There aren’t many people in the world who can boast of having spent as much time as Dilmah founder Merrill J. Fernando, doing what they are passionate about and love. The results of this effort are clearly evident with Dilmah today Sri Lanka’s only significant globally recognised brand name.
Sri Lanka’s Tea industry is facing difficult times, and with low yields and a higher level of competition from larger producers, the future remains uncertain. With that, we spoke to the iconic Ceylon Tea trailblazer, Merrill J. Fernando, about his legacy, his vision, and his prescription for the ailing industry.
Back in 1950, when you joined the industry as one of the handful of Ceylonese to be trained, how challenging was it, and what spurred you on to build your own legacy?
Well, it was a big challenge because the British, who dominated the tea industry at the time, did not want to recruit any locals for tea tasting and training. They thought, or their excuse was, that they said that the Sri Lankans, or the Ceylonese at the time, ate too much spicy food and they can’t taste tea. That was, of course just to protect their work permits and visas.
Somehow when the tea commissioner selected six trainees for learning tea tasting under Mr. O.P. Rust, who was then the Tea Commissioner’s chief taster, and who had an undertaking during the war for a few years to supply a limited amount of tea direct to the UK food commission.
So Mr. Rust was overlooking that and the Tea Commissioner had clout with him. So he persuaded Mr. Rust to train six people. Soon after, when I heard about this, I got to him through a friend and maybe two, three months later, I was taken in for training. Learning it was not much of a challenge. He taught us very well, and he then left the country.
Then, I had the good fortune to learn again under two of the best tea traders in the country – that was Heath & Company, Mr. Sandy Mathewson, and Mr. Stan Campbell, two brilliant people. I then had a slight interruption when I broke away from tea and worked in an oil company, but came back to tea and joined A.F. Jones & Company.
It was then that the real difficult times started, because I went to London to learn tea branding and marketing. What I saw there accounts for my personal success, and when I saw what they did to our tea there it shattered me.
What was it that was happening to Ceylon Tea in the UK?
All of us, as exporters, including myself until 1985, were supplying tea in bulk and making other traders around the world richer and richer. Even today, most exporters – especially the large multinational brands – are traders in tea. Traders are what we were taught to be during the British period. We compete with each other here to sell it as cheap as possible to our buyers abroad, and they take our bulk tea and mix it with other teas and call it Ceylon Tea.
So in terms of what happened to our tea in the UK, when I say I was shattered, it was because I had a great respect for Englishman, and thought they were very honest and honourable men. I suppose once they become traders, honour and integrity all disappears for money. So I saw them mixing cheaper teas or teas from other tea producing nations, with Ceylon Tea, and their packs were marked ‘Ceylon Tea’ and were being sold out. I realised, oh my goodness, our poor labourers and our plantation owners are working their guts out to enrich people and traders outside our country.
They squeezed the tea farmers and their workers, and also lied to their consumers, because what they called Ceylon Tea was just a mixture of tea from other countries.
So that’s what changed me, and when I saw that I thought this cannot be, we should never sell bulk tea, but we should supply our own branded tea. Soon I realised I was dreaming and tried to forget that, thinking that we have no hope in this big world of tea. However, the thought kept haunting me and 34 years later, I came up with my brand Dilmah. That was the beginning of Dilmah.
How were you able to break out from this key trade monopoly and establish Dilmah as a Sri Lankan made brand and capture the global market?
Well consumers realised, or rather did not realise until I embarked on this journey with my tea, that they were drinking a lot of other blended mixed teas. They realised that what I launched was a real product, because I selected Australia to launch my brand because I was a strong supplier of bulk tea to Australian markets and to New Zealand.
So when I decided to launch in Australia they were importing 52 million pounds of Ceylon Tea for many, many years, but in the 80s the multinationals entered the market and acquired the family companies that were dominating the tea industry strictly with Pure Ceylon Tea. Once the multinationals entered the market they started eliminating Ceylon Tea from their original brand names and progressively replaced, maybe almost 60 to 70% of those packs and brands, with foreign teas and cheaper teas. However, the consumer perception was that these were Ceylon Teas.
I told the press that I was going to get integrity and honesty back to tea. I went to market with Pure Ceylon Tea grown by us, branded, packaged and processed completely in Sri Lanka by us, and marketed it in Australia as my first market.
I told them that from every pack you buy, I send a share of the earnings of what you pay back to Sri Lanka, and not into the pockets of big multinational traders.
So the consumers liked the concept that money was going back to Sri Lanka to help the poor, and I said I will bring single origin 100% pure Ceylon Tea, grown and packaged in Sri Lanka, and I will bring to the market the world’s only ethically produced brand. This was possible because all the value addition is done and the proceeds are retained in Sri Lanka. In my case I said I will share my earnings with the poor and the needy and I launched my brand named Dilmah after the names of my two sons Dilhan and Malik. That made the brand very valuable in the eyes of tea drinkers. I did not consult any marketing experts because I had no money to pay their fees.
Secondly, I had to find a method to market and advertise my tea. I used Kamal the famous singer in Australia, at the time who had been forgotten, but we relaunched Kamal in Australia, and we used him for two years.
