Tea major to strive for quality upscaling to ward of market challenges
GUWAHATI: Amalgamated Plantations Private Limited (APPL), a tea major with 25 tea gardens in Assam and West Bengal with a 31,000-strong workforce, has flagged `single-minded devotion’ to improve quality of the tea produced to cope with various emerging realities in the domestic and global tea market. Most of the APPL tea gardens were earlier owned by the erstwhile Tata Tea Limited.
The APPL has had to absorb a cumulative loss of Rs 85 crore in the last three consecutive years despite the company’s sustained efforts for wide-raging innovations to contribute to the initiatives to recreate the relevance of tea as a beverage that is facing stiff challenges from alternatives available in the market today.
Addressing the Annual General Meeting (AGM) of the company in Kolkata on Wednesday , the 30th August, 2017, APPL Chairman Ranjit Barthakur observed that three consecutive years of adverse financial results of the company’s operations, had made it imperative that goals and deliverables were to be reprioritized and the company got focused on emerging realities.
Apart from higher production linked expenditure there were higher spends on pesticides due to climatic fallout, food grain procurement on delay in introduction of National Food Security Act (NFSA), medical and social infrastructure costs were some of the factors attributed to the loss suffered by the company
However, the Chairman in an optimistic note said, “Despite adverse business outcomes in recent years, a lot of good work is being done with an eye on the future to hasten a quick turnaround of your Company. Operating in a commodity industry is always challenging since price realisation, hence profitability, largely depends on market vagaries. It is our endeavour to work out ways by which we can improve the size and quality of our cash flows and offset cost pressures that currently eat into our margins.”
“Opportunities to derisk the business in whatever form, if found expedient, would be pursued. Given the current situation, Governments, both in the Centre and the Sates have increased interventions/ support and the industry, like-wise, has responded similarly.,” he said.
“Deliberating on the prevailing scenario in the industry, the Chairman said, “The tea industry at the crossroads. Choices and preferences are evolving fast with economic development and exposure to developed countries through digital and social media . We are focusing on wide-ranging innovations to help recreate the relevance of tea. Despite all efforts, we don’t find tea prices improving significantly,” he said in the backdrop that average price realization for the company dipped to Rs 144.23 per kg of made tea in 2017 as compared to Rs 150.56 per kg in 2016
“At the back end, newer entities or forms of ownership like the mainly proprietary small tea growers (STGs) and bought leaf factories (BLFs) are emerging. Such a scenario calls for urgent interventions from the regulated tea growers (RTGs) like us who work under the corporate model, for sustainable growth of the industry. It would be prudent to see these changes as opportunities, rather than threats to strengthen our business model and thus, remain relevant,” the Chairman said.
He said in tea producing countries across the globe STGs and BLFs had been successful as low cost producers and compete with these mainly proprietary operators and remain profitable, RTGs like APPL have to consistently recalibrate their operating strategies and cost bases.
“The lesson that we have learnt from price movements in various quality brackets is that ‘only quality will pay’. Therefore, pursuit of quality should be a duty of single minded devotion,” he said while reiterating that a Unified Tea Policy remains the mainstay of inclusive agriculture in the context of tea.