Agri Business

Tata’s APPL to source more tea from small growers

Shobha Roy Kolkata | Updated on January 09, 2018 Published on August 24, 2017

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Amalgamated Plantations (APPL), an associate company of Tata Global Beverages Ltd, intends to raise its production volume from small tea-growers while consolidating its own plantations and focusing on high-value tea.

These strategies, coupled with prudent cost management, will help shore up the company’s topline to ₹800 crore in the next 3-4 years from the present ₹600 crore, said Jagjeet Kandal, Managing Director, APPL.

The country’s second-largest producer of bulk tea, APPL currently sources 40 per cent of its requirement of 43 million kg from small tea-growers. The remaining 26.5 million kg comes from its own production.

“Going forward, the share of small tea-growers will increase to 60 per cent. Volumes will grow,” Kandal told BusinessLine.

Better margins

With an annual production of nearly 550 million kg, the small-grower segment accounts for nearly 44 per cent of the country’s total tea output. The production cost for a small grower is 50 per cent lower than that for a planter in the organised sector.

On the other hand, the cost of production for an organised player has risen 45 per cent in the last three years, with manpower alone accounting for nearly 60 per cent of the total cost.

This has been exerting pressure on prices, which have not kept pace with the demand-supply dynamics and inflation. “Since their (small tea-grower) cost of production is low, they are able to earn a neat margin. This price then becomes the benchmark for the market as a whole,” he said, explaining why prices were not moving up in tandem with demand.

APPL earns a ‘comfortable margin’ from the sale of tea produced by these growers.

To ensure quality produce from these growers, the company has set up Tea Extension Advisory Services (TEAS), which imparts knowledge and technology to small growers.

For a player in the organised segment, the only logical way forward is to produce quality tea fetching a higher price. APPL will focus on production of quality tea across its 25 estates in Assam and West Bengal.

The company has been present in the niche segment, through organic tea brands like ‘Hathikuli’ and ‘Anshi’. “We will slowly and steadily grow this segment thereby adding to our bottomline,” he said.

Published on August 24, 2017
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