Kodagu coffee stays in the family
Shree Padre, Bengaluru
In 2007, Greenhills Estate, a coffee plantation in Kodagu, fell on hard times. Its owner, A.T. Chengapa, had taken ill two years earlier and couldn’t manage his affairs. Grappling with a financial crisis, he sold 25 acres to pay off his debts. But he still owed the banks Rs 40 lakh, Meanwhile, his plantation continued to decline.
Chengapa had two daughters. The younger one, Dalia, 35, resigned from her job at American Express and returned home to revive the family business.
“I had no clue about how to run an estate. Since Dad was ill, everything was in bad shape,” recalls Dalia. “I really didn’t know what to do. Many friends and relatives offered advice. But what we needed was practical help.”
Their heritage bungalow was in a shambles. The plantation workers had all left. The yield of coffee beans had declined drastically. And the estate had very few irrigation facilities.
Dalia approached Care T Acres, a company in Madikeri that manages sick estates. After a visit, the company agreed to take over the 75-acre estate. In 2007, a memorandum of understanding was signed.
The company developed infrastructure. It built a tank and a pumping system. It invested Rs 20 lakh, generated from the estate itself, in the first two or three years.
“The results were amazing after just one year,” recalls Dalia.
The yield of coffee beans has now risen from 250 kg to 800 kg per acre. Income from pepper climbed from Rs 2 lakh to Rs 37 lakh last year.
“Once Care T Acres intervened, all our troubles were over,” says Dalia. “It still seems like a miracle to me. We never dreamed that a sustainable income was possible from coffee and pepper. We refurbished our palatial bungalow with the money and we can now keep it as a hereditary memory.”
Chengapa passed away in 2015 but his sick coffee estate is in good health.
Kodagu is Karnataka’s smallest district but is well known for its coffee. It is recognised across the world. But many of its estates are turning sick. One reason is absentee owners. About 25 per cent of the estates are managed long-distance.
Another reason is that the planters who know how to manage estates are growing old and can no longer cope. The younger generation lacks experience and isn’t as closely linked to the estates and the coffee business as their parents were. Many have been away for their education and though they would like to retain their family estates, they don’t know how to keep them profitable. The result is that they end up selling out.
Care T Acres has revived over 20 sick estates. The company’s promoters say their mission is to provide a service. Relieved estate-owners put it differently: “It’s a Godsend.”
Once Care T Acres takes over, it shoulders all responsibilities. It undertakes cultivation, harvesting and pruning. It builds infrastructure such as tanks, buys machinery, lays pipes for irrigation, upgrades labour lines, pulping units and drying yards. It even markets coffee.
The company deducts its remuneration or share of profits, as the case might be, and transfers the rest to the estate owner. For running the business, there is a joint bank account and every transaction is transparent. The estate owner can carry out checks anytime. Detailed monthly accounts are furnished and the processes are farmer-friendly.
Polibetta Estate was in a similar condition to Greenhills. Five years ago, its 32 acres yielded just nine tonnes of coffee beans. In four years, after Care T Acres took over, production rose to around 30 tonnes. Trees were pruned and weeds cleared. The estate’s 15-year-old coffee plants were manured and irrigated and they revived.
The idea of starting such a company struck Arun Biddappa, a Kodagu planter who traded in coffee in Bengaluru, one day while chatting with Bose Mandanna. The latter was his partner in Karnataka Coffee Brokers and a philanthropic planter. Biddappa stressed the need for a professional service to manage estates like his. Mandanna roped in N.K. Chinnappa, an experienced and skilful manager who had resigned from Tata Coffee, and the three discussed the idea.
They brought in partners like K.M. Cariappa, B. Ram Bopaiah, K.M. Appaiah, N.P. Machaya and K. Ajit Appachu. The concept crystallised into Care T Acres on 15 July 1999. Each promoter invested Rs 1 lakh and a little time and goodwill. The company was named Care T Acres — caretakers with the capacity for managing many, many acres.
Biddappa was the company’s first client. Seeing it shaping up well, he wanted to be part of it. Unfortunately, he passed away in 2006. His wife, Aruna Biddappa, who lives in Mysore, inherited his estate and Care T Acres continues to manage it. “I have two daughters who are studying. We are not in a position to run the estate. Care T Acres are doing this job very well,” she says.
Palani Estate’s story is similar. Lalitha Nanjappa, 76, has two daughters. She lost her husband in 2008 and the estate was in dire straits. The irrigation infrastructure existed only in name. The 52-acre estate yielded a paltry 200 bags of coffee beans.
In 2008 the estate was handed over to Care T Acres. A tank was dug for Rs 5 lakh. Pipelines and machinery worth Rs 10 lakh were bought. Coffee production has increased to 1,350 bags. A drying yard costing Rs 7 lakh is being built. Labour lines have been renovated. A raking-cum-spraying multipurpose machine has also been bought.
