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.
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.
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.