Company profile · Nilgiris

INDCOSERVE: 30,000 small growers, 16 factories, and the question of who earns from a cup

A grower with half a hectare of tea cannot build a factory. In 1965 the state built a federation of grower-owned factories. It became India’s largest tea co-operative.

3 min read · 3 sources · Public information only

The model

Growers who own the factory

Most Nilgiri tea is grown on plots under one hectare, much of it by Badaga farmers. Green leaf must be made into tea within hours, so a grower needs a factory nearby. INDCOSERVE, the Tamil Nadu Small Tea Growers’ Industrial Co-operative Tea Factories Federation, was set up in 1965 so that growers own the factories that process their leaf.

Scale

Big, but selling cheap

It grew to about 30,000 members and 16 factories making about 1.4 crore kg of black tea a year. But for decades almost all of it was dust tea, sold cheaply through about 30,000 ration shops in the state. The federation was large, but not very profitable, and growers’ prices stayed low.

Selling everything to one buyer at one low price is simple. It is also how a business stops improving.

Selling everything to one buyer at one low price is simple. It is also how a business stops improving.
2019–21

From dust to leaf tea and tea vans

Around 2019 the IAS officer Supriya Sahu, once collector of the Nilgiris, became chief executive. Within two years the federation was making better tea, paying growers better, and selling a retail range that grew from three teas to eleven, online and from red tea vans in Ooty and Coonoor shared with a tribal producers’ collective. Loss-making factories turned profitable, and in 2021 it joined Fairtrade.

Points for a finance reader

  • Pool the fixed cost. A factory is a fixed cost no smallholder can carry alone. A co-operative spreads it over 30,000 growers.
  • Product mix decides margin. Dust tea through ration shops and branded leaf tea online earn very different margins from the same leaf.
  • Sell closer to the customer. A tea van in Ooty keeps the retail margin that an auction gives away.

Sources

  1. Slurrp: How a female leader changed Nilgiris tea (Apr 2021) ↗
  2. Fairtrade NAPP: India’s largest tea co-operative federation joins Fairtrade (2021) ↗
  3. Wikipedia: Nilgiri tea ↗

Figures are as published by these sources on the dates shown. They are not our estimates. Where a figure is old, it is the latest we could find from a public source.

Written by Boovaraghavan & Co., Cost Accountants, as part of our notes on Tamil Nadu industry. Write to us if you spot an error or have a question about costing in Nilgiris.