The Tata Tea / ULFA Story

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Themes: Ethics in Business
Period : 1997-2001
Organization : Tata Tea, ULFA
Pub Date : 2002
Countries : India
Industry : Food & Beverages

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Case Code : BECG008
Case Length : 09 Pages
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Tata Tea was the first Indian tea company to set up processing and packing facilities at the tea estates itself. In 1976, Tata Tea acquired Sterling Tea companies from James Finlay & Company and its 7 associates. In December 1982, the Tatas bought out the holdings of the foreign partners. In 1983, the company's name was changed to Tata Tea Ltd. The company's subsidiaries comprised Consolidated Coffee Ltd., Conscofe Investments Ltd., Tata Tea Inc., and Tata Tetley GB Ltd. (TTGBL)².

Tata Tea also had joint ventures with Hitachi (marketing tea and coffee), NYK Line³ (acting as an agent for transportation, operations and management of sea ports, container depots etc.) and Lloyds (providing solutions to insurance companies regarding ship surveys, cargo surveys, pre-shipment surveys, mediclaims etc.)

Tata Tea's tea business was divided into bulk tea and packed & instant tea divisions. The company's major packaged tea brands included Kanan Devan, Agni, Gemini, Chakra Gold, Lucky Cup, Tata Tea, Leo, Zesta etc.

The company pioneered the concept of poly packs in the tea industry. Besides tea, the company was involved in the coffee, strawberries, mushrooms and spices businesses.

The company had around 60000 employees, spread across 21 tea estates in Assam, 4 in West Bengal, 24 in Kerala, 4 in Tamil Nadu, besides a coffee and a cardamom estate in Tamil Nadu. Tata Tea produced 58.2 million kgs of tea in 1999-00.

The company's distribution network comprised over 2,000 selling agents and retail outlets in almost every corner of the country. Tata Tea's profit after tax for 2000-01 was Rs 1 billion on a total income of Rs 8.7 billion. With almost half of Tata Tea's tea estates being in Assam, the company faced several problems due to the political unrest in the state (See Box).

The terrorists, usually from the poorer sections of society, sought funds from companies operating in Assam. Gradually, all businesses in Assam were coerced into making monthly payments to the terrorists. These payments varied from Rs 100 for cart-pullers to a couple of lakhs for owners of medium-sized factories⁴.

A NOTE ON ASSAM'S POLITICAL UNREST

India's NorthEastern region comprises seven small/medium states - Arunachal Pradesh, Assam, Meghalaya, Nagaland, Manipur, Tripura and Mizoram. Anthropologically, culturally and linguistically, the North East is quite different from the rest of India and has never been completely brought into the Indian 'mainstream.' The people of the region have always complained that they have been neglected by the Indian governement over the years. This sense of alienation resulted in the emergence of militant groups demanding sepearate states for themselves. Almost all the states had their own seperatist militant groups.

Political unrest in Assam dates back to the pre-Independence era, when the British brought workers from Bengal into the region. Over the next few decades, the migration of Bengalis into the area continued unabated. After the 1971 Bangladesh War and the Bangladesh drought in 1972-73, there was an influx of East-Pakistan Muslim Bengalis into the area. This made the Assamese Hindus a minority in their own state and led to the birth of the Assam Movement, spearheaded by AASU (All Assam Students Union) and the AGSP (Assam Gana Sangram Parishad). By the 1990s, the ULFA and NDFB had emerged as the two biggest militant outfits in the state. While the ULFA movement was started as a protest against the increasing dominance of Bengalis in Assam, the Bodos (an Assamese tribe) were fighting against the increasing dominance of Assamese Hindus.

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2] TTGBL was formed in 2000 as a Special Purpose Vehicle for acquiring the UK based tea company Tetley Group Ltd. Tetley was one of the best known tea companies in the world and the world's second largest company, selling branded tea.
3] By the end of 2001, Tata Tea had divested 40% of its 50% stake in the NYK Line JV and was planning to terminate the Hitachi JV, as it had decided to concentrate only on the core businesses of tea and coffee.
4] Even Jafa admitted that tea companies, trading companies, public sector units and even state and central government departments had been paying 'protection money' to ULFA and Bodo militants.