Professional Documents
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HISTORY OF TEA
It is said that tea was discovered accidentally by emperor Sheen Nung back in 2700BC. After a large meal one day, he was relaxing in the garden with a cup of boiling water. At that time some leaves from a nearby tree fell into the cup. Unnoticed he consumed the drink. He enjoyed the taste of the tea and the pain relief of the drink was so much. Like this the cup of tea was born. The Indian legend tells how in the fifth year of a seven year sleepless contemplation of Buddha he began to feel drowsy. He immediately plucked a few leaves from a nearby bush and chewed them which dispelled his tiredness. The bush was a wild tea tree. The first tea used in England came from China, and it wasn't until the 19th century that tea growing spread to other countries and indigenous tea was discovered in Assam. The UK is the largest importer of tea. The English quickly developed an almost unquenchable thirst for the drink and began searching for a way to get tea without having to buy it solely from China . In 1835 the English East India Company, upon discovery of an indigenous variety of Camellia Sinensis in Assam , India , established their first experimental tea plantation there. It was largely unsuccessful at the beginning. In 1856 varieties of tea from the Yunnan and Keemun provinces of China were introduced in Darjeeling , India , and soon thrived. Some of the most prized and expensive Indian black teas come from this high mountain region. One year later tea was cultivated in Ceylon ( Sri Lanka ). Luckily, for tea growers and consumers, a fungus wiped out the coffee crop in Ceylon in 1869, then its' main export. This opened the door to increased tea production and exportation. By the early 1900's tea was being cultivated in Java, Sumatra , Indonesia, Kenya and other parts of Africa . Presently, the United States has been added to the list of tea producers as there is one plantation in North Carolina .
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Because of absence of large domestic base and due to comparatively small range of exportable items, Sri Lanka and Kenya have an edge over India to offload their teas in any international markets. This is one of the reasons of higher volume of export by Sri Lanka and Kenya compared to India. Another important point is that, U.K has substantial interest in tea cultivation in Kenya. Most of the sterling companies, after Indianisation due to implementation of FERA Act started tea cultivation in Kenya. So, it makes business sense for U.K. to buy tea from Kenya and Kenya became the largest supplier of tea to U.K. Tea is an essential item of domestic consumption and is the major beverage in India. Tea is also considered as the cheapest beverage amongst the beverages available in India. Tea Industry provides gainful direct employment to more than a million workers mainly drawn from the backward and socially weaker section of the society. It is also a substantial foreign exchange earner and provides sizeable amount of revenue to the State and Central Exchequer. The total turnover of the Indian tea industry is in the vicinity of Rs.8000 Crs. Presently, Indian tea industry is having (as on 31.12.2006 )
1655 registered Tea Manufacturers, 2008 registered Tea Exporters, 5148 number of registered tea buyers, Nine tea Auction centres.
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Labor intensity
This industry is very labor intensive. Labor cost is generally fixed and therefore lower production would result in higher unit cost of production. The proportion of variable elements in labor cost depends on labor legislation and extent of casual and temporary workers employed. If the production suffers on account of bad weather or pests, the per unit cost of production goes up significantly.
Long gestation
Tea bushes mature for commercial exploitation in 5-7 years and remain productive for over 100 years. Major part of capital expenditure is to be incurred in first five years, which then yields return over the next 100 years.
Commodity nature
Tea prices fluctuate widely with demand supply imbalances. The commodity is perishable and demand is relatively inelastic to price. While demand has a secular growth rate, supply can vary depending on climatic conditions in the major tea growing countries. Unlike other commodities, tea price cycles have no linkage with the general economic cycles, but with agro-climatic conditions.
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Organized industry
Tea industry is an organized agro industry. This implies that labor laws exists and since the dominant mode of tea trade is through auctions, a large number of small producers get fair prices.
