, Levers too has transferred its entire tea plantation business in Assam and Tamil Nadu (including the factories) into two wholly owned subsidiaries. The company had stated that it is looking for joint venture opportunities with leading players in this sector.

It is believed that revenues from these two plantation divisions were slightly below 1 per cent of Hindustan Lever's annual turnover of Rs 10,245.79 crore in 2004.

In May, this year, Levers sold its entire stake in Rossell Industries, another tea plantation outfit, to the Mumbai-based M.K. Shah Exports. HLL held this stake through Unilever Overseas Holdings BV, a wholly owned subsidiary of Unilever PLC and Lipton India Exports Ltd, a 100 per cent subsidiary of HLL.

Both Levers and Tata Tea are leaders in the packaged tea segment with backward integration into plantations. After these divestments, the companies are now free to concentrate more on aggressive brand promotion.

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