When it comes to tea, one of the biggest names in international markets is the Sri Lanka-based Dilmah Tea. With a footprint in around 104 countries, Dilmah Tea has in the last 32 years established itself as a name to reckon with when it comes to authentic Ceylon tea. In an exclusive interaction with The Dollar Business, Merrill Joseph Fernando, the Founder & Chairman of Dilmah Tea, talks about entering the Indian market, the importance of quality and innovation and the need for combining business with social welfare.
Interview by Anishaa Kumar | January 2018 Issue | The Dollar Business
TDB: What was your inspiration behind entering the tea business?
Merrill Joseph Fernando (MJF): Sri Lanka, formally known as Ceylon, produces some of the world’s best varieties of tea. World over, colonial powers would bring crops and agricultural products to their colonies. They would then take the produce as raw material to their countries – in the case of Sri Lanka during the British empire it was mostly tea - to blend, mix, package, brand and market. Producers of the raw material - farmers and workers in Sri Lanka – would put in the hard work and produce the world’s finest cup of tea but they would remain poor while watching their labour enrich foreign companies, making their owners millionaires and billionaires. This is because blending, mixing and packaging are the most profitable segments of the tea business. As a young student, I saw the exploitation of the tea workers in my country. I witnessed in countries like England the raw material, which was brought at what would currently be around 50 cents a kilo from the producers in Sri Lanka, generating 4 to 6 times the revenue as the processed product. However, none of these profits came back to the farmers and workers. It was then that I decided that some day I would start my own brand of tea, for which profits would come back to Sri Lanka and help farmers and workers access a better life and a secure future. When I started off I received much ridicule from the people of my own country, but I pursued my dream regardless.
TDB: Dilmah has made a name for itself as a premium tea brand not only in South Asia, but the world over. Could you tell us about Dilmah’s journey?
MJF: Today, Dilmah tea is exported to nearly 104 countries. I initially started exporting bulk tea, 66 years ago, which foreign companies then branded and marketed. I started my own brand, Dilmah, 32 years ago. When I started exporting 66 years ago, every country in the world was already drinking Ceylon tea. So, I was selling to almost all countries. In fact, at some point in time, I must have sold bulk Ceylon tea to every international and multi-national tea company. When I began exporting in 1988 under the Dilmah brand name, my first market was Australia, as I had been a supplier of bulk tea to Australia for many years before I launched the brand.
TDB: What has been the driving force behind Dilmah’s growing popularity in the international market and is there any difference in your marketing strategy across countries?
MJF: Our primary strategy has been to market the finest quality Ceylon tea – grown, packaged, branded and marketed by my family. Having our own tea gardens and the required facilities for packaging in our control gives us absolute control on the quality and freshness of our tea. This is the reason we are able to sell our tea at relatively higher prices.
TDB: India is one of the largest tea-drinking and tea-producing nations in the world. How has Dilmah’s journey in India been so far?
MJF: When we started our journey in India, we partnered with Dabur as we were an unknown brand then. But today, we work in partnership with Amalgamation Group, to pack and market our tea in India. We have started distribution in certain parts of the country. Understandably, our tea is priced higher than most Indian brands. But, the people of India appreciate the quality and the wide variety of teas we offer. And this is the reason our business is growing in India. We know we cannot be a big brand in India because there are already many big tea producers, but we do want to make our presence felt at the top end.
TDB: Did you face any regulatory challenges in entering India?
MJF: Yes! The government created many problems because they did not want tea, as a product, to be imported into India. We had problems and issues with various government bodies. These bodies should actually support imports from Sri Lanka, because in Sri Lanka we support imports from India in a big way. We do not receive that cooperation for our exports from the Indian side. But, slowly things are changing for the better now.
TDB: Where does the brand stand when it comes to Sri Lankan market?
MJF: I initially didn’t intend to get into the domestic market because there were too many small players and I didn’t wanted to compete with them. I wanted them to keep their market share. However, it was only when Dilmah started promoting Sri Lankan cricket – we sponsored the Sri Lankan cricket team for eight years – we realised that while people abroad knew what Dilmah was, in Sri Lanka not many had heard of the tea brand. So, we were forced to launch the brand in the domestic market too. There are three or four other brands in the domestic market, but we sell at the highest prices. We now have a very good market share. Like India has its own variety of tea, so does Sri Lanka.
Our countrymen respect the Dilmah brand of tea. People also respect the brand for its philosophy of caring and sharing. Today, we have a very big market share and we must be the second largest player in the domestic market. Of course, there is a lot of difference between the number one and number two brand in quality and price.
TDB: Dilmah has been actively working towards assisting and uplifting tea growers. How important has this involvement been for the company?
MJF: We, at Dilmah, are farmers. We grow our product with love and care. We want to give the consumers the best deal for their money while caring for our farmers. Our MJF Foundation does a lot of work for the workers, their children and the wider community. We can do this because we market our own tea and the profits come back to Sri Lanka.
TDB: When it comes to tea, innovations, in terms of flavour and packaging to cater to different markets and consumers – from high-end hotels to households, have become almost an essential. How is Dilmah innovating?
MJF: When it was launched, Dilmah brought a revolution to the tea sector. Over the last 10 years, Dilmah has been at the forefront of innovation. For instance, we introduced the concept of serving tea with food at a global event in Sri Lanka. We have also set up Dilmah Tea lounges around the world, where we serve everything made from tea. These lounges are very popular. Many others are now adopting these concepts. Though people can copy the concept, they cannot copy our heart and soul. No one can copy my love and passion for tea. And this is the reason we stand way ahead of everyone else when it comes to tea.
TDB: Would Dilmah ever look into expanding into other products like spices or any other agricultural product?
MJF: We are producers of tea and would like to continue to concentrate on the production, branding and marketing of tea. We have our hands full at the moment. But, my son Malik runs the leisure department in our company. We have three villa concept hotels in Sri Lanka. That is a speciality business he looks after. Then we also have the best packaging and printing company in Sri Lanka. We also have other manufacturing facilities that make products related to tea exports like wooden boxes etc. Like Dilmah Tea, each of those companies contribute 10% of their profits (before taxes) to the MJF Charitable Foundation.