KDHP, the largest tea plantation company in south India and an associate company of Tata Global Beverages,is planning to focus on branded tea outlets in the name of Ripple Tea Chai Bazaar to improve margins.
Faced with stagnant tea prices and the highest wages in the world, the viability and sustainability of tea plantations are at stake, said K Mathew Abraham, managing director of KDHP, the largest employee-owned tea company in the world.
The 10-year CAGR in terms of wage increase in Kerala is 14% while in the same period, price increase of black tea has been a CAGR of 6.5%. We pay the highest wages in the world of $9 a day , he added.
Africa has the lowest wages in tea plantations of around $2 a day while the plantations in North India only pay about a half of the wages in Kerala. Besides the wages, the plantations have to bear the social cost of infrastructure like house, roads, schools and hospitals for the labourers.
The share of wages in the cost of tea production in Kerala comes to 65% while the average cost of tea production per kg comes to `150. The average price of south Indian tea during 2018-19 stood at `103.15 per kg , according to Tea Board data.
KDHP produces 25 million kgs of teas annually and only 7.5% of it is sold in the branded retail market while the rest is auctioned in the bulk format.
The plantations also faced one of the worst floods in August 2018 which was followed by a drought and frost leading to decline in production.
Abraham pointed out that the only option available to the company is to increase value addition in the commodity, raise the sale of branded tea and open branded retail outlets.