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Strength
Old Industry-long Experience Technical & Manpower Skill Good Research Support
Opportunities
Quality and Brand Equity Export Potential Big Domestic Market Financial Institution support
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Weaknesses
Min development investment Stagnant Production No Effective Cost Management Declining Export
Threat
Open Global competition Low Cost in some countries Import of Tea Uncertain Price
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Country India Bangladesh Kenya Indonesia (PTP only) Malawi Sri Lanka Tanzania Uganda Zimbabwe Total
share in global production (%) 17 0.2 23.2 3.1 6.1 22.2 3.1 19.4 5.8
The domestic tea industry has finally recovered from a seven-year long bearish phase, spanning 1999 to 06, and now looks set to participate in the current bull run in commodities. Tea prices have been firming up since CY07 and future prospects appear to be bullish, too. If financial indicators are anything to go by, the industry has already started showing signs of recovery. Its operating profit margins, which had dipped to around 4% during the middle of 06, have now risen above 9%. And there are indications that this rise is likely to continue. With tea being a staple drink of Indians, it is no wonder that the country is the largest producer and fourth-largest exporter of tea in the world. The labour-intensive industry
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directly employs over 1.1 million workers. The bulk of tea trading in the domestic market is done through auctions. Companies generally strike private deals to export the commodity. Kolkata, Guwahati , Siliguri, Kochi, Coonoor and Coimbatore are the major auction centres. However, the Rs 10,000-crore domestic tea industry is a fragmented one. So, while the Rs 600-crore Mcleod Russell is the largest tea producing company in India, it has only an 8.3% share of the domestic tea market. On the other hand, Tata Tea is India s largest independent tea marketer and has emerged as the world s second-largest tea manufacturer after a spate of international and domestic acquisitions. The industry has a wide spectrum of companies, ranging from pure plantation companies like Mcleod Russell, Apeejay Group, Harrisons Malayalam and Assam Company to companies like Hindustan Unilever (HUL) and Tata Tea, which are focussed on marketing branded teas. Around 80% of the costs of plantation companies go towards fixed expenses like fuel, power and labour. Inflationary pressures are now pushing up these fixed costs. Labour unrest is another major problem faced by such companies. All these reasons are forcing companies like HUL and Tata Tea to sell off their plantations and concentrate on brand building. Branding helps marketing companies to ride over crop cycles by passing on the increase in costs to consumers. However, marketing companies face an increase in raw material costs (in the absence of plantations) as well as competition from regional brands. Last year, India produced 940 million kg, of which, more than 800 million kg was consumed domestically. Indian tea consumption is growing at a rate of 3.3% annually. The production trend in India has been weak since the beginning of this year. This, coupled with lower production in Kenya (the world s second-largest producer of tea) and Sri Lanka, make for a bullish case for tea prices, going forward. The prices in CY07 were up 15-20% year-on-year. During times of rising prices, tea marketing companies face margin pressures if they are not able to pass on the increase in prices to customers. For instance, a rise in tea prices may not augur well for Tata Tea, which gets only 10% of its revenues from plantation tea. However, many tea companies today have diversified into other related products to hedge themselves from the acute cycle in the tea industry. Among the existing companies, Tata Tea seems to be the most promising one, as it has diversified into tea, coffee, bottled water and other value-added beverages. HUL, despite having the largest selling branded teas, earns only around 10% of its revenues from the tea business. Harrisons Malayalam also produces rubber and pepper on a large scale in South India. So, which companies are likely to benefit from the rally in tea prices? Companies with plantations in North India, where the quality of tea is better than that in South India, will benefit from the rise in tea prices on the back of strong domestic demand. Among the existing plantation companies, Mcleod Russell stands to gain the most. After acquiring plantations of Williamson Tea and Doom Dooma Tea from HUL, Mcleod Russell has now become the largest tea plantation company in India. Other companies which have North Indian plantations are Jayshree Tea, Goodricke Tea and Duncans Industries. Harrisons Malayalam, South India s largest tea company, also has good growth prospects.
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but around 50 per cent of the exports by volume. The prices paid for South Indian teas are often much lower. The reason lies in differences in quality, which are partly related to different methods of production. Most Southern production is of the 'crushed, torn and curled' (CTC) type, which is mechanically processed, while a much larger proportion of the North's output is so-called 'orthodox leaf', or hand-processed. CTCs are more suitable for teabags and orthodox teas for brewing in the pot. We will discuss the marketing implications of these differences below.
