Kolkata: After focusing exclusively on expanding its plantations in India and abroad through the past decade, McLeod Russel India Ltd—the world’s biggest tea producer—will be seeking growth in the years ahead from “marketing and value-addition”, its vice chairman and managing director Aditya Khaitan said, signalling a major strategy shift.
The company needs to “reinvent itself to meet future challenges”, Khaitan said in an interview, describing the current phase as an “interesting” one, when the Williamson Magor Group flagship is looking for new growth drivers for the next 10 years. “It is important to understand how tea is to be consumed in the future, in say 30 years from now,” Khaitan said.
Until now, McLeod Russel, which produces around 120 million kgs of tea from 67 estates, has been ramping up its output by acquiring gardens in various countries such as Uganda, Rwanda and Vietnam when inorganic growth opportunities in India became thin.
In India, McLeod Russel has 53 estates in Assam and the Dooars region of West Bengal.
A new model of selling tea has to evolve looking at future trends in tea consumption, Khaitan said. McLeod Russel is seeking advice from consultants and the first white paper is expected to be ready in 6-9 months, according to Khaitan. “Unless you reinvent, the costs of an existing business will eat into profitability,” he added.
The most obvious way of adding new revenue streams is to create brands of packet tea, and selling McLeod Russel’s own produce through them. But that alone may not be sufficient: Khaitan said the company is looking at more innovative ways of value-addition. In future, tea may not be consumed in the same form as it has always been, he added.
Meanwhile, because of two months of bad crop, McLeod Russel plunged into a net loss of Rs.17.43 crore in the June-quarter compared with a net profit of Rs.28.71 crore
in the same period a year ago, the company said on Monday. Though the company’s sales grew marginally year-on-year to Rs.171.32 crore (from Rs.166.64 crore a year ago), realisations fell sharply.
The company’s shares rose 1.9% to Rs.195.35 on BSE in a flat market.
Though the first quarter’s performance has been poor, Khaitan expects his company to recover the loss through the rest of the financial year.