Planter's success allows him to venture on to bigger things

  • Business
  • Thursday, 31 Jul 2014

SINCE it is relatively young compared to more famous tea brands that have been around for over a hundred years, not many are aware of how the tea company Dilmah changed the face of the tea industry worldwide.

As a young man working with the tea growers of Sri Lanka in the 1950s, Merrill J. Fernando, the founder of Dilmah , bore witness to the commoditisation of tea by tea traders from Europe.

Today, Dilmah is one of the largest independent tea companies in the world and competes against much older brands owned by huge multinational corporations.

“Ceylon tea was once regarded the finest in the world and they used to be produced by small family-owned plantations in Sri Lanka,” said Fernando.

But over time, big tea brands acquired over 75% of the tea producers in Sri Lanka and those that refused to sell were soon forced into bankruptcy because of their inability to compete with the large corporations.

Fernando was 24 years old when he was sent to be trained in the blending and marketing of tea in Mincing Lane, London — the mecca of tea at the time.

Fernando's idea to  produce and sell single-origin pure Ceylon tea helped to stop the trend towards the commoditisation of tea.
Fernando's idea to  produce and sell single-origin pure Ceylon tea helped to stop the trend towards the commoditisation of tea.

There, he observed with his own eyes how quality Ceylon tea leaves were simply treated as raw material, had value added through its packaging and sold at profits that earned the distributor at least 10 times more than the tea growers of Sri Lanka that lived in poverty.

“In reality, the ‘Ceylon tea’ marketed by the big brands only contained a percentage of Ceylon tea leaves mixed with tea leaves of other origins to save on costs,” said Fernando.

“I knew that it was only a matter of time before Ceylon tea leaves were phased out completely from these old brands that everyone knew and loved.”

As a result of bringing down the quality of tea, the price of tea plummeted, making it nothing more than just another commodity.

Having neither the money nor capability to change the industry at the time, it was not until 1988 when Fernando could finally create his own brand of tea, Dilmah — a name that comes from combining the names of his two sons, Dilhan and Malik.

Dilmah ran on a simple concept long forgotten by those big brands — single-origin tea, which means that Dilmah grows, produces and markets all of their own “100% pure Ceylon tea” from Sri Lanka.

Today, 26 years after Dilmah’s first exports to Australia, the brand enjoys worldwide recognition for its quality and is the crown jewel of Fernando’s group of companies under MJF Holdings Ltd.

With a market value of US$500mil (RM1.6bil), Dilmah controls about 18% of all tea production in Sri Lanka and enjoys a compound annual growth rate of about 8%.

And unlike other big corporations in the industry, Fernando runs his company on strong family values, committing his business to the service of others.

“My mother was a charitable person so when I started my business, I wanted to share the company’s profits among the farmers and workers,” said Fernando, who has been doing this long before “corporate social responsibility” became the buzzword it is today.

Under Fernando’s leadership, entities under MJF Holdings are obligated to contribute 10% of profit before tax to the MJF Charitable Foundation, which looks after their workers and underprivileged children and families in Sri Lanka.

“We allocate about US$3mil a year to charity and almost half of my personal revenue is contributed to our various causes,” added Fernando.

What is unique is the fact that the MJF Charitable Foundation only uses the money raised by Fernando’s companies and does not accept outside donations.

That benevolence was later expanded with the establishment of the Dilmah Conservation initiative, which is involved in elephant conservation, marine conservation, ecosystem restoration, indigenous community upliftment and more.

“To have succeeded means that we have an obligation to share our wealth with the poor in the community around us, and that is what Dilmah is all about,” Fernando added.

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