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The expected data projects an increased area under tea plantation both for south India and north India. This shows the area available has not been utilized to full extent.
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Selection of highest bidder for any lot and declaration of out lots in absence of reasonable bid from the buyers Issue of delivery order and tax invoices to the highest bidder by the broker In North India, two types of Buyers are operating, credit buyer and cash buyer Credit buyer can take delivery of tea from the warehouse before prompt date without payment. But cash buyer is required to pay in cash before taking delivery of tea Receipt of payment towards tea price from the buyers within stipulated prompt date Payment to manufacturer by the broker within prompt date after deducting VAT/SST/CST/ Warehouse charges etc Deposit VAT/SST/CST to the Commercial Tax Department of concerned state government Payment of warehouse charges to the Warehouse owner by the Broker Present Electronic Auctions Current Status Electronic auctioning of tea is currently being conducted at 5 of the 6 Auction Centres on a limited scale except for Coonoor There are different levels of conversion to the electronic platform Coonoor : 100% live (Both Leaf and Dust)
Other Centres in the South : 100% live on Leaf only Siliguri in the North Kolkata in the North : 25% of Leaf only : 0%
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Land for tea plantation: India produces 27% of total world tea. Nearly
80% of the tea produced is consumed within India. The organized sector comprising little above 1600 tea estates, with a tea area of above 10.12 ha. (25 acres) per garden, accounts for about 80% production of tea. The number of small growers with a tea area of not more than 10.12 hect. is around 1.27 lac. The total tea area of such small tea growers is 1.10 lac hect. accounting for 21% of the total tea growing areas of India. The average holding of such small growers is 0.67 hect. Tea, Coffee and Rubber crops generate significant foreign exchange through exports (15% of total agricultural export earnings) although they occupy only about 1% of the total cropped area in the country. Land available is very costly (Tea Estate in Ootty costs Rs.6.25 lakhs per acre).
2.
minimum wage levels as stipulated under the Minimum Wages Act of the State. The details of wage rates in the major tea producing States are as follows:
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The daily wages for Adult (both Male and Female) and Non-adult worker employed in the tea plantations is given below:
More than 50% of the workforce comprise of the female workers at the tea production site and is mainly dominated by male workers in the industrial production phase.
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CHAPTER 7 : SEGMENTATION
MARKET SEGMENTATION
Market Segmentation
Segment Rural Urban North East West South Domestic Export Share (%) 55 45 36 20 25 19 72 28
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The market is mainly concentrated in West India and the market is whopping 72% in domestic market than in export which is just 28 %.
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The main type of tea produced in India is CTC which comprise of 90% of the tea produced. The main direct competition is thus from Kenya which also has around 95% total tea production as CTC. And, this is one of the main reason of the price hike of Indian tea export in the current scenario (Kenya s loss India s gain).
The packaged to lose tea ratio is 30:70 (Indian Tea Association). It is projected to change to 40:60 in the coming quiennial period, say by 2005-06. The use of polybags was aimed at consumer-orientation which was orchestrated in ad campaigns. It was reinforced by branding and regionalisation. The campaigns have been effective as the rural market, impressed by brands, becomes conscious. To stimulate the industry, government allowed a higher investment allowance (40%) for the tea industry enabling tea companies to invest in rejuvenation and replanting of tea bushes and undertaking developmental programmes under the relevant schemes approved by the Tea Board of India. The government also amended the Tea Marketing Control Order (TMCO), 1984, granting tea growers the option to sell tea through any channel. Earlier, growers had mandatorily to sell minimum 75% of their produce, subject to certain exemptions, through public auctions. quality-
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The government had put in place a new package to resuscitate the somewhat gloomy tea export front. To reimburse the cost on value addition, handling, packaging and transportation, the government finalised a Rs 52.5 M package. The facility was designed as a onetime measure and was intended to make Indian tea more competitive globally. Tea Board has planned for developmental schemes during the Tenth Plan period for enhancing productivity, quality and marketability of tea produced in India. It covers a Tea Plantation Development Scheme (Rs 986 M); market promotion scheme (Rs 986 M); quality up gradation and product diversification (Rs 768 M); R&D scheme (Rs 700 M); and HRD Scheme (Rs 60 M). The overall plan allocations add up to Rs 3.5 bn. Industry has also geared up to face the looming challenges. Among several steps the domestic tea promotion was targeted to double the per capita consumption over a three year period from the current 63 gms. That was an uphill task and developments showed that it cannot be achieved. A conscious decision has been taken to increase production of orthodox tea to cater to export market. India's tea exports during 2000-01 were 205.3 M kgs as against 192.7 M kg in the previous year, representing a growth of 5.8%. There was been a setback in exports with a drop from the 2000-01 level to 180.4 M in 2002-03. In 2003-04 the exports are estimated at 170 M kgs, a drop of 6% mainly due to the loss of the Iraq market. The exports to Pakistan were, however, higher. With Iraq and Iran opening up, the exports could rise to 200 M kg in 200405. The tea production has also been better. The prices at the current level are the best in the last five years.
