McLeod Russel looks at entering packet tea segment

Kolkata, Aug 9 (IANS) Tea producer McLeod Russel India is looking to enter the packet tea market, the company’s Managing Director said on Wednesday.

We are seriously looking into entering the packet tea segment. The company will take this step soon. It is now in a study phase," Aditya Khaitan, the company’s Vice Chairman and Managing Director, said here.

The company’s board has decided to initiate discussion with Eveready Industries India Limited for participating in a joint venture as a strategic business partner for the development of packet tea business through a separate entity, he said.

With this measure, both companies will bring their respective skills of marketing and distribution and tea plantation knowledge to focus and develop the packet tea business.

"How it will be processed and what role the McLeod will play are in the process of the study," Khaitan said after the company’s Annual General Meeting here.

The tea producer has tea estates in West Bengal and Assam and also in Africa and Vietnam.

The industry is looking at 60-70 million kg shortage of tea in Africa this year and market prices to go up in Africa.

"As the market in Africa is up, the Assam tends to benefit from this and your company tends to benefit more because in the month of May, June and July, the export market comes into play," he told shareholders.

Global black tea production during 2016 was higher by approximately 100 million kg on account of increase in production in Kenya and India.

However, Kenya has lost around 50 million kg of production during first three months of 2017 due to unfavourable dry weather conditions. This shortfall is likely to continue throughout 2017.

The global demand is likely to grow by two-three per cent, thereby creating shortages and lower inventory levels, McLeod’s latest annual report said.

Khaitan said the company’s exports would be higher this year as compared with last year.

He also indicated the tea producer would increase mechanisation in the coming years to offset some input costs.

The company would be procuring more tea from bought leaf market to add more volumes, he said.

Speaking on the industry scenario, Khaitan said: "Prices of tea in the last few years have not gone up in the same way the costs have increased. It is a matter of time before we get a sharp increase in selling prices."

India has to find ways of exporting 270-300 million kg from the current exports volumes of about 200-220 million kg, he added.