Then my advertising agency said that the best person to promote and advertise your tea was me, because I knew so much about the tea, and suggested that I become the face on the product. I said I can never get on screen. So, for about six months, they worried and worried me and finally I agreed, and I started with a really simple commercial where I told the consumer “this is my own tea grown and packaged by me and named after my two children”. I just said “do try it” and still the equity of that line is enormous today.
When I used to walk around Australia and New Zealand people used to shout “do try it” and say “Mr. Dilmah how are you?”. So there was emotional value in the brand name and me as the owner facing the brand on TV and radio. Only I spoke for the brand. So, the consumers began to really like the tea and my concept of putting my face on my own pack.
Consumers in both countries, Australia and New Zealand, would write to me and say “Mr. Dilmah you are not a faceless multinational, you have a face to it”. This meant that international traders and multinationals have a brand name, but when consumers try to find out who the owner of the brand is they realise that there is no owner. All the multinationals and big international companies are owned by investment banks, so there is no face. If consumers want to complain about it or compliment there is no one to write to. Whereas with Dilmah they have me, I was there to take responsibility. So consumers value that enormously, the integrity.
Today consumers have supported the brand so much it is globally the number three brand, and I’m aiming to be the number one brand in the next three years, because the quality, freshness and the purpose behind Dilmah remains unchanged. Not even a little bit has changed from the day I launched that tea to today, and forever it will remain that quality. So consumers around the world know this is an excellent, outstanding quality.
We are the only company in the world that is fully integrated in the tea industry. We own plantations, we own the factories, we own our own printing and packaging facilities and everything that is needed to bring Dilmah tea into overseas markets. No other company in the world has that, and importantly, we are the only company in all tea producing countries and coffee producing countries too, which has a country-owned, farmer-owned brand globally.
So what I have to say is that traders say “we can’t do this”, but you can if you say “I can do it and I’ll be different”. I named the brand, and I face the brand in a way that nobody else could, and every step of the way, I did the right thing. I never did anything wrong by the consumer or by the tea producer.
You’ve recently increased your pledge up to 15% of Dilmah’s pretax profits for your foundation. What will it focus on?
I established a charitable foundation called the MJF Charitable Foundation which contributes 15% of all our companies’ profits before tax, and the foundation earns a very generous amount of money which is spent in changing thousands of lives.
We have in Moratuwa, a MJF centre where we treat children with Down’s Syndrome, autistic children, abused children, and another one in Rajagiriya that helps children with Cerebral Palsy. If you go there, you will give away all your wealth to those people. We have several other centres in the country and a big one in Kalkudah in the East on 22 acres of land, entirely devoted to the welfare of underprivileged children and others.
So the lesson I learned from this business is a great one; a lesson for all other business people. That is, when I started sharing my profits in the in the first year itself, in a small way, it got bigger and bigger and my business grew.
Today, many of my employees’ children have benefited from my Foundation’s scholarships and have become doctors, lawyers, and architects. The MJF Foundation has a broad education programme which includes scholarships for children at Ordinary and Advanced Levels, thereafter for University, and vocational training.
Plantation tea picker’s children today are doctors, lawyers, and judges, and have achieved amazing success. So this proves that a little bit of help to the poorest child in our country can make them all grow to what you and I can become.
Your foundation the MJF foundation has long been heavily involved in making life better both for people and planet. What kind of a better world do you envision through it?
I learned a lot from this exercise and I’m happy we give away so much. My children are following in my example; my grandchildren are following in my example, so I’m sure that the good Lord directed me all the way. All my success is owed to Jesus Christ, who leads me, shows me the way, and teaches me to help those who need help.
Everyone, every consumer helps me to help the poor and I sincerely hope that the success of my business; the moment it started flowing towards the poor and the needy, will continue to become a method of human service.
I appeal to all other successful businesses to share a tiny bit of their earnings to make other people happy, or poor people happy; the sick and needy to be comfortable, and their businesses will thrive and grow beyond their belief.
Finally, when I say we come to this world with nothing, we go with nothing. The wealth some of us acquire it with the help of so many others. Therefore let us learn to share that wealth with the community and the world will be a far better place than it is now.
Dilmah has been at the forefront of value addition, with a host of new products including Tea Beer as well. How have they been received?
We do everything with tea, and we have opened tea centres and tLounges all over the country, and in other countries also there are a lot of people asking for them. We do amazing things with tea. We are totally committed and dedicated to tea. Airlines from Australia, Air New Zealand and leading Middle Eastern airlines carry only Dilmah,
Emirates, works closely with us for training through our School of Tea, and tea inspired innovation that enhances the guest experience in-flight and in their lounges globally. Six or seven out of ten five star hotels will have Dilmah Tea. That’s what we earned, because we served absolutely spotless quality, fresh with my heart and soul in that tea. Nothing has changed and nothing will change.
