Kochi tea auctions serve up bitter brew as prices crash

As “chai pe charcha” over the pros and cons of demonetisation gathers momentum in the country, its impact has been felt in the retail market, with prices of the common man’s drink nose-diving, at least in Kerala.

The cash crunch has taken its toll, with dwindling prices and declining retail sales of tea, considered the second most preferred beverage after water. The sales drop, it is pointed out, was almost 25 per cent both in packed and loose tea.

Unlike in Kerala, such declining trends are not seen in the Coimbatore and Coonoor auctions, where the majority of sales cater to exports and upcountry markets than retail.

AVT, Kerala’s leading player in retail tea sales, with more than 50 per cent market share, has already witnessed a drop of 30-40 per cent and the officials attribute it to lower footfalls in super markets as well as reduced wholesale trade in the post-monetisation era.

The tea retail sales in Kerala, according to KB Shajimon, Senior Manager, (Marketing), Harrisons Malayalam Ltd, is normally carried out on a cash-and-carry basis after purchasing the commodity from the Kochi auctions.

However, the withdrawal of high-denomination notes has virtually affected the cash flow. The November-December period is considered to be Kerala’s peak time for tea consumption, especially with the starting of the Sabarimala pilgrimage season.

The cash shortage also hindered tea arrivals to the Kochi auctions, and they are now hovering at around 8 lakh kg per week vis-a-vis 11 lakh kg in the previous year.

Due to low demand, the prices at the auctions were also down by ₹5-6 per kg in the dust category.

Of the 8 lakh kg offered at the auction, he said 80 per cent of the tea is sold in the retail market and the rest taken by upcountry buyers and exporters.

Shelji George, Manager, Tea, Kerala State Civil Supplies Corporation, the second largest player in retail sales, says there has been a drop of 25 per cent in all commodity sales and this was reflected in tea. The company, with a 10 per cent market share, expects the situation to improve once the currency shortage issue is resolved.

Says Mathew Abraham, Managing Director, Kanan Devan Hills Plantations Ltd: “With a 20 per cent market share out of the quantity offered in the auction, the drop in retail sales was around 10-12 per cent. This may prolong due to the uncertainty in the market. The drop in prices and sales is likely to affect the producing companies, which are already passing through critical phase due to various reasons.”

Ramesh Bhojarajan, Chairman, Coonoor Tea Traders Association, pointed out that there are several small and bazaar buyers in the Kochi auctions, who sell limited quantities in the market. They require cash for each transaction. Hence, the currency crunch has affected their operations and this was reflected in the drop in overall retail sales and prices.

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