Dilmah and its initial struggle

I have often heard it said that Dilmah, as a brand name, received exceptional assistance and favours from the Sri Lanka Tea Board and the late Minister of Plantations Major Montague Jayawickreme, who was my ex-father in law for 12 years.

I didn’t bother about the rumours for several years although they were unfounded. However, noting this misconception of several decades persists, as mentioned to you in your investigations for the Special Report on Ceylon Tea in The Sunday Times FT of September 23, I am compelled to explain the reality behind the allegation, which is based on rumours generated by vested interests and disgruntled individuals, so that my sons will not have to face the same issue in future.

For many years, while I was engaged in exports of bulk tea, I was unaware that the Tea Board was providing vast funds to some exporters, mainly multinationals. Very large sums were dispensed year after year. Two or three local exporters also benefited from these grants. I could not understand the logic behind these investments. All of them supported foreign companies at this end or the other. Funds were generously extended and exporters were not required to contribute one single cent in matching funds.

I served two terms on the Ceylon Tea Propaganda Board (CTPB), the predecessor to the Sri Lanka Tea Board, as representative of the Colombo Tea Traders Association. At that time members of the CTPB were exclusively foreigners and local employees of agency houses or multinational traders. I was quite young and had acquired a working knowledge of marketing. My little marketing knowledge appeared to be very significant in the total absence of any among my colleagues at the time. At my first meeting of the CTPB, I drove home the importance of developing our own brand names. That was over 40 years ago. Most members of the Board ridiculed me for my ignorance of “realities in the market place”. Nevertheless, I stayed true to my strategy for eight years.

During this time, I had antagonised many of the senior officials of the CTBP. I did not hesitate to point out flaws in administration and suggested corrective action towards making it a dynamic arm of the tea industry. They were not used to such criticism and resented my presence on the CTPB. However, Board members and some officials were aware that there was some sense in what I was trying to do. But they believed that we as “natives” lacked the expertise to compete with “foreigners” in marketing tea.

Besides, they were unwilling to think of supporting any form of producer marketing; fearing that our large bulk tea buyers would turn against us. Yet nearly all our once captive markets were already being eroded, as our exports to those countries had dropped by 50% or more. I did not get very far but I did create some awareness of the desperate need to market our tea, in the long-term interest of the industry.

The establishment of the Tea Board in 1976 recognised the importance of the tea industry. If there had been marketing talent in our country at the time, Sri Lankan owned brand names would command a significant and profitable segment of the global tea industry today.

My first real contact with the new Tea Board was when an official attached to the Tea Centre in London asked me to participate in a joint venture project. I was conscious of the fact I would not receive any favours because every employee of the Tea Board, in Sri Lanka and overseas, became aware of my vision for marketing our tea and incorrectly assumed that it would reduce the importance of their roles. I realised that he came to me in desperation, having failed in his discussions with two other exporters. When he explained the project I realised that it would be money down the drain but did not say so until much later.

The project was “Thé 1868”, a brand of French company TGA Distribution. TGA was a new company trying to launch their brand name with the support of the Tea Board. TGA Advertising was the advertising agency in France for the Tea Centre London, which was responsible for European activities of the Tea Board. Thé 1868 was to be launched as a private label product, supported and generously funded by the Ceylon Tea Centre. TGA lacked the required knowledge and experience in marketing as well as the facilities necessary for distribution. They were paid brand name and packaging development costs, which in France, even at that time, were quite substantial. They were also paid all advertising and promotion costs. TGA did not have to invest any funds in the project at this stage.

The owners of TGA were introduced to me and I found them to be nice people to work with. They visited Sri Lanka with samples and we had several meetings. I persuaded them to change to a more appropriate quality and grade of tea. Soon we were ready with the first shipment of Thé 1868. During this period I explained to the Tea Board official in good faith the futility of this project. I pointed out that, if it was successful, it would be one more brand, which sooner or later would compete against Ceylon Tea. He understood but showed resentment.

