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ITC brewing a fresh plan, eyes organic tea
Business Standard - 16 Dec 2003

ITC Ltd is looking at tea in its organic form to add to the basket of commodities being handled under its international business division, better known for its e-choupal network.

"Extensive groundwork is under way in the field of organic tea which has a bright future in international business and the company would be exploring opportunities in the field", S Sivakumar, division chief executive of the international business division of ITC, said.

Sivakumar said ITC will not be in the market to acquire any gardens growing tea or factories. Instead it would be looking for alliances and partners which will conform to its standards for organic teas and produce and package the commodity to the specifications laid down by ITC. The process would take some months, he added. ITC would be looking for the best quality in organic and bio-dynamic teas.

There are several small growers of organic tea in northern India mostly in the Darjeeling region. The producers cater mostly to overseas buyers who prefer the organic leaf to normal black tea grown through use of chemical fertilisers and pesticides.

Existing producers are small but the total tonnage produced by them will run into several million kilos. The unit price of organic tea was much higher than the normal variety and production cost was also somewhat lower, though yield per acre was also considerably below chemically treated and processed tea.

Producers essentially depended on private sales and exports. ITC’s entry would bring in the marketing muscle that the sector lacks, tea industry sources said. Revenues from ITC’s international business and e-choupal initiatives would exceed all other sources by 2010, Y C Deveshwar, chairman of ITC, had announced recently. This implies that e-choupal would pip even revenues from sale of cigarettes which accounted for 80 per cent of the company’s revenues in the last fiscal.

ITC’s agri-business group, under which the e-choupal business was run, accounted for revenues of Rs 734 crore out of gross sales of Rs 5611 crore in six months ended September 2003. Cigarette sales generated Rs 4,575 crore in the same period but the gross figure included the high incidence of taxes on cigarettes. Deveshwar also charted out the expansion of choupal network.

In the next five to seven years, ITC will have 20,000 choupals. To explain the coverage of the choupals, each choupal spanned around five villages, which meant that the company would have access to one lakh villages. Each choupal served around 550-600 farmers. The company was reportedly adding five to six choupals a day. At present there were 2,600-odd choupals reaching out to more than 1.5 million farmers in close to 13,000 villages.