Tata Tea rural initiative

The growth of local tea companies in UP, despite the fact that Tata Tea and HUL were also growing, posed uncomfortable questions. Sent out to seek answers, the Tata Tea sales teams as well as the hired consultants, came back with the same answer — Tata Tea was not selling in more than 100,000 villages in UP.

Local industry bought cheaper CTC tea from auctions and packaged it into poly-packs in backyards. With zero advertising, retailers pushed this product for higher margins, often Rs 40 per kg as against the Rs 20 the organised sector could offer. Realising that the local tea industry had resurfaced in rural areas, Sachin Vyas general manager for sales and distribution at Tata Tea, opted to reach rural consumers through NGOs, despite the severe apprehensions of other team members. "These institutions had access to people like none other," says Vyas. Eventually, the Sir Ratan Tata Trust and the Dorabji Trust screened 12 names.

The rural initiative was launched in December 2005. Named Gaon Chalo, meaning "let's go to the villages", the intiative saw Tata Tea joining with 12 NGOs to spread its reach across rural UP. By the end of 2006 Tata Tea added more than 20,000 retailers, including 500 new rural distributors, in 10,000 villages across UP to its distribution network.

"The whole problem with any rural initiative is that people think it’s unviable since a lot depends on retailers’ sincerity and integrity," says Vyas. "You need large investments and the creation of a feasible infrastructure."

MoUs were signed with NGOs (Rural Dealer-1) to act as main distributors at a district level, collecting various products from Tata Tea on credit before giving them to mobile rural distributors (RD-2), also on credit, who would then visit a fixed number of villages periodically to supply tea to small rural retailers (RD-3), who in turn sold to rural consumers. RD-3s made payments to the RD-2s on subsequent visits to replenish stock, and so on up the chain. An average RD3 now earns an additional monthly income of Rs 300-1,000, while an RD2 earns Rs 5,000-7,000. Eventually, NGOs made payments and took supplies from the company.



"Our status as facilitators of rural income has improved our image and financial position," says Raj Shekhar of Irada, an Allahabad-based NGO. And Meenu Tyagi of Sabla, a Rae Bareilly-based NGO, notes that a steady, locally-earned income curbs migration to urban areas to a large extent. "My value and status in society has increased because of the Tata name," says Sanjeev Kaushik, an RD2 supervisor in Muzzafarnagar.

A Gaon Chalo pilot is now being attempted in Madhya Pradesh. The next phase is expected to see most group products (automotives, salt, consumer goods, telecom, insurance) being introduced to this permanent, exclusive distribution chain under a programme called Tata Hut.

Businessworld
Sreevalsan Menon