In the year 1833 when Robert Thomas, a young and enterprising Welshman, reached Calcutta (present day Kolkata), the city was rapidly emerging as a hub of trade and business. At a time when the Agency Houses (credit institutions financing Indian exports) faced a financial crisis following the 1829 Depression in London, new opportunities were also emerging from India for trade. Tea was certainly one of them – it was a beverage of choice among the elites in England. Robert’s company traded in several commodities, particularly indigo. But as indigo lost its lustre over time, the company began to realise that the future belonged to tea.
The year was 1861 when the first tea auction in India was held by R Thomas & Co (Robert’s firm) at Kolkata. It was conceptualised as a platform to bridge the gap between tea growers and markets. The system evolved and perfected itself over time, and the fortunes of the brokerage house grew in tandem with the growth in the tea trade. We know this company today by the name J Thomas and Company, and it commemorated 150 years of a proud and illustrious legacy in 2011. Through the passage of time, private trading of tea has also grown. But the auction system continues to stay relevant, accounting for around 50 per cent of tea produced in India.
The role of tea auctions and how they determine the price of different grades of teas provides interesting food for thought, especially because of the sheer unpredictability of the end result on a given day. Krishan Katyal, MD, J Thomas & Co Pvt Ltd emphasises on this phenomenon, “What is the one single factor that makes or discovers the price of tea, which does not have an MRP attached to it? In our industry we are fortunate because we know our supply at the beginning of the season – give or take 10 million kg. We also know our demand at the beginning of the season – give or take 10 million kg. But how come we cannot predict the price? There is no straightforward answer.” As one of the most renowned experts on tea, he admits that he cannot predict the price accurately. The only plausible explanation that comes to mind is the competition, as he adds, “In an environment of competition, different levels of quality establish themselves at different prices depending on who wants what more. I see no other factor at play. The system does not presume to predict demand, it just magnetises it. No one can say he knows everything he needs to know about the market. Then you have a system that does not presume to know, but in its blindness brings all those factors together on a given day and provides you the result.”
J Thomas, on the other hand, is a remarkable case study in terms of business longevity. Even after over 150 years, it is the largest tea auctioneer in the world and handles around 200 million kg of tea globally. One of the critical factors behind its sustainability, according to Mr Katyal, is its unique ownership structure, wherein there are no owners, no veto power and no majority shareholding in one hand. Shares are distributed among employees. When someone retires, he relinquishes his/her shares for their fair value, and the shares are redistributed. This ensures a structure that is self-correcting. The other major factor is the company’s commitment to maintain unquestionable integrity. As Mr Katyal elaborates, “Whenever any new person joins, the chairman of the company calls him and tells him that we expect you to make a career with us for a life. We expect you to be the best auctioneer and the best taster, best manufacturing man, best PR person, best client servicing – best at everything. If you fall short anywhere you will get a leg up to support you there. But if there is one instance of dishonesty, it doesn’t matter how good you are – you are out.” Employees of J Thomas consider themselves the custodians of a legacy that they are passing from one generation to the other. Moreover, an aspersion on J Thomas would mean an aspersion on the auction system. And that is something the company would never tolerate!