For your information, if you see the export earnings of this country, Dilmah Tea earns Rs.2,000 to Rs.2,200 per kilo. A few others earn over Rs.1,000 but the majority earn Rs.800 or below. This is because our governments and institutions do not do anything about marketing, and they will not know how to support marketing, how to encourage value addition. There is much talk, but little action in terms of effective promotion, adequate incentives for value addition and enforcement of the standards we need in the industry.
How can Sri Lanka take advantage of its many resources and products through value addition?
We have products with high potential such as our tea, our coconut products, and spices. Our spices are a gold mine. The government must recognise the need to add value. The world has changed dramatically, especially in 2020, and to help the tea and spice growers, as well as the exporters and our national economy, we need expertise and focused effort.
They must identify people who are successful in branding, marketing, advertising and promotion. Government servants can’t do this. Government officials, however clever they may be, can never handle these aspects. It is impossible for a regulator to also assume the role of marketer. There are successful marketers in Sri Lanka. If five or six people should get together and tell them now work for your country, and retain all the value addition of our bulk tea exports, that used to enrich other traders, for the benefit of the country. Then it will be done.
However, if I go and tell them how to sell tea or how to brand it, and market it like I have done, they will say “very good” but they don’t know how to do it. They will get government officials to do it but they don’t have a clue. So the implementation is lacking.
Now our president is very keen on value addition, and he has referred to Dilmah several times, and I can give all the ideas, but who will implement them? Government servants can’t do it. If our value added exports are shipped as value added branded products, the income from our exports will immediately double, and in three or four years’ time they will be selling at three times the price. I know exactly what I’m talking about, and I do believe that it is the case.
Your legacy in the tea world is beyond comparison; however what is your future vision for Ceylon tea?
Well I’m surprised that our government and our plantation community have virtually written off the tea industry. It is an herbal product. It is the world’s most popular natural beverage, but we have written it off. In the correct hands, it will grow and grow and be more and more successful if it is handled well.
Now we are talking about COVID-19. The Chinese say they steam inhale four times a day, and drink four cups of tea a day. So we do not know how to cash in on those things. We do not know what effective advertising and promotion is. The people in charge of those things haven’t a clue about marketing, so that is our fate.
I’m not criticising anybody, I’m just saying the opportunities are there, but we do not know how to seize them and take advantage of them and turn those opportunities into cash. However, there are people who can do it and help the government, if they’re given the proper incentives and are allowed to do this without interference.
What kind of stumbling blocks did you have to face at the start?
When I started, even the government was against it, and not aware of what I was going to do. All the multinational companies had their representatives here. The big companies and multinationals at the time used their clout to tell the government that if my company starts exporting tea bags and value added teas, they will stop buying Ceylon Tea. So I was told this by Treasury officials, so I explained to them that the multinationals have already reduced their Ceylon Tea purchases, and they will progressively reduce Ceylon Tea in their packs.
For example, they were buying about 80 million pounds of tea in the 1970s and 80s. Today they buy about 20 million pounds when the prices drop, nothing more. So that was the trend. I saw it coming. The government officials also said, you can’t do this, because this may happen. I said, no, that will not happen and I fought my way through and I got it.
All our exporters turned against me. They published articles in the newspaper condemning me and at the end of it all, I gave the government ideas on how to add value and promote and advertise. I served on the Tea Board for some time and gave all the benefits and advantages, but as soon as I left they reversed all those things.
We are sitting on a gold mine with our produce, but we are not able to take advantage of what they offer. I have no doubt the President is working very hard towards value addition in our products. Yet he needs people with the knowledge and commitment to implement his vision.
What advice would you give to upcoming entrepreneurs?
An entrepreneur is someone who creates something out of nothing, but his vision and the commitment must be there. We have a programme in the MJF Charitable Foundation, the Small Entrepreneur Program, where we don’t fund anybody but we buy all the tools and machinery that they want even if its Rs.15 or Rs.20 million. You will not believe how those entrepreneurs have risen and developed their businesses, because the first thing is a young entrepreneur goes to a bank or development banks and asks for a Rs.1 million loan. For this, the bank asks for collateral. What can he mortgage? He has nothing to mortgage, so he doesn’t get the money and all that talent withers.
What I believe is that government should launch a fund managed by successful entrepreneurs. They will be able to identify viable business after talking to 10 people and provide the necessary support. That is the kind of support that is needed. I tell young entrepreneurs, aspiring entrepreneurs, whatever you do have 100% commitment. If you have no money, go to a bank or some other source, go to a friend or relative and make you case. Offer a shareholding in the company.
I could have never have grown the way I did in my initial stages the way I did, but luckily I met the Managing Director of National Grindlays Bank Mr. Glen Gash, he gave me millions of rupees without any security and guarantee. Never did he refuse to give me an overdraft. My first overdraft was Rs.400,000, then it went up to several millions. I was fortunate enough to get bankers who trusted me. I never provided a mortgage.
Therefore I started saving money, and in the last 25 years I have not borrowed a single cent from any bank. All my businesses are funded from our own capital. That is carefully planning for the future. I wish there was a body of four or five entrepreneurs, who can advise people, spend their time, teach others to start businesses and how to grow. Our business people are generally content with what they do.