The Sundaytimes Sri Lanka

Supporters of free tea imports are traitors, asserts Merril J Fernando


The Ceylon tea industry is different to that in all other countries because while multinational traders have successfully converted their tea into a commodity, Ceylon Tea has managed to stay aloof as a specialty, origin dominated product, says the country’s tea pioneer – Merril J Fernando.

“We maintain at any cost and under all circumstances, every promise held out at the launch of Dilmah tea in Australia 24 years ago. Whatever we say and do, the real success of Dilmah tea comes from the quality of Single Origin PURE CEYLON TEA, packed right where it is grown. That is ve

Merril J Fernando and his two sons - Malik (centre) and Dilhan at a Dilmah Distributors Conference a few years ago.

ry largely the strength of the brand. The company has proved beyond doubt that Ceylon Tea enjoys consumer perception of quality, which other producers envy,” he said in the chairman’s review in the latest annual report of Ceylon Tea Services (CTS), the Dilmah brand builder and owner.

With gusto, Mr Fernando waded into  a new debate that burst into the open a few months back with a section of the tea export sector urging a review of the regulations that restrict tea imports for blending on the grounds that the market is more favoured for multi-origin tea than single-origin like Dilham and a few other brand builders. He called these lobbyists ‘traitors’.

“Our tea traders, in their failure to build Sri Lankan brand names, owing to their drive for quick profits in the role of suppliers, instead of marketers, are now looking for a trading platform. Everyone who supports free importation of orthodox style tea will turn out to be a traitor of the industry and the country. The 150-year-old industry should not fall into the hands of adventurers who may, both wittingly and unwittingly, destroy our great industry,” he said, oftenly repeating statements he has made over the years when various calls were made for imports.

He said the current debate on making Sri Lanka a centre for trading in tea, and making Ceylon Tea a commodity, is an age old wish of a few tea traders. Vested interests, both local and foreign, are bringing pressure on politicians to pursue this adventure once again. “Let it be a warning to everyone who advocates the removal of restrictions placed on the import of orthodox tea, that they are treading dangerous ground, filled with assumptions and illusions. Their assumptions are far from realities in the market place. Demand for this flows from traders who built brands of foreign companies who, with time and well known purpose, moved to more convenient locations,” he noted in the review which referred largely to these issues and global marketing trends.

The Dilmah owner called for a new dialogue between workers and trade unions essential to improve productivity. “Our production costs are high, due largely to pressure brought on plantations companies to yield to unrealistic wage demands. Whilst earnings of estate workers are not very high, low productivity has rendered the wage completely out of proportion with worker contribution. The answer is to establish an ongoing dialogue with workers and trade unions to resolve this issue.”

He said an aggressive redevelopment programme of plantations, with special emphasis on replanting, will increase yields and reduce the cost of production. These are the urgent needs of plantations today. On the global downturn, he said giant FMCG companies and other trades have seized the opportunity to develop a culture of discounting over the past five years. Retailers have welcomed it by driving suppliers in all categories in the same direction. “This culture forces many small and medium suppliers concentrating on quality, out of business, in their inability to accept deep cuts and simultaneously, maintain product integrity. This discount culture is exploited by big suppliers and retailers to eliminate competition and to dominate in their respective trades,” he added.

But he noted that the present economic conditions will not last forever. “They may well begin to improve in the next two years when consumers with cash surplus will begin to look around for quality,” he said, while stating that brand names which flouted their integrity are likely to retain their present low quality but, no doubt, increase their prices. “That is the power of old colonial era brand names which consumers still respect.”

To change the outlook for tea, immediate measures should be introduced to encourage and incentivise tea producers to actively engage in exporting tea, with special focus on building Sri Lankan brand names. Within three years of implementing such a strategy, the outlook would be different, he said.

In such a case, he believes Sri Lanka would be the first country which encourage farmers to market their tea crop by establishing links with end users in supermarket chains, department stores etc. Other producing countries will turn to Sri Lanka for direction and guidance, he promised adding that “that is when Sri Lankans will realise how, by retaining the benefits from value addition and marketing of our produce will make our nation prosperous and proud.” In the meantime, group turnover was Rs 5.8 billion in 2011/12, virtually unchanged from earlier while post-tax profit was Rs 1.67 billion versus Rs 1.4 billion in the earlier year.

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