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CHAPTER 8 : COMPETITION
COMPETITION IN THE COUNTRY
Tata Tea emerged as the largest integrated tea manufacturer in the world. With the acquisition of Tetley as the world's second largest tea brand and a leader in the British tea bag market with a share of 22%. Tetley, also the inventor of the tea bag, is the leading brand of tea bags in the UK, both by value and volume, and is also among the top 20 grocery brands in the UK. The acquisition has resulted in Tata Tea becoming a global company, zooming to the number two slot in the international tea company rankings. Tetley has brand leadership in tea bags. In Canada, it enjoyed 38% of the market. In France, it is the fastest growing tea brand. The actual cost of Tata Tea's acquisition of UKbased Tetley was estimated to be 129 M. Tata Tea produces almost 27 M kg of tea from its 25 gardens spread over Assam and Dooars in West Bengal and almost 31 M kg from 28 gardens located in Kerala and Tamil Nadu. Tea major, Goodricke group, went in for warehousing facilities in Long Island in the US to augment exports. It had been trying to develop a niche market for its instant tea in the US market. The company had to shut its packet tea production for a while to re-engineer its division altogether. The company's major brands include Goodricke, Castleton, Thurbo and the economy brand Zabardast. Eveready Industries and Bishnauth Tea agreed to packet teas from the Eveready stable. amalgamate Bishnauth with 400 M, inclusive of the debt component of
Eveready with effect from April 2001. Tez and Premium Gold are the two branded Eveready controls 19 tea estates with a production of around 22 M kg, excluding the ones identified for sale. Bishnauth controls 15 tea estates in Assam with a total production of 18 M kg. Eveready Industries has demerged itself into two companies - FMCG business including packet tea a new company for bulk tea. The bulk tea business is transferred to Eveready Co. India Ltd, (ECIL), which will subsequently be renamed McLeod Russel India.
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The Williamson Magor Group sold its five tea gardens: three in Darjeeling and two in the Dooars region of north Bengal. Managing 65 to 70 M kgs of tea under one umbrella had become increasingly difficult for the company. It is after 37 years that Willamson Magor of B.M Khaitan and George Willamson (Assam) of the UKbased Magor family also decided to amicably part ways. Wiliamson (Assam). Bishnauth Tea had sold its two estates - Seajuli and Majulighar in Assam Shah Exports, a tea broking firm. to M K The BM Khaitan group continues to remain a leading seller at the auction houses with or without George
gardens in favour of George Williamson. The group further decided to dispose of Jayanti and Matelli in Dooars in favour of Kolkatta-based Bachawats. The group had targeted to shore in around Rs 2000 M from the sale of tea gardens and another Rs 1000 M from dilution of minority stake in Eveready's battery business to partially clear off the huge loan burden of the group. Philip Magor took full managerial control of George Williamson. The Magor
company George Williamson (Assam) will be renamed Williamson Tea Assam as part of the split and would continue to expand the areas under its cultivation through judicious acquisition of tea estates in Assam. Hindustan Lever discontinued its low-priced Lipton Tiger brand. The company
