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Tea Brokers Battle for Business

By Randy Altman

While some may claim it, the tea broker is not nearly extinct. Although declining in number, those in this profession still perform a vital service to the trade. The contemporary downsizing does not signal the demise of brokers, rather, a flexibility that now exists because of the changing business conditions of the internet era. Brokers operate successfully away from the public eye, maintaining quiet links to government agencies, producers, buyers and Reuters and Associated Press. Tea brokers, while fewer in number than before, possess secure positions of influence and prestige within the industry.

Brokers can attract strong negative opinions. Estate owners complain of brokers allegedly “withdrawing” tea from auctions too quickly. The most common complaint is that brokers are an overly costly middle-man. And the e-commerce zealots are already announcing, falsely, the death of the brokerage business.

The internet does present a challenge to traditional business practice. The web weakens one source of control formerly held by brokers: the collection and dissemination of tea data, such as price, yield, lot size, quality and export volume. Previously, brokerages held a near-monopoly on such data presentation, via glossy publications. The internet is reducing the ability of brokers to remain in control of information. Expensive booklets and newsletters listing data are less marketable with the new web options.

However, data promulgation is only one important tea-broker function. Brokers grade tea. Grading defies quantification, which prevents automation and the internet from replacing brokers. Brokers also provide crucial behind-the-scenes business information, such as wholesale buyers’ credit worthiness and confidential history of timely payment. Even more quietly maintained are brokers’ connections with government officials, regulatory agencies and banks. A less glamorous role - and an underperformed one - is the monitoring of the warehousing of tea awaiting sale or export, dealing with common problems of humidity, pests, damage and theft. From quality to credit decisions, brokers do provide services that have nothing to do with the internet.

Brokers possess a unique sense of “fraternity” that crosses national boundaries. Leading firms formally pair with another nation’s brokerage, termed a “Correspondent” company. These international Correspondent relationships can last generations. This system transcends national and political boundaries, giving brokers a lasting power-base in the new world order of export globalization.

Unprecedented international corporate structures are now forming. Forbes & Walker Tea Brokers Ltd. and Teauction.com recently finalized a joint venture, a unique bilateral Indo-Ceylon partnership. F&W is one of the oldest, best-known brokerages in Sri Lanka, under chairperson Chrisantha Perera and managing director Yshan Fernando. Perera is also chairperson of Forbes & Walker Ltd., a parent corporate entity, on whose Board Malik J. Fernando sits alongside other members of his family.

The joint venture is already incorporated in Sri Lanka and called Forbes Teauction.com Ltd., with Perera as the chairperson. The managing director of teauction.com is Ayush Bagla, who states that his system saves web site customers money by reducing warehousing costs, at times almost eliminating certain post-offering storage costs. The Bagla family controls Hanuman Tea Company Ltd., and they are looking at similar joint ventures involving the internet with Indonesian and Bangladeshi companies.

Hanuman is a relatively low-profile major company, listed on the Bombay Stock Exchange, with powerful interlocking directors in N. P. Goenka, A. K. Kanodia and P. D. Khaitan. Bagla’s web site uses an IBM firewall for security, with expert engineering from Web Development Company (WDC). In conjunction with IBM, WDC sold this technology to Hanuman, providing an advantage in internet tea sales via auction and private contract. Ashok Sadhya is vice president of Tea of Hanuman, with Rakesh Bhutoria the senior executive who implemented the original web site.

Within India, four of the largest brokerages are forming their own alliance to meet the challenges of the internet. The patriarch of tea brokers in India is P. K. Sen, recently retired as chairperson and managing director of J. Thomas, the largest tea brokerage in the world. Sen, who remains active with JT, states that his company will “join hands” with Carritt Moran, Contemporary Target and Eastern Tea Brokers to develop a tea portal called eteaworld.com. Sen identifies a major obstacle to auctioning tea over the internet: providing physical samples of the product to potential buyers.

The new JT Chairman and managing director is Ronobir Sen, based in Calcutta. The new vice-chairperson and managing director is Ajai K. Atal, based in Cochin. Three managing directors at Calcutta are A. Chowdhuri, A. Batra and A. Ghosh. The director at Coonoor branch is V. Shankar, the Guwahati director is V. S. Crishna, with the remaining Board member, K. Katyal, at the Calcutta main office. Vijay Jagannath is a manager handling publications, presentations and statistics, with specific jurisdiction for Darjeeling.

J. Thomas also handles coffee, rubber, financial services and management consulting. Solidifying global leadership, JT links with prestige Correspondent houses in the world hubs: Bartleet & Co Ltd. in Colombo, National Brokers Ltd. in Chittagong, Africa Tea Brokers in Mombasa, Kantor Pemasaran Bersama in Jakarta, and Tea Brokers Central Africa in Limbe. Within India, JT owns Calcutta’s landmark building Nilhat House, providing two floors to a government trading agency. JT this year finished a modernistic building in Guwahati, Assam’s tea center, demonstrating this brokerage’s ability to manifest long-term stability in even unstable regions.

Generally, brokers operate under registration from Tea Boards. Tea Board of India, in theory, registers even internet auctions. More importantly, Tea Boards negotiate huge-volume sales directly with other nations. One recent “protocol” negotiated 25,000 metric tons of Indian tea to Russia. In such cases, the Tea Board functions not as a broker, but as agent or facilitator. All Tea Boards remain major players in their nations’ export globalization.

While most brokerages are old, a few new corporations are taking marketshare. Asia Siyaka Commodities, in Sri Lanka, was recently founded by veterans departing long-established firms. Anil Cooke, senior vice president at Asia Siyaka, is frequently quoted by Reuters as a reliable source on broad aspects of the tea trade. A commercial bank, Asia, holds a minority stake in the brokerage bearing its name. Cooke states his company now handles 15% of the Colombo market.

Africa presents the toughest challenge in terms of infrastructure. The continent’s dominant brokerage is Africa Tea Brokers (ATB). ATB collects the most data, maintains the most sophisticated web site, moves the most tea and remains the most quoted source for global wire services in Africa. ATB’s Chairman is Norman J. M. Wilson, with T. C. Muchura as director and Y. S. Shangvi the financial controller. ATB is based in Mombasa, and this one location uniquely handles re-export from several nearby nations. These other tea producing nations are land-locked, thus relying completely on Kenya’s Mombasa for their access to export globalization.

This unique need for the Mombasa port does present labeling problems. Tea labeled “Kenyan” is too often merely exported from the location, but grown elsewhere. Even within the trade, few executives realize that nine African nations utilize Mombasa as the gateway to export globalization. ATB was the first broker in Mombasa, starting when the London auction (now deceased) still controlled most African tea. Since 1992, Mombasa auction is pegged to the dollar, a huge advantage for the stability of the process. Other hubs would benefit from a currency transition to the dollar, but overly nationalistic politics block consideration of even partial “dollarization.”

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