Tea companies brewing alternative revenue lines

Tea companies "" Tata Tea, Goodricke group, Duncans Industries "" are pursuing alternative revenue streams in a bid to overcome the cyclical nature of the commodities business.

Most of the companies have embarked on a mission on an experimental scale to study the feasibility of multi-cropping and other options are being weighed.

Tata Tea has launched pilot projects in two of its estates in Assam, Borjan and Hatikuli. The company is considering fisheries, vegetables, cultivation of spices, as options of diversification.

The surplus land at the company's tea estates would be used to pursue the options. The idea is to re-examine the real potential of the two principal assets of the plantations in the region "" land and people "" and to find solutions beyond the traditional business model of a tea plantation. The companies are looking at alternative revenue streams, albeit in different forms.

Goodricke recently announced a new structure of management with an accent on diversification. However, all the diversification options may not take place in the estates.

At a recently held meeting, the board decided that the company would have three managing directors, with one of them holding the portfolio of diversification.

Goodricke officials could not be reached for comment. However, the company, at its last annual general meeting, announced the intention of agricultural diversification, which could be the areas in which Camellia plc, the parent company, was currently present or new business areas.

Camellia group's plantings other than tea include citrus fruits, table, grapes, edible nuts, avocados, coffee, rubber, pineapples and forestry.

Gouri Prasad Goenka-promoted Duncans Industries is also eyeing multi-cropping options in his estates in West Bengal. The total land under cultivation is 8,000 hectare and the company produces 15 million kg of tea.

However, the total grant to the company is 60 to 70 per cent more than 8,000 hectare. Goenka said that most of the estates have labour lines, streams, roads and drainage systems.

So, what makes multi-cropping so attractive? Goenka says that the ancillary crops would be much more remunerative than tea, an opinion shared by Tata Tea.

He also said that tea prices were at the rock bottom. Surprising, given that this is one of the better years for the industry with the Kenyan drought.

But like most other years, prices have not picked up to the extent as was expected by the industry.

Pegged to be one of the best years after the peak of 1998, tea prices are still just about Rs 8 to Rs 10 per kg, higher than the last year.

Goenka said that one reason that makes ancillary crops much more attractive is that tea requires more labour. "It requires regular plucking, almost once a week," said Goenka.

What makes things worse in West Bengal is the land-labour ratio.

The West Bengal government regulations stipulate one worker per acre.

Aditya Khaitan, managing director, Mcleod Russel India, the world's largest bulk tea producer, has a different take on the subject.

He added that in an estate, land available for other crops would be much less compared to tea, while it would take up a lot more time.

Mcleod Russel, which had plans of diversifying into other crops, abandoned it on these grounds.