Siliguri Tea Auction sales crop down

Major corporate buyers of tea are shying away from the Siliguri Tea Auction Centre, resulting in a slump in volume of sale and price of tea produced in the Dooars.

For reasons variously interpreted and explained, cumulative buying by big players like Hindustan Unilever Ltd (formerly Hindustan Lever Ltd), Duncans, Eveready and Godfrey Phillips India Ltd has registered a sharp fall in recent times.

A look at the figures available with the centre shows that Hindustan Unilever, which used to buy the lion’s share of the auction centre’s tea, has reduced its purchase by more than three times between 1999-2000 and 2006-2007.

Industry sources said the FMCG major did not lift any tea from the Siliguri auction centre in the first quarter of this financial year. “This month, they have made a few purchases, but that is negligible compared to the amounts they used to buy about a decade ago,” a Siliguri-based broker said.

“Hindustan Unilever and other institutional buyers form our core business,” said S.K. Saria, chairman, Siliguri Tea Auction Committee (Stac). “It definitely is a setback for us when they do not participate in the auctions. Pricing of tea is affected the most because their presence helps prices go up.”

Former Stac chairman Ravi Agarwal, who is a member of the Siliguri Tea Traders’ Association, said in the absence of the big players, other buyers, too, are sticking to a wait-and-watch policy, hoping for prices to fall further. “They are buying only the tea that is strictly on demand and are not stocking up,” he added.

Figures show that after average price of tea touched a high of Rs 71.42 per kg in 1999-2000, it has remained around Rs 60 per kg for most of the intervening period, finishing at Rs 64.78 per kg in 2006-07. Total sale through auction has also remained more or less the same, despite an increase in tea production.

No one is quite sure why the Big Four are steering clear of the Siliguri auction centre. Some industry sources claim that there has been a decrease in the market share of these companies, while other say the big players are sourcing their tea from the Guwahati and Calcutta centres.

P.K. Bhattacharya, secretary, Dooars Branch of the Indian Tea Association, said it is not unlikely that the institutional buyers are resorting to private, or out of auction, sale.

Industry sources here said they are not in favour of private sales because in that case planters are less likely to get the best price for their tea.

M.C. Lohia, from the senior management of Tea Champagne, said competition from local entrepreneurs could be one reason. “Of late, there has been a surge in the number of local blenders who have launched their own brands,” he said. “They are eating into the market share of the larger companies.”

A spokesperson for Hindustan Unilever, however, said this was not so. “Since small and big players operate in different markets, there is little chance of one impacting the other,” he said over phone.

About sourcing, the spokesperson wrote to The Telegraph in an email that the company uses “all the available marketing channels, which include auction centres”. He said the company’s sourcing strategy takes into account “consumer preferences across domestic and export markets, blend recipes and the mix of (Unilever’s) portfolio”.

However, the spokesperson refused to divulge any details about the amount of tea Hindustan Unilever procures from different sources.

Source: The Telegraph