Green dining from leaf waste

Assam-based firm produces disposable dinnerware from areca nut sheaths, marketing the produce from village micro units, with near-term plans for expansion

Pranjit Das of Assam's Bodoland area never knew that areca nut sheath, treated as a waste in the region, would one day help him earn a decent living.

It was Arindam Dasgupta, 35, a graduate from the Institute of Rural Management, Anand (Gujarat), who saw such an opportunity. As an officer with Entrepreneurship Development Institute of India (EDII) in Guwahati, in 2005, he decided to try and tap the potential of these sheaths to produce environment-friendly disposable dinnerware.

Today, around two million plates are being produced from the areca nut sheaths in Assam, through a venture called Tamul Plate Marketing Pvt Ltd (TPMPL). It was set up by Dasgupta and three others in 2010 and has already inked an investment deal with venture capital (VC) firm Upaya Social Ventures. Another with Rianta Capital is in the offing. Though Upaya did not disclose the size of the investment, Rianta Capital said theirs' would be around Rs 30 lakh.

FACT BOX

• Started operation in 2010
• Turnover in 2013-14: Rs 57 lakh
• Turnover projection for 2014-15: Rs 1.88 crore
• Rs 15.7 lakh Ebitda in 2014-15; to break even by 2016

"Based on our due-diligence and experience, we are convinced the market for these biodegradable products is continuously growing within and outside India. Tamul Plates is the only established northeast producer and has an advantage of an abundant supply of raw material and increasing demand in the northern and northeastern markets," said Sreejith Nedumpully, director (business development) at Upaya.

From a turnover of Rs 12.5 lakh in 2010-11, it touched Rs 57 lakh in 2013-14 and is expected to cross Rs 1.5 crore this financial year. The firm aims to sell around four million plates in 2014-15 and around 15 mn annually by 2018-19. And, to register Ebitda (earnings before interest, taxes, depreciation and amortisation) of Rs 15.7 lakh this year. It expects to break even in the next two years.

Bhavna Chopra, head of strategic projects at National Skill Development Corporation (NSDC) said, "The most interesting aspect is that they have capitalised on local reality and are producing and marketing biodegradable dinnerware. We believe that given the right infrastructure, training and good market linkage can lead to better growth prospects but we have to ensure there is consistency in the quality of products produced and sent." Dasgupta was the winner of NSDC's 'Power to empower challenge' event in 2013.

Beginning
"Inspired" by Verghese Kurien's Amul model, Dasgupta says since his graduate days at Shri Ram College of Commerce in Delhi, he had developed a passion to start a people-driven enterprise in rural India. After zeroing on the areca nut initiative, he quit his job at EDII. For some years, he worked under the banner of a non-government body, Dhriti, to create awareness regarding the utility of the nut sheaths, creating the ground for the proposed venture to take off. He also toured South India and visited at least 40 units producing areca nut leaf plates during this period, for personal exposure. Finally, in 2010, he set up TPMPL with an initial investment of Rs 10 lakh.

"I had seen South India producing environment-friendly disposable dinnerware from areca nut sheaths. But here in the northeast, people were unaware of the utility of the sheaths, despite the region having largescale plantations. It was like people sitting on gold without knowing its value," said Dasgupta.

Though the betel nut is used widely in various forms in the northeast, the sheath attached to the leaf is considered a waste. By government estimates, there are at least 100,000 hectares of areca nut plantation in the region.

Business model
TPMPL has a two-tier system, where the production in managed by village-level producers and the marketing is done by the firm under the brand of Tambul Leaf Plates.

The plates are produced by village-level micro enterprises. Currently, there are 100 such units and TPMPL aims to have 500 of these in the next three years. TPMPL sells the machinery to rural producers and provides a 100 per cent buy-back guarantee for the plates. These are purchased from the rural producers at a fair price and then TPMPL does quality checks, packaging and finally markets the plates across India.

"Running one large-scale production unit is difficult and the costs are higher. The raw material logistics is such that it is better to have micro-level production facilities in the areca nut plantation areas and transport the finished products later, as transportation of the sheaths is very costly," said Dasgupta.

Ben Metz, an expert who has worked on capacity building with many enterprises said, "The decentralised nature of the approach, along with the low capital costs of start-up and the abundance of raw material and significant demand for the end product, makes the potential for scaling very high in the case of TPMPL."

Market
Areca nut leaf plates are targeted at the high end of the market. These are 20-30 per cent costlier than the widely used styrofoam plates. There is not much clear data on the market size for disposables, especially in India. According to work done by a business research company, Freedgonia, the world market for disposable dinnerware was $48.6 billion in 2013.

At present for TPMPL, the major markets are north India, eastern India and the northeast states. Around 90 per cent of TPMPL's product moves through the wholesale chain in an unbranded manner. "We are trying to expand our market in the eastern and northeastern states, where we have a competitive advantage over South India producers, and to also increase our retail presence through branded products in cities like Delhi, Kolkata, Mumbai and Guwahati," said Dasgupta. TPMPL is also "building the base" for targeting the export market in a "big way". "We want to export 30 per cent of our total produce by the next financial year. In the export market, we are targeting both the Western and the Southeast Asian markets," he added.

EXPERT TAKE

  Tamul Plates Marketing is aiming to address the global disposable dinnerware market, which according to estimates stands at $32 billion and is growing at 4.8 per cent annually. It's believed a substantial share of this global market will be occupied by eco-friendly biodegradable material manufacturers such as this one. The company has created an innovative way to build its production capacity, while addressing the unemployment and insurgency scenarioy in the northeast. They do this by encouraging and supporting rural youth to set up their own micro enterprises, capitalising on the vast supply of natural and agricultural resources such as areca nut. These get converted to high quality plates, using appropriate technology as currently done by the company. The plates made of arecanut sheaths have better dimensional stability, beside being hygienic and biodegradable. TPMPL undertakes several activities as part of its typical operations, which range from production & marketing of areca nut leaf plates, bowls & leaf plate machines, facilitating technology and financial linkages to leaf plate producers, bundled with training and exposure support to the producers.

The main challenge for the business is scaling up the production capacity and tapping the premium retail market, both national and international. To scale up the production capacity, the company needs to further strengthen the clustering approach by organising self-help groups, which can provide the leverage to buy the machines, raw materials and facilitate training with group members to achieve economies of scale. As the firm wants to expand abroad, it needs to strengthen its positioning by weaving in a credible impact story, of offering not only high quality bio-degradable plates but creating tremendous social impact via employment and empowerment of rural entrepreneurs.

Digbijoy Shukla has 11 years of experience spanning diverse high-growth entrepreneurial startups and organisations, and is currently a Director with Ennovent