Assam Tea Sector: Chasing a Mirage

A CORRESPONDENT

JORHAT, Aug 5: The Assam tea industry has been in the news for wrong reasons. Of late, it has become a trend in the auction centres of specialty teas fetching record prices – so and so tea sold at a record price of Rs 1000 a kg or Rs 2000 a kg. However, the quantum of tea sold by these “star gardens” is not more than five kilogram at the most.

“I strongly believe this hype is not doing any good to the industry, since it gives a misleading picture of the prices of tea and holds up an illusion that other gardens can emulate this strategy to find an orbit out of their financial woes. However, this is exactly what this is; an illusion, or if you prefer, a mirage,” Tea Board chairman Prabhat Bezboruah pointed out in an article in the Assam Tea Planters’ Year Book published recently.

This strategy of selling small tea quantities in record prices, experts believe, is a marketing strategy undertaken by the manufacturers concerned in league with the broker and buyer concerned, to draw attention respectively to their mark, their brokerage and their buying firm and indirectly confer a “star” quality profit upon themselves and by extension, upon their other teas.

Bezboruah observed that even CTC (crush tear and curl) lots that sell at Rs 500 a kg and more are often 10 bag lots making the deal value Rs 1,50,000. “The iconic garden that sells its CTC teas at these levels ended 2017 with an average CTC selling price of Rs 280 per kg. We are told that its cost of production is Rs 250 per kg, and its annual output per man-day is 1.8 kg of make tea, against the average for Assam which stands at 2.5 kg per man-day. Hence, when wages rise say Rs 30 per day, this garden’s cost will rise by Rs 24 per kg, whereas a typical garden’s cost will rise by Rs 18 per kg. Will the quality premium keep pace with the cost escalation? It is anyone’s guess,” Bezbaruah explained.

The Tea Board chairman, who is an experienced tea planter managing the Boloma Tea Group since 1988, said that he was not advocating manufacture of poor quality produce by the industry. “Rather I feel that the industry must try and upgrade this significantly. This effort should be silent and scalable, with minimum hype, so that buyers cannot react by lowering price levels for a given quality level due to increase availability of higher quality teas,” he said.

The tea expert observed that these days people hear about white tea, green tea, purple tea, yellow tea, dark tea and God knows what else but have these myriad hues really done anything to improve the fortunes of the fast sinking organized industry?

“There are tea estates which may survive the impact of a steep wage hike of the workers, but these are gardens with a high yield, a genuinely premium quality profile, coupled with a moderate cost of production sustained by low overhead. Focusing on producing exotic offerings to gain publicity may not be a good strategy as one need to have a ready and willing customer in place to achieve the desired results,” he said.

Krishan Katyal, chairman and managing director of auctioneer J Thomas said that there has been a stress in the tea sector because cost is going up and the wage pressure but prices are not rising in tandem…unless the overall prices do not go up, the sector will remain under stress.”