Daybreak - Ikea and Walmart are leading the resurrection of jute in India

Episode Date: June 4, 2023

With the advent of plastic in the 1980s, the once-flourishing jute industry of India saw a slow demise. But lately, the tables seemed to have turned.Countries are implementing more stringent ESG rules forcing global retailers like Ikea, Walmart, Tesco, etc to look for alternatives to plastic bags. India being the largest producer of jute is suddenly in focus. More than $120 million worth of jute bags were exported in the last financial year alone.However, neighbouring Bangladesh, also one of the leading producers of jute is quickly catching up.Tune in to find out more.Recommended reading: Walmart and Ikea are why a British-era industry is back in vogueDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. What could a city that lies on the shores of the North Sea have had common with India more than 200 years ago? I'm talking about Dundee. Now, it happens to be the fourth largest city in Scotland.

It was in 1820 when the first consignment of jute was unloaded on the docks of Dundee. It was that moment when the city's history changed forever. Not long after, the city came to be known as jutopolis, the center of the world's jute industry. The jute, of course, was coming all the way from India, from the jute mills that sat along the banks of the Hugli River in Bengal. to be specific. By the early 1900s, almost half of Bengal's industrial workforce was employed by the jute sector. So it is not surprising that India, even now, is the largest producer of jute in the entire world. But for decades now, our jute industry has been struggling to survive

since the 1980s, because that is when plastic came into the picture. But something changed in the couple of years. India exported jute bags worth $120 million in the last financial year. Compared to 2021, this was a 50% rise. So what happened? The Earth is dying. That is what happened. I'm sorry, I don't want to sound alarmist, but we all know that is a fact. Countries are banning plastic finally after waking up to see what it is doing to our planet. And jute happens to be the most sustainable option for global retailers. Think IKEA, Walmart, the British retailer Tesco, the German retailer, Aldi, and the French hypermarket change, Ehrlichlerc.

They all want jute shopping bags. Things are looking quite good again for the Indian jute sector. But I would not be telling you this story if things were that simple. You see, our neighbor, Bangladesh, also happens to. be one of the biggest producers of jute in the world. And it is catching up quite fast with India. And not just that. Unlike the Indian government,

the government of Bangladesh hands out cash incentives to jute exporters. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Das Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is, worth understanding and worth your time. Today is Monday the 5th of June. New interest in jute is interesting because jute is quite expensive.

More expensive than plastic, of course, but even cotton. Despite this, global giants and many smaller enterprises seem happy paying a higher premium for using jute. And that is because the world, especially countries like the US and France, are becoming more stringent about bad ESJG. practices. And this is why sustainability has become a priority over costs for these companies. The Kolkata-based jude products development and export promotion council, an industry-led body under the Ministry of Textiles, says that there are 229 jude exporters in India.

The number of exporters has risen by over 50% in the last couple of years. But this year, it has been exceptionally high. A person who works with the council told the Ken reporter Ronok Kumar Gunjan that in just two months, starting from April 2023, more than 15 new exporters have reached out to register

with the council. Now, until very recently, it was these exporters who were on top of the supply chain pyramid. They acted as the ultimate authority for meeting with buyers, striking deals and controlling the cash flow. But with a new

interest in jute now, the status quo is changing. These exporters are now faced with a new competitor, their own suppliers. As more buyers keep flooding in, some of the mills are directly approaching the international brands instead of just supplying process due to the exporters. Older mills like Birla, Glou and Ludlow among others, have added a separate wing only focused on manufacturing export quality shopping bags. In the past though, jute mills were never really interested in manufacturing, especially because it was a labour-intensive

and very time-consuming process. But things like I said have changed now because mills sourced jute directly from the farms and already have processing units in place, which is why they are able to make these shopping bags for cheaper. On an average, a large order of, say, 200,000, 250 to 300,000 bags annually costs $1 per bag, and it can go up to $6 based on the size, color and the kind of print. Mills can provide these shopping bags at a rebate of about 10 to 15% compared to exporters.

So now that you understand what is happening at the upper rungs of the Jude supply chain pyramid, let us take a look at its most important part. the farmers and the mill workers who form its base. Stay tuned. For the longest time, farmers have had the worst end of the stick in the jute sector. Dealing with jute was not always rewarding. Mills sometimes would suddenly shut down and thousands and thousands of workers and farmers would have to pay the price. So over time, as the demand for jute fell, farmers began to shift to other crops.

and all of this pushed the new generation away from the golden fibre. But now that seems to be reversing. Take for example the case of Pranab Kumar Mandel, a 33-year-old man who Ronak spoke to. He left his hometown in West Bengal's Nadia nearly a decade ago in search of livelihood. Now he has decided to go back and join his father who happens to grow jute. because the financial condition of jute farmers seems to be improving. And he says that there are many others like him. Jute needs less than half as much of water as cotton to grow

and needs no fertilizers and pesticides. And apart from being a negative carbon energy source, jute can also be grown in between two crop cycles because it just takes four months for it to grow from sewing to becoming harvest ready. Parish Babu, whose family has been growing jude for generations in West Bengal, told the ken, and I'm quoting, you can be a potato or a tomato farmer, but also grow jute in between two seasons. It just requires a humid climate with moderate to high temperatures.

When the crop fails for some reason, jute becomes a saviour because it is usually a dependable crop in terms of yields. End quote. We also spoke to mill workers who form an important part of the base, of the jute supply chain. Turns out, things are not so hunky-dory for them. Despite the jute sector doing well now, the fruits of it are not completely trickling down to all the stakeholders.

There have been large protests across West Bengal. For example, last month, thousands of jute mill workers assembled in a town on the outskirts of Calcutta to protest against mill owners. They had two big complaints. number one, bad working conditions and number two, permanent workers being replaced with temporary ones to cater to the rising demand. Mangal Benbashi, a jute mill worker and the leader of a workers union in Calcutta,

told us that the workers live and work in dirty, dingy conditions and that the number of permanent workers has also drastically decreased. And that's because mill owners get away by paying much lesser to temporary conditions. workers. On an average, a temporary worker earns a little less than $2 per day. A permanent worker, meanwhile, makes anything between $4 to $6 per day on average. Plus, mills don't always pay provident funds and gratuity to temporary workers. Coming up next, Bangladesh emerging as the biggest threat to India's reviving jute sector could make things worse for these workers. For India to stay on top of the jude game, the costs need to be kept really low. And that is because of the

stiff competition in price from cotton bags and also made in Bangladesh jude shopping bags. The government there, like I told you earlier, provides large incentives that Indian jude exporters don't really enjoy, as much as 15 to 20% in fact. Bangladesh exported jute shopping bags worth nearly $97 million dollars in the year that ended in March 22. This was just $30 million less than India. So it won't take long for it to actually beat India. And technically, if all jute products, not just shopping bags are taken into consideration, Bangladesh already is a larger jute export market than India.

This is based on data from Bangladesh's own Export Promotion Bureau. But Ronek spoke to Raymond, someone who works for a lot. French apparel brand. He has been coming to India to source jude bags for his company. He says that the quality of Indian jude bags as of now is better than Bangladesh's. But our neighbor is watching us keenly and learning very fast. So unless India takes strong steps to keep the momentum that it has while keeping the most important thing that is sustainability in mind,

it could soon become number two. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps, and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien. Thank you.