“Care T Acres is dedicated and disciplined. Its labour management is excellent. None can fool them,” says Nanjappa. “My only request to them is to continue their wonderful work.”
Care T Acres takes over only sick estates. Currently, the company is managing around 600 acres of coffee estates belonging to 18 planters. Estates below 30 acres aren’t taken up because they aren’t financially viable for both sides.
When the company receives a collaboration request from a coffee estate owner, it conducts a discreet inquiry. Is the owner a team player? If the answer is yes, the company visits the estate.
“We prefer not to take over estates in areas that receive very heavy rainfall like Madikeri and Bhagamandala. Achieving good production there is just a dream,” says K.M. Appaiah.
But if the planter is insistent, Care T Acres makes it clear that production won’t be much. Coffee and pepper grow well only in the traditional coffee-growing belt. These are the two main crops in which Care T Acres has expertise. The company points out that without good yield it can’t insulate the estates from financial problems and make them sustainable.
Care T Acres enters into a five-year understanding with the estate owner. It is renewable by mutual consent. “We have easy exit options too,” says Chinnappa, who is 63. “Either side can prematurely terminate the understanding by paying a particular sum.”
The company draws up a long-term plan to make the estate self-supporting, sustainable and professional. If the client’s family members take back the estate and follow the company’s plan, they will earn reasonable profits without much difficulty.
“Our first priority is to clear the estate’s bank loans. We put in our own funds to do this once a memorandum of understanding is signed. We don’t want the estate owner to take the hasty decision of selling a portion of the estate to meet the expenses of new development works. We also need to get the land documents back from the bank,” explains Chinnappa.
The Robusta variety of coffee beans is more popular here than Arabica because the latter requires more labour and is prone to stem borer menace. Rain is crucial. Since rainfall can vary, irrigation becomes all-important. Estates are vast and most don’t have complete irrigation coverage.
An old adage is popular here: “If you are lucky you will get coffee beans by the tonne. Otherwise you will get a tin.” So if there is timely rain, you will harvest coffee in tonnes. Else, you will turn bankrupt.
So the company’s first priority is to cover the entire estate with an irrigation network. On Paka Estate, a big abandoned tank is being desilted. On Benlomond estate, the owner, Antony Tharakan, has bought a small piece of land from a neighbour to expand his water tank, which will be done next year.
“When a coffee estate doesn’t have enough water for irrigation, we always suggest investing in tanks,” says Chinnappa.
He also stresses the importance of pruning coffee plants. “It is equal to giving them a dose of manure because you are cutting off unproductive branches. Proper pruning and timely manure in the first year makes production shoot up.”
The first three years are spent in pruning, shade regulation and developing adequate irrigation facilities. Then Care T Acres switches to upgrading processes such as renovation of labour lines, construction of a drying yard, desilting of tanks, developing a pulping unit and so on.
On estates that have been mismanaged for years, pilferage is rampant. “We do the job of policing, too, though it is unpleasant,” says Chinnappa.
Until the estate begins making profits, the company works on a fixed remuneration which depends on the estate’s area, production capacity, the development works to be done and so on.
After the estate has been restored to health and starts making a profit, Care T Acres switches to a profit-sharing mode. Seventy per cent goes to the owner of the estate and 30 per cent to the company. The turnaround usually takes about three years. “But this depends on how far conditions have deteriorated,” says Chinnappa.
Antony Tharakan’s Benlomond estate, for instance, still runs on remuneration six years after Care T Acres took it over. The coffee plants on the 160 acre estate are very old and need to be replaced by younger ones. “You are running an old-age home,” remarked the Care T Acres team after the first inspection.
Seventy-five acres have already been replanted. The company wisely replanted the rest in phases so that the family would have some income. Pepper vines have been planted as shade trees. “In another five years, this will be one of the best maintained estates in this belt,” predicts Mandanna.
The company doesn’t compromise in building infrastructure at considerable cost. It is this investment that ensures a steady rise in production in the coming years. Neither does the company borrow from banks. Instead, it ploughs back the initial profits from the estate.
“Unless this is done, the estate can’t graduate into becoming a very good income-generating proposition,” says Chinnappa. The estate is given an unbelievable facelift in a short span of time. As production goes up, post-harvest processing facilities, starting from the drying yard, have to be upgraded.
To ensure their clients get the best prices for pepper, Care T Acres has introduced a unique bidding system. Traders are asked to bid for the year’s crop contract in advance. They pay a deposit beforehand. The traders visit the estates before the bidding process and make an estimate of the prevailing crop. About 30 to 40 traders take part in the bidding process. They write their bidding amounts on slips of paper and hand them over to a Care T Acres representative.
