Financial Times

Watawala mulls branded palm oil product, exports

Watawala Plantations plans to launch its tea in the United Kingdom later this year, is expanding its oil palm plantations and considering developing and marketing a 'plantation fresh' vegetable oil to complement its tea and coconut products in the domestic market.

It is also looking at the possibility of exporting palm oil, the company's CEO Vish Govindasamy said.

The company, a subsidiary of India's Tata Tea, made a loss of Rs 26 million in the last financial year mainly owing to higher wage costs and lower tea prices.

Govindasamy said the outlook for this year was "touch and go" since high gown teas were "not doing that well".

"We'll have to see how tea prices pick up because costs are going up - our main costs are wages, fuel and electricity and they keep increasing at a rate at which we can't increase our prices."

Govindasamy said Watawala exported three million kilos of Ceylon tea last year, mainly to its partners Tata Tea and Tetley.

The company, which manufactures and markets Zesta tea, plans to start selling its tea in the UK by September and is also thinking of entering the New Zealand and Australian markets, he said in an interview.

Watawala teas are already being exported to the Maldives and Malaysia and it also has a "small presence" in India, in support of Tata, Govindasamy said.

"It is difficult to sell value added Ceylon teas which are more expensive than Indian teas because the Indian tea market has been in bad shape for the last two years," he said.

There already was competition among brands there and a lot of money was required to compete with big brands.

Govindasamy said Watawala has 1,200 hectares of bearing oil palms producing 300 MT of oil a month and another 1,000 hectares of new plantings that will start bearing fruit in five years. This may be expanded by another 500 hectares or so.

"Our current oil production is sold mainly to domestic customers but we are looking at the possibility of exporting oil," Govindasamy said.

"We're also considering some value addition to come up with a branded vegetable oil, if the numbers work out - we want to see if we can refine a small volume of crude palm oil to test the local market under a brand.

"Now we have Watawala coconut oil. Because it is our own oil, we think there might be a niche market for plantation fresh palm oil - like we now sell plantation fresh tea."

Govindasamy also said Watawala was venturing into spices and minor export crops having planted arecanuts, which can be exported to India and Pakistan where a lot of betel is chewed, as well as coffee, vanilla, pepper, and passion fruit.

Contd. from pg 1"Our aim is to derive 10 percent of revenue from other plants rather than from our major crops."
Govindasamy attributed last year's loss mainly to the June 2002 wage hike wrested by labour unions led by the CWC.
"It set us back by Rs 90 million," he said. "We couldn't sustain prices to keep up with costs."
Seventy five percent of Watawala's revenue comes from tea with the rest from rubber and palm oil.
The company also plans to generate electricity and has identified three or four sites that can generate hydropower, ranging from one megawatt to 4MW plants.