was planning to re-launch A-I brand in the same segment. Hindustan Lever were to acquire the largest tea brand in Gujarat, Bagh Bakri - having annual revenues of around Rs 1450 M - in a bid to strengthen its leadership position in the domestic tea industry. The packaged tea segment is facing increased competition from the loose tea segment. HLL's (Red label and Taaza Leaf brands).share has come down to about 36% - 10% lower in the last two years. segment are Tata Tea, Duncans Hindustan Lever has entered into a marketing alliance with Pepsi India to promote sales of ready to drink teas and speciality tea through vending machines and fountains. It is also developing and testing a slew of new products to be launched is the market. The list includes iced tea flavours, green teas, herbal teas and diet teas. In the hot beverage segment, HLL offers Lipton, Taj Mahal and Bru. hot tea in cardamom, diet cardamom, ginger and masala flavours. The tea beverages brands of HLL include Major gainer in the packaged tea
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Warren Tea was to acquire tea gardens in Assam to step up its output level. The company is keen on adding 2-3 M kg to its production. combined capacity of 20 M kg by 2002. Nestle India is also venturing into the market with iced tea, almost a decade after its failed attempt with its packaged brand Paloma. Nestle and Coca-Cola recently announced a global tie-up for marketing tea, cold and hot. The company plans to launch 'slosh-type' of vending machines. Sarda Plywood decided to focus on tea business to stay afloat in a difficult market. The company earlier turned its plywood manufacturing base in Assam into production line with a capacity to produce 1.3 M kg per annum of tea. Duncans Industries, GP Goenka's flagship company for tea and others, was diversifying into retailing tea through the setting of a chain of tea boutiques. The tea initially sold through ten locations, was to be marketed under Duncans' brand. J Thomas & Company (JTC), the largest tea auction house in the country, has forecast a buoyant year for the tea industry in 2004. Substantial premiums had been forthcoming in auctions for top quality teas both in north and south India following good competition. The revamped Tea Marketing Control Order (TMCO) has helped producers by reducing time to sale, with closing dates for all auctions from April to December fixed at 19 days prior to sale. As a result, the auction system in north India handled 359.8 million kg in 2003 compared to 311 million kg in 2002. It was targeting a
The market share of the various brands in India can be seen from the following table:
Lead Players
Company Share (%) Hindustan Lever (Including Lipton India 25 Exports) Tata Tea Others Including : Eveaready Jayashree Tea Goodricke Group George Williamson Warren Tea Sterling Biotech AFT Industries Duncans Inds Assam co A.V. Thomas 11 64
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Leading Brands Brooke Bond, Red Label, Yellow Label, Sargam, Rangeeli, Green Label, Tata Tea, Tez, Double diamond, Brahmaputra, Taj, Taza, Pickup, Shakti, Lipton, Yule Red, Goodricke, Amber, Premium Gold, Planters', Pride, Leo, Gemini, Kanan Dewan, Plantation Green, Tasters Choice, Twinning, Liptons Top Stars, Wagh Bakeri, Society, Yule Gold, Amrit, Super Cup, Hasmukh, Kanan Devan, Agni.
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Global competitiveness
Paradoxically, India is not globally competitive in production of tea, which is labor intensive. Competing countries like Kenya and Sri Lanka are also under-developed/developing and have comparatively lower labor cost. The labor laws are less stringent in these countries giving the producers the flexibility during bad times. In India, large capital investment, long gestation, stringent labor laws and restrictive land ownership laws prevented Indian entrepreneurs from expanding. The high average age of tea bushes effects productivity and cost adversely. Indian producers became complacent with the lucrative USSR market. Although, Indian producers have made significant progress in developing non-USSR markets during the last 4-5 years, countries like Kenya will still have a competitive advantage in increasing production and exports.
