Sipping the storm in their teacup

22 December 2006

The success of the Kanan Devan Hills Plantations Company Ltd is the result of a meticulously planned sell-off of Tata Tea's plantations to its employees, says T Damu, vice president corporate affairs, South, Indian Hotels Company Limited.

When troubles started brewing strong and steady for more than six years, making the tea plantations unviable to operate on a profitable plank, Tata Tea, one of the largest tea companies in the world, decided to exit from its key tea plantations, keeping only a few others. This was in line with its overall business strategy of focusing on brands. The focus first was on its South India plantations operations (SIPO). Since the major chunk of the company's tea plantations in South India was located in the High Range of Kerala, it became the testing ground for the company's exit strategy.

Nevertheless, as is unique about the Tatas, the business plan was very clear about a two aspects of its divestment. First, the exit from the plantations should not cause any adverse impact on the employees, several of whom had spent their entire life in the shaping of one of the best maintained and organised tea plantations in the world. Second, there should be no adverse impact on the ecology of the pristine mountains of Munnar.

Thus the task to exit was taken in right earnest in the SIPO considering various options. There was great enthusiasm to try the co-operative model of running the business and one estate in Munnar was chosen for a trial in December 2003. However, the employees did not find favour with this model for want of job security and proper management. A producer company model was also explored, but this, too had its fair share of nebulous loopholes and was abandoned.

At this point of time, the management of the SIPO gardens took the initiative of examining the possibility of the 'employee buy out' model under which employees become co-owners of the business enterprise but would function under a professional management. In February 2004, the then general manager of Tata Tea's SIPO, T V Alexander, an avid planter well-known for his path breaking leadership and management strategies, meticulously assembled a core team of young and enthusiastic managers, which devoted itself to several days of painstaking work to come out with the framework of the 'buy-out' model. At the end of several rounds of discussion and presentations to the company's middle and top management in March 2004, the unique business model took shape.

The objectives of the new model appeared as an ideal fit to the Tata Tea's exit plan, as there was an astounding realism about the sustainability of the new entity, without compromising the Tata values on social security and environment conservation. A 10-year business plan was prepared in April 2004, which was shared with the prospective financial partners, ICICI Bank, which was quite excited about the project right from the word go.