India Brews a Stronger Cup

By Madhur Singh / Darjeeling

The cool valleys of Darjeeling produce some of the best teas in the world, delicate little leaves so delicious that some call them the "champagne of teas." But you don't need to taste them to know how much they are valued. At Happy Valley tea estate, perched at 6,800 ft. (2,100 m) where the Himalayas snake into India between Nepal and Bhutan, workers harvest the autumn flush, plucking each tip of dwi paat suiro--two leaves and a bud--as if it were worth its weight in gold. As the sun sets on the looming Mount Kanchenjunga and a lazy mist begins to settle, pickers carefully empty their bamboo baskets and take in their loads to be weighed. One man swiftly but keenly examines the leaves before each worker signs in her day's pickings.

Despite the idyllic surroundings, Happy Valley nearly closed four years ago. It faces the same challenges confronting the rest of the Indian tea industry--intense global competition, fickle consumer tastes and labor disputes that have occasionally turned violent. India produces more tea than any other country in the world except China, but after years of neglecting to invest in marketing or technology, India has seen its exports fall behind those of Sri Lanka, Kenya and China in the $7.5 billion global tea market.

Since 1998, when a glut of tea from low-cost producers caused prices and profits to plunge, Indian growers have struggled to pay the country's 1 million tea workers. Unpaid employees launched a wave of strikes, while some owners sold or simply abandoned their plantations. "Many tea plantations became totally unviable," says Shiv K. Saria of Soongachi Tea Industries, which owns five tea farms in northeastern India. Estates went bankrupt because they were selling at below-cost prices and banks wouldn't lend any more.

This year India's tea industry has finally begun fighting back. The central government has promised $1.16 billion over the next 15 years in loans and subsidies for new, more productive plantings. Copying the clever marketing of tea producers in Sri Lanka and Africa, Indian entrepreneurs have begun to build their own upscale brands. Some producers, meanwhile, are branching out into tea bars for the subcontinent's free-spending young professionals. India's tea producers may never recapture the glory days, but they'll need a new strategy to survive into the future.

When the Ambootia Tea Group bought the 437-acre (177 hectare) Happy Valley tea estate in March, its tea bushes were old, its machinery was obsolete, and its workers had not been paid regular wages for months. Seven months on, the estate's new owners have hired new managers, started regular maintenance of the plants and soil and begun a move to organic farming. Perhaps most important, productivity is inching up. In addition to a guaranteed minimum daily wage of $1.38, workers get incentives to pick more. Darjeeling's oldest tea estate is turning its original factory into a working museum. "Innovation, along with quality and marketing, is the key to surviving today," says Ambootia Tea chairman Sanjay Bansal, who says he has turned around 11 dying tea estates. "That's how I'm able to demand ridiculous prices for my teas." Darjeeling tea, for instance, can be sold for up to 10 times the typical $3.54 per lb. ($1.61 per kg) for other Indian teas, and Ambootia's Brumes d'Himalaya, a "first flush," or spring-harvest, tea, sold at a high-end boutique in Paris two years ago for $727 per lb. ($1,750 per kg).

Appealing to high-end consumers abroad and to the increasingly discerning tastes of the booming Indian middle class is a top priority for India's teahouses. The Tea Board of India won "geographical indication" status from the World Trade Organization for Darjeeling tea last year and is pursuing similar recognition for Assam tea, prized for full-bodied blends like English breakfast, and for the aromatic, copper-colored Nilgiri tea from southern India. Tea producers are experimenting with delicate white teas, which are less processed and contain more antioxidants than black teas, and oolongs, which fall midway between green and black teas. Darjeeling is also leading a move toward organic farming, with a third of its estates now certified as chemical-free.

Using a strategy that has worked well for Sri Lankan producers like Dilmah, Indian firms are taking their teas straight to consumers by marketing directly online. Assam Co. also opened the popular Camellia chain in Kolkata (formerly Calcutta) this year, and Soongachi Industries has launched Infinitea, a hip, upmarket tea bar in Bangalore that sells more than 70 brews. Soongachi's Rishi Saria, 30, gave up a software-engineering job in Bangalore to return to Darjeeling and take on marketing for the family company. His cousin Gaurav Saria now heads Infinitea. "Our generation is focusing on improving our quality, product mix and positioning," says Rishi.

The Saria family and other tea producers are getting some help from the Indian government. State research institutes have committed $18 million to developing higher-yielding seeds and machinery to suit small growers, and the government is looking at introducing electronic auctions to make transactions faster and fairer, especially for the little guys. An additional $41 million fund gives tea producers incentives to process tea as more desirable--and profitable--long leaves rather than as granules.

All this new investment is an attempt to correct years of neglect. For decades, India was the biggest producer, exporter and consumer of tea in the world. That changed in 1991 after the collapse of the Soviet Union, India's largest export market, where demand fell by two-thirds, to less than 88 million lbs. (40 million kg) per year. India's producers had grown reliant on that guaranteed market, failing to maintain their bushes and machinery, and they never really recovered. Sri Lanka and Kenya are now the world's biggest exporters, each selling about 692 million lbs. (314 million kg) in 2006, well ahead of India's 450 million lbs. (204 million kg).

Everything that happens in the tea industry, of course, depends on its workers. The Plantation Labor Act of 1951 guarantees not just a minimum wage for workers in tea, coffee and rubber but also housing, education, medical care and drinking water. Those benefits add about 11% to production costs and are the main reason Indian tea costs about $1.62 a kg to produce, compared with $1.23 in Sri Lanka, $1.16 in Kenya and 84-c- in Malawi. Strong unions in India's tea-growing regions have fought to preserve those benefits. Tea-estate workers are paid on average $1.38 a day in northern India and $2.25 in the south, and because the estates are so remote, workers must rely on tea companies for basic services. "The only long-term, sustainable solution is for estates to give workers a stake in the earnings," says Samir Roy, head of the Defense Committee for Plantation Workers Rights.

That's exactly what some tea producers are trying to do. Tata Tea's Kanan Devan estate in Kerala, in southern India, gives each worker shares in the company. Although Tata is otherwise exiting the plantation business, this new ownership model has the unofficial support of many tea producers and trade-union leaders. Ambootia workers raise organic oranges and ginger, which the company markets abroad. At Makaibari Tea Estate in Darjeeling, owner Rajah Banerjee gives workers cows and buys back manure for use on the estate. "My mantra is, Partnership with workers, not ownership," says Banerjee. "You can't run a tea garden merely as a business."

In India, tea has always been more than a business. Tea drinking is as much a part of the national culture as playing cricket or watching Bollywood movies. And like those other Indian institutions, it is changing rapidly. Nearly half the population is under 25, and young people have been drinking more coffee and cola, leaving the tea in their parents' drawing rooms. Teamakers are trying to woo them back with home brew--whether instant, iced or canned, black, green or white.