GOVERNMENT SCHEMES
For the XIth(1-4-2007 to 31-3-2012) plan government has planned 1. Special purpose tea scheme (SPTF) loans and subsidies for replanting, replacement planting/ rejuvenating : The most important factor afflicting the Indian Tea Industry is the ageing of tea bushes, leading to declining quality and productivity. This has resulted in the cost of production of Indian Tea becoming the highest among major tea exporting countries. To arrest this trend, the Government of India in the Ministry of Commerce and Industry have approved a proposal of Tea Board India for setting up of a Special Purpose Tea Fund for
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extending financial support to the needy tea estates for undertaking replanting, replacement planting and rejuvenation of old aged tea bushes. The objective is to cover 2.12 lakh ha over a fifteen-year period. Government approval has been obtained for phase-I of the programme i.e. for activities to be completed till the end of the XI plan period (2007- 12). The estimated area to be taken up for re-plantation/rejuvenation during Phase-I would be 85,044 ha comprising re-plantation on 68,154 ha @ 11,359 ha per annum a nd rejuvenation in 16,890 ha @ 2815 ha per annum. Government s contribution towards the programme during the period has been fixed at Rs. 567.10 crore (capital infusion of Rs. 91 crores to the SPTF and subsidy of Rs. 476.10 crore equivalent to 25% of the projected project expenditure of Rs. 1904.40 crore).Continuation of the scheme in the 12th plan period and further till the end of the 15 year programme period would be considered after evaluation of the implementation and success of the programme in Phase I. 75% of the assessed unit cost of replanting/replacement planting/rejuvenation pruning and consolidation would be provided to tea gardens by way of term loan (50%) and subsidy (25%). The borrowers are required to bear the balance 25% of the cost. B. ACTIVITIES ELIGIBLE FOR LOAN AND SUBSIDY: 1. Replanting in the plains and Hills 2. Replacement Planting in the plains and Hills 3. Rejuvenation pruning and consolidation by infilling of vacancies only in the Hills.
The total tenure of the loan to be advanced in any given year is 13 years with moratorium on the principal for a period of 5 years and commencing from the 6th year, the outstanding principal is to be repaid in 16 equal half yearly instalments. The interest rate on loan is @1.5% per annum
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3. Special purpose tea fund scheme of tea board initiated during January 2007 received overwhelming response from the industry
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India's Premier's Tea, which claims to process the world's purest tea at its state-of-the-art facility, has entered the North American market in October
The Kolkata-based company will sell all its major brands - Darjeeling, Assam, Nilgiris and Kangra - in Canada, the US and Mexico through its Toronto-based Premier's Tea North America subsidiary. Launching the famous Indian brands here Wednesday, Premier's chairman Hasmukh Shah said: "We already sell in 26 countries. Now consumers in North America will get a taste of our 100 percent pure Darjeeling tea when so much fake tea is being sold under this world-famous brand." Though the Darjeeling brand is globally protected, almost 75 per cent of the so-called Darjeeling tea sold worldwide is fake, he lamented. "India produces 8.75 M kg of Darjeeling tea, but 33mn kg fake tea is sold
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worldwide under this brand as dealers in many countries, including the UK, brand adulterated tea as Darjeeling tea," he said. Shah said Indian missions abroad were mounting an awareness campaign and initiating legal action to check faking of the Darjeeling brand. He said Premier's pure tea was set to capture more of the global market as people abandoned coffee or health reasons. "People in the West now realise that tea is very good for health as it has just 1.3 percent caffeine as compared to 14.1 percent in coffee. Plus, tea is a great antioxidant," he said. Claiming that Premier's Tea was the purest in the world, Shah said: "All our brands are the purest as our tea is put through an eight-step cleaning process at the world's best plant - the only one outside Japan - in Kolkata."Premier's Tea North America chairman Martin Dories said: "North Americans will now enjoy a pure, unadulterated cup of Indian black or green or organic tea... the finest cup you have ever tasted from the tea gardens of India." Premier's Tea North America president Robert Hebert said: "Till now, what you have been drinking is a blend of low quality teas. Now you will get our 100 percent pure Darjeeling and other brands." A convert to Hinduism, Herbert said tea was fast replacing coffee in North America. "Already, 330 M people in the age group of 16 to 65 drink tea. The numbers will rise fast as people get access to pure teas. We are beginning with two containers and I am sure we will soon sell a lot more," he said.
The Brij Mohan Khaitan group-controlled McLeod Russel India (MRIL), the largest integrated tea conglomerate in the world, on Friday announced the group s plans to buy 100% stake in Phu Ben Tea Company of Vietnam. This is the first overseas acquisition of a tea plantation by the group.