Thé 1868 was launched and a repeat order was received. A short while later a representative of TGA had been seen in Colombo. I was surprised that he was in Sri Lanka without my knowledge. We managed to contact him and enquire about his visit. Not surprisingly, the Tea Board London employee, who by now was transferred back to Colombo, had invited TGA to meet another exporter who would supply cheaper. We received no more orders. Needless to say Thé 1868 eventually failed. It did however inspire me to soon venture out marketing my own brand of tea.

I made a presentation to members of the Tea Board, outlining as best as I could, how I intended to succeed.

I took this opportunity to explain the failed Thé 1868 project. I forced the view that unless bulk tea exporters were assisted to develop their own brands, the tea industry would continue to be subject to exploitation. A member of the Tea Board at that time was Victor Santiapillai, Chairman of the Export Development Board and importantly a very senior marketing hand, as Director of the International Trade Centre, Geneva. He briefed members of the importance of brand marketing our tea and stressed that every encouragement and assistance should be offered to suitable companies. I followed with my project ‘Dilmah’, seeking assistance to launch initially in Australia. This was the first ever attempt to launch a consumer brand of Ceylon Tea owned by a Sri Lankan firm.

The members displayed tremendous enthusiasm and voted the funds solicited, as I recall Australian $300,000.00 (Rs 5.9 million then). In the usual manner the Secretariat would then come up with a plan worked closely with the exporter. In this case, I was ever consulted and to my horror, the bureaucrats submitted a board paper recommending that due to limited funds, my project and all future projects should be funded 50% by the exporter. This was contrary to the procedure all this time, which benefited foreign owned brands and was clearly aimed at sabotaging my project. I explained to the Board that the Secretariat opposed my project, for reasons previously explained and that I would like them to understand that, unlike bulk tea, value addition requires huge investments on plant and machinery, packaging, business travel, advertising & promotion. Importantly it also involved the payment of listing fees & related promotional funds to supermarkets.

At this point, Mr. Santiapillai, appreciating the significance of the project to the country and the tea industry, undertook on behalf of the EDB to pay the 50%. At the next meeting of the Tea Board, a new proposal was submitted by the Secretariat, recommending that the funding should now be three ways – Tea Board, EDB & Dilmah. Clearly, the objective of the Tea Board bureaucrats of the time was to scuttle my project without any regard to the national interest. It was discrimination against their own kind.

The official behind the Thé 1868 debacle had by then unofficially assumed the position of self-appointed marketing expert in the Tea Board, not having grasped the very basic concept of Sri Lankan owned brands.

Finally, some concessions were made by members of the Tea Board, enabling me to set off against my one-third share some of the expenses already incurred. The Dilmah project still lagged behind due to machinations of secretariat personnel who were intent to deny the first Sri Lankan owned brand the light of day.

At no stage of these painful experiences did I appeal to the Plantations Minister, Major Montague Jayawickreme, who by then was my ex father in law for over 12 years. Not once did he make a request to the Tea Board on the Dilmah project. He was completely unaware of what was being done to this project. However, he was made instrumental in authorising special funds for other projects, which the Secretariat privately supported, where the Board did not approve. The reason given by them, when queried, was “the Minister ordered payment.”

These officials did not cease to cause pain and embarrassment to Dilmah. Even after the project commenced, their harassment continued in the form of delayed payment to promotional agencies and the like, delays of several months in some instances.

Dr. Wickrema Weerasooriya, Sri Lanka High Commissioner in Australia at the time, intervened to save embarrassment to our country. Yet the Tea Board officials continued their opposition to Dilmah, even disregarding Dr.Weerasooriya’s advice.

What is stated above presents the true facts surrounding the promotional assistance extended to Dilmah. The industry will hopefully realise that whilst today, Dilmah is being hailed as a role model for adding value at origin; it was very nearly stillborn