Goodricke will increase its production steadily over 5 years: Atul Asthana

Goodricke is the second largest tea producer in India

Goodricke Group’s parent Camellia Plc recently pipped McLeod Russel to become the world’s largest private tea producer. In an interview with Avishek Rakshit, Goodricke Group’s managing director and CEO Atul Asthana, said that Camellia Plc’s revenues from India would touch Rs 1,000 crore, while the Goodricke Group would steadily increase its tea production capacity over a 5-year period. Edited excerpts:

Camellia Plc has now become the largest private tea producer in the world. How is Camellia Plc placed in India and what is its scale of operations?

In India, Camellia Plc has four tea producing group companies - Amgoorie India Limited, Stewart Holl (India) Limited, Koomber Tea Company and Goodricke Group. Earlier, all these companies were run independently under Camellia Plc, but in 1991, the former three companies became subsidiaries of Goodricke Group. Camellia Plc is an overarching umbrella, which we are a part of. 

In terms of own production, we produce 28 million kilogram (mkg) of tea excluding our bought-leaf operations. It makes Goodricke the second largest tea producer in India. The acquisition of two gardens in Assam will increase our own production by another 2.5 mkg. We are not looking at any further acquisitions. 

What’s going to be the focus for Goodricke in India?

Our primary focus for Indian operations will be to improve the quality of production which will lead to increased profitability. To achieve this, we have to reduce production costs by having a higher production volume; and at the same time, we have to improve the quality as well.

You have been focussing on mechanisation of estates which is bound to affect quality. How will you balance quality while controlling costs?

There is a very thin line between optimisation of mechanisation and quality. After a series of experiments, we know where to draw the line. For each of our estates, we have identified the maximum possible threshold of mechanisation that will not adversely affect the quality of produce. Selective mechanisation of estates and controlling the level of mechanisation is the way forward. We are also experimenting with mechanisation for the two Darjeeling tea estates.

What about your factories? Do you plan to scale them up?

Back in 2007, when we pioneered tea factories in India, we had realised the potential of small tea growers and have been gradually expanding tea production lines. Apart from our own production, we also produce 8 mkg of tea from purchased leaf. 

Our installed capacities in the factories can go up to 50 mkg and we plan to increase it by 1.5 mkg every year for the next five years. Each of these capacity additions will entail an investment of Rs 4-5 crore. We have enough land available and it wouldn’t be a problem.

What is your tea portfolio and to what extent do you see it chaining this year?

Out of the 28 mkg tea we produce on our own, 16 mkg comes from Dooars, 0.8 mkg is Darjeeling tea and the rest is from Assam. This year, another 2.5-3 mkg will get added to Assam portfolio and hence its contribution to the production volume will increase.

How have your production costs changed after the wage agreements?

In Dooars, it is around Rs 181, while in Assam it is around Rs 200. On the other hand, in Darjeeling, the cost of production is as high as Rs 600. 

In Assam, labour costs have gone up from Rs 137 a kilo to Rs 167 a kilo, while in West Bengal, the same has increased from Rs 135.50 to Rs 176. However, the company’s profitability stands to improve as more crop gets added, improving the economies of scale. The cost of production should come down by atleast 10 per cent. 

Will this result in improved earnings?

This fiscal year, the consolidated revenue from all Camellia Plc companies in India, taken together, should be Rs 1,000 crore. It used to be around Rs 700-800 crore 3-4 years back. Improvement in price realisation by 5 per cent, improved packet tea sales, increase in number of gardens and bought leaf operations would drive growth. 

What plans do you have for your packet tea business?

The retail business contributes around 25 per cent of the total revenue which can go upto 30 per cent. However, we would like to remain a production company.

Nevertheless, after we acquired the packet tea business from Godfrey Phillips, sales volume has increased from 8.5 mkg to 11 mkg in the last fiscal year. This year, we intend to sell 12 mkg in retail space and are targetting 15 mkg in 2023. 

Are you still feeling the pinch of the 2017 shutdown in Darjeeling?

The situation is improving, but is still far from normal. Many workers had migrated to other states, or have taken up other jobs and there is labour shortage which is affecting two of our five estates in Darjeeling.