MRIL s wholly-owned subsidiary, Borelli Tea Holdings, will buy the stake from SA SIPEF of Belgium for $2 million (around Rs 9 crore). This apart, Borelli Tea will also have to arrange a bank guarantee of $5.01 million (Rs 23 crore) to secure repayment of inter-company balance of the same amount which SA SIPEF had granted to Phu Ben Tea. The total deal, including the bank guarantee, is pegged at around Rs 32 crore and part-funded by internal accruals. The group hopes to complete the acquisition by December 2008. The move is part of the Khaitan Group s plan to consolidate their bulk tea business further through mergers and acquisitions. Post acquisition, MRIL and its subsidiaries will collectively have an annual throughput of a staggering 80 million kilos of tea. Engaged in the business of growing and manufacturing tea, Phu Ben Tea has three tea processing factories with an annual tea production capacity of around 4.5 million kgs. Elaborating on the deal after the company s board meeting in Kolkata, MRIL managing director Aditya Khaitan said: Since Phu Ben Tea owes $5.01 million to SA SIPEF, we agreed to secure the inter company balance of $5.01 million to SA SIPEF through a bank guarantee. As per the term sheet agreement signed between Borelli Tea Holdings and SA SIPEF, Phu Ben Tea Company will repay the inter company balance in equal instalments within three years at the end
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of 2009, 2010 and 2011. With its experience in tea production, manufacture and marketing, McLeod Russel hopes to improve the quality of tea being produced by Phu Ben Tea and consequently achieve a higher price realisation in the years to come, Mr Khaitan said. The strategic acquisition will give McLeod Russel a presence in Vietnam. The group is also looking to enhance Phu Ben Tea s annual tea producing capacity to 6 million kgs in the next two years and to 12 million kgs over the next four years.
Capitalizing the growing demand for organic products, Organic India -manufacturer and marketer of organic Tulsi tea, organic natural medicines and organic fiber harmony -- is now going to flavour your cup with new and enriched flavours of Tulsi.
The company has announced the launch of five premium blends of Tulsi tea for Indian consumers. The range has been specially manufactured and packaged according to the taste and preference of Indian consumers. The five premium blends of Tulsi tea are Tulsi Tea Jamine, Tulsi Tea India Breakfast, Tulsi Tea Sweet Lemon, Tulsi Tea Sweet Rose, and Tulsi Tea Mulethi. Each pack of eighteen tea bags of these five new blends costs between Rs 78 and Rs 94. Tulsi tea is stress-relieving, refreshing and energizing. It is abundant in antioxidants, supports healthy digestion, and is caffeine-free, powerful adaptogen. Announcing the launch of Tulsi Tea, Krishan Gupta, MD & Global CEO of Organic India, said, "Demand for organic products is brewing and catching up in a big way. We have pioneered the introduction of Tulsi tea. We are combining the rejuvenating properties of tulsi and launching it as a healthy beverage. Each blend of our Tulsi tea collection has its own distinct, characteristic taste that contributes to the delicious flavour and aroma in every cup of tea. We had recently launched 18 Tulsi tea flavours in the US and all these flavours are doing exceptionally well." Organic India's products have presence in most retail stores such as Fab India Stores, Fortis Health World, Reliance Wellness, Hyper city, Reliance Fresh, Spencer's Retail, Food World Chain, Guardian Stores, 98.4 Retail Pharmacy, Big Bazaar (north) stores, Apollo Pharmacy, Dabur New-U Stores, Nature's Basket (Godrej Agro vet stores), Health & Glow, Namdhari's, Nilgiris etc. Organic India has a pan-India presence as well as a global presence with its own offices in the US, Australia and Israel.
India may become only the second non-European country to gain European Union brand-name protection for one of its most famous exports Darjeeling Tea.
