How big is big?

Where does tea come from? I don’t mean where exactly but who controls it? Who produces the more?

Believe it or not the answer is not easy to find. Thanks to Internet and the Economic Times, I found out that in 2014, the world’s largest bulk tea company was McLeod Russel India Ltd (a company I had never heard of) and that it was aiming at diversifying its plantation business to mitigate risks and grow in the coming years. I then found out that the second largest company was Tata Beverages Limited.

I began looking all over to see if I could find more info about production, number of estates, locations… and I couldn’t find much. I was able to find some information for McLeod Russel India Ltd but not always consistent with other sources found on the website. One reason could be that merger and acquisitions make things complicated to follow but as you can see below this is probably not the main reason.

Area under production (ha) Production (tons)
2010-2011 34,091.40 74,871.72
2011-2012 34,575.13 79,308.11
2012-2013 34,310.26 78,213.26
2013-2014 34,100.37 87,110.72
2014-2015 33,947.35 80,056.98
2015-2016 33,899.07 85,675.36

Tea estates of McLeod Russel India Ltd (source McLeod Russel Groupe website)

With merger and acquisitions, the area under production would change and increase and except for the last year, for which I found evidence in another place that new estates were added, this is was here obviously not what happened as the areas and even the estates stayed the same over the 6 years period (yes you can find their names if you look for it).

This peculiar company focus has always been in Assam and Dooars, probably for historical reasons. However recently, they acquired estates in other countries (Rwanda, Uganda and Vietnam), bringing their number of estates to 63.

How do this new estates compare to the others? I collected some data, that are not 100% consistent with the ones found earlier but that should be able to give us some insights on this peculiar question.

Assam – North Bank Assam – South Bank Dooars Vietnam Uganda Rwanda Total
Number of estates 23 25 5 7 5 2 67
% of total 34.33% 37.31% 7.46% 10.45% 7.46% 2.99%
Area under production (ha) 16,253 14,587 3,257 1,662 2,973 1,239 39,971
% of total 40.66% 36.49% 8.15% 4.16% 7.44% 3.10%
Average area per estate (ha) 706.65 583.48 651.40 237.43 594.60 619.50 596.58
Production (tons) 38,937 40,436 6,375 8,500 17,365 4,870 116,483
% of total 33.43% 34.71% 5.47% 7.30% 14.91% 4.18%
Average production per estate (tons) 1,692.91 1,617.44 1,275.00 1,214.29 3,473.00 2,435.00 1,738.55
Productivity (tons/ha) 2.40 2.77 1.96 5.11 5.84 3.93 2.91

Tea estates from the McLeod Russel Group (source McLeod Russel Group website)

What can we learn from this table?

That the main activity from the McLeod Russel Group is still made in India, where they have most of their teas estates, the bigger ones and those with the highest production level. However the new “countries” have estates that on average are as big as those from the “old” ones (apart for Vietnam, where they are slightly smaller) and are fare more productive (between 2 and 3 times more). This could be explained by the younger age of the plants, the geographical organisation of each estate and perhaps by more intensive production techniques.

Now that we know a little more about the largest bulk tea company in the world, how does it fare when compared to both the production and the size of the area under production? I will not look at productivity as the list of tea producing countries is so big with countries in different parts of the world that it would be like comparing peaches and apples, they are both fruits but not at all comparable.

Here the obvious source of information is the Food and Agricultural Organisation (FAO), an UN agency that has a database with a lot of data on nearly everything produced. However as always, this kind of data is long to collect, which means that if I can go back to 1961, I can only come back to 2014. But one has to do what he can with what he has.

Regarding this timeframe, I will also have to make one last assumption as McLeod Russel Group publishes data for periods overlapping 2 years (for example 2010-2011) where as the FAO is on a yearly set of data. I will therefore compare 2010-2011 to 2010 and so on.

Area under production in the world (ha) Area under production by McLeod Russel India (ha) Weight of McLeod Russel India Production worldwide (tons) Production by McLeod Russel India (tons) Weight of McLeod Russel India
2010-2011 3,145,177 34,091.40 1.08% 4,603,516 74,871.72 1.63%
2011-2012 3,400,106 34,575.13 1.02% 4,773,895 79,308.11 1.66%
2012-2013 3,504,971 34,310.26 0.98% 5,034,639 78,213.26 1.55%
2013-2014 3,616,415 34,100.37 0.94% 5,349,088 87,110.72 1.63%
2014-2015 3,799,832 33,947.35 0.89% 5,561,339 80,056.98 1.44%

Worldwide weight of McLeod Russel India (source McLeod Russel Group website and FAO database)

The biggest bulk tea company is worth 1% of the total tea production areas in the world and around 1.5% of the tea produced in the world in any said year.

This brings two comments: the first one is that the productivity of each tea hectare owned by McLeod Russel India must be higher than the average productivity in the world (otherwise both weights calculated above would be the same), which says something about this last one as we saw earlier that the productivity on McLeod Russel India was overshadowed by the one from its newest estates. However as we all know it, productivity in tea isn’t the Alpha and the Omega of everything.

The second comment is that in the tea world, a giant producer is still a small player. Why do I say that? In most industries, the top 20% manage to produce or to sell 80% of the total production (this is a rule of thumb based on the Pareto distribution) while here because of the dispersion of production, it seems rather unlikely that such a level of control can be reached from the production side. The only reason that could lead to a high concentration level would be if the market on the “customer” side was dominated by a few big names that could buy most of the production and be in a situation of monopoly. But this would be another thing to study.

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