← Business Models: Industry Specific (Industrials & Materials) (all topics)
Auction price vs bought-leaf
What it is
Most Indian tea is sold through public auctions where price is set by quality, season and demand. Bought-leaf factories buy green leaf from small growers rather than owning estates, so they carry no plantation labour obligation
Small growers now supply a majority of Indian tea
Impact on industries
- Auction prices have stagnated in real terms while estate costs rose, compressing the margin of integrated plantation companies
- Bought-leaf factories undercut estates structurally, since they buy leaf at market price without welfare or land costs
- Estates can also buy leaf to fill capacity, blending their own crop with purchased leaf to spread fixed costs
- Quality differentiation and orthodox or speciality grades are the estate's defence, since bought-leaf output is largely commodity CTC