Colombia scored a first in September 2007 when it won the EU s protected designation of origin status for Cafe de Colombia, the brand created by Colombia's National Federation of Coffee Growers. India may well follow in Colombia s
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footsteps, maybe in the second half of 2009, if all goes smoothly, say experts at the European Commission, who check applications for name protection. The EU protects more than 800 regional foods, insisting that only those producing the products in the relevant region can use such names. Several thousand wine names are also protected. For example, only ham made using traditional methods near the Italian city of Parma may be called Parma ham; Roquefort cheese must come from its native region in southern France; and Madeira wine from that same-named Portuguese island. India applied in late 2007 for EU protection for Darjeeling. Somewhat bizarrely, an objection to the tea designation may come from the French lingerie company Darjeeling, officials say.Commission experts said the application, after many months of scrutiny, looked likely to be published in the EU's Official Journal before the end of the year. India produces some 10,000 tonnes of Darjeeling tea each year and labels it with a certification mark, since the amount of tea sold worldwide under the name Darjeeling is estimated at more than 40,000 tonnes. "When we consider that more 'Darjeeling tea' is produced outside India than in the Darjeeling region -- some estimates put the figure of false Darjeeling -- at three times the amount of genuine product, it is easy to understand why," a Commission background paper said. Early this year, India also applied to the Commission for EU protection for Kangra tea. Other non-EU applications have come from China, which wants protection for various fruits as well as types of asparagus, garlic and potato; rice vinegar and a crayfish. The Commission is thought to have returned the files, requesting more data. Somewhat bizarrely, an objection to the tea designation may come from the French lingerie company Darjeeling, officials say.
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for quite a long time. Russia is now importing tea from Sri Lanka and Cuba. After more than a decade this deal has been signed, so once again Indian tea companies will be able to export tea to Russia and tea market will experience a boom, said G S Homa, Chairman of the Bengal Chapter of CII. The first consignment of tea is expected to be exported in the month of June this year. India is the world s largest producer and consumer of tea. Tea is cultivated on around 521,500 hectares of land in the country.
2. The provisions of Press Note No.2 (2000 series) dated 11.2.2000 stand modified to the above extent. (Source: Department of Industrial Policy & Promotion Press Note No.6 (2002 Series) dated the 5th July, 2002)
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The export value of both North India and South Indian tea has increased , mainly for the south India where they have increased by 55.10 %
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The management has also offered support to the tea workers to dig water bodies in the lowlying areas of the garden for viniculture and poultry farms as well as irrigation while waste lands in and around the gardens would be used for bamboo and rubber cultivation.
The Indian tea industry is going through a phase wherein the production does not seem to be keeping pace with consumption. The very small carry forward stock from last year resulted in a rush for the teas, at the beginning of the new season, leading to a rise in price by approximately Rs 8 per kg. Internationally, the crop failure in Kenya and mounting export enquiries put additional pressure on the market, resulting in the prices firming up by another Rs 9 per kg. Thus the total impact on price was about Rs 17 per kg. A clear challenge the industry is facing this year is with the availability of tea. With increased export demand, the current crop will be available only till December. Companies will have to stock up teas for January-April 2009. This will put working capital pressure on the packet tea industry.
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5. Machinery cost :
*Tea bagging machine, falling under tariff item = Rs.842230.00 *Tea packaging machine, falling under tariff item = Rs842230.00 *Colour sorting machine, falling under sub-heading = Rs 843360
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*Tea leaf-cutting rolling machine, falling under tariff item =Rs. 843880.40 *Mechanical harvester, falling under tariff item = Rs 843359.00 *Tea pruning machine, falling under tariff item = Rs. 820160.00 *Mist lower, falling under tariff item = Rs.841459.20 *Sprayer, falling under tariff item =Rs.842481.00 The total fixed cost comes as Rs. 67, 19,159.60
6. The growth rate in the industry is as low as 2% and projected 1.8% for up till 2015, which is extremely low and tells that the market is saturated and there is very low chances of future growth and there can only be penetration or differentiation like China has started producing Organic tea as its major cash crop.
CONCLUSION
If the entrepreneur wants to enter for the production process as a whole ( including tea plantation), then the cost of entry and exit is very high. Moreover, gestation period will be 810 years and growth rate is very low at 2% . Therefore, it is better not to enter the industry as even the market share is too scattered. However, the other option an entrepreneur can exercise to enter the industry can be to acquire the small fragmented firms so that the company can start earning the profits early by avoiding the gestation period and an advantage of the growing export demand can be availed.
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