Deliberations are conducted in front of all the traders and estate owners so that the bidding process is transparent. The highest bidder gets to harvest the pepper crop on the estate whose bid he has won. “Since there are about 10 traders competing, the proceeds are higher than what planters used to get earlier,” explains Chinnappa. Every September, the accounts get audited and the estate owner gets his or her share of the proceeds.
By then, the coffee has also been marketed. “We generally make an interim payment to the estate owner months before the coffee is sold because we can’t keep their money in a fixed deposit,” says Chinnappa.
“India’s average production of coffee is 950 kg per hectare of Robusta. Kodagu’s average is higher,” explains Mandanna. “We are happy to say that we get an average of 1,900 kg per hectare, due to the agronomic changes that we make. This is double the country’s average.”
The company’s outstanding capability is that its cost of production is very low. “All credit to Harrisons Malayalam where I worked for 15 years. I learnt to be frugal to the core when I worked there,” recalls Chinnappa.
“See, we are partners in the company and we are all individual coffee planters too,” says Ajit Appachu. “We are not able to keep cultivation expenses on our own estates as low as on estates, managed by our company.” Having a client means taking special care.
The company is, in many ways, a one-man show. It is Chinnappa who is at the forefront of handling operations. “But I work with inputs and full backing from all my partners,” he says. “This gives me strength, especially when we face setbacks.”
He admits he is getting on in years and can’t handle the pressure as easily. Every year the company takes over one or two new estates but the older estate owners don’t want their estates back so his burden keeps increasing.
If the company spots a capable family member, it suggests the owner take back the estate once the management agreement lapses. “This way, we can help someone else. But this taking back is not happening,” says Chinnappa.
The company has been flexible and large-hearted with owners. Mandanna cites an example. Three years after they took over a coffee estate, profits had risen. The company was entitled to take a share and not just remuneration. The young lady who managed the estate was getting married and said her family required money. She asked the company to agree to taking a remuneration that year too. The company agreed though it meant forfeiting a considerable profit.
Care T Acres has also, on more than one occasion, volunteered to pay off bank debts of indebted coffee estate owners with its own funds. “We pledged our fixed deposits to the bank and took a loan. The client was asked to pay a small percentage of the interest,” says Chinnappa.
The company is now getting enquiries from distant coffee-growing areas like Chikmagalur and Sakleshpur. “This is physically and mentally a demanding job. If we take up more assignments than we can handle there will be dilution,” explains Chinnappa. It is becoming difficult for the company to recruit efficient field staff. People prefer to work as watchmen for tourist resorts mushrooming all over Kodagu, he says.
Chinnapppa handles administration, marketing, field supervision and more. If these divisions were handled by other people, he feels, the company could double the number of clients. He is keen that younger people take over.
His only son, Cariappa, has an MBA degree from the Melbourne Business School. He is a coffee trader in Nairobi, but he has worked with his father for a few years. Chances are that he will return and join Care T Acres.
“I worked with my father for two years. I know the positive impact Care T Acres has had on Kodagu’s coffee farming community. I believe my father has the drive to continue for a number of years. In the near future, I would like to concentrate on building a successful career in coffee trading. When my father decides to step back, we will sit down and discuss the company’s future,” Cariappa said over the phone.
Mandanna is hopeful. “Unless the returns from farming are good we won’t be able to attract our youngsters back to the soil. Now prices are good. I know of many youngsters with good jobs in the city, some from the US, who have returned to farming. In the past few years, I have come across at least 24 cases in Kodagu alone. This has become a trend in Chikmagalur and Sakleshpur too,” he says.
Using the profits of the company, the partners of Care T Acres and their families go on a coffee study tour every year. So far they have visited Vietnam, Kenya, Chikmagalur and Pattiveeranpatti in Tamil Nadu. These tours have exposed them to new technologies that can be adopted back home.
“To succeed in farming, innovation is necessary. In Kodagu, some planters have started litchi, apiary and avocado cultivation. Newer cultivation methods are being tried out,” says Mandanna.
“Our Chikmagalur study trip inspired two of my partners, K.M. Cariappa and his brother, K.M. Appaiah, to start drip irrigation. In Chikmagalur there are planters who have doubled their crop yields with this method. Dynamic farmers have started direct export of coffee to countries like South Korea. Each successful innovation can motivate our youngsters to return to farming,” he adds.
Appaiah uprooted 20 acres of his old estate and raised a new coffee plantation on it, incorporating drip irrigation and fertigation. Over the past two seasons, for the first time in Kodagu, this portion of his estate has water nine months of the year. He is also experimenting with another innovative method called agobiada, which involves bending the tip of the young coffee plant to induce multiple stems. Four stems are allowed to go up and sprout berries. Both these innovations were borrowed from Chikmagalur and have doubled the coffee crop there.
Asked to appraise Care T Acres’ work, Chinnappa’s face lights up. “We have ensured that many coffee estates were not sold. We have restored the health of sick coffee estates and helped many Kodagu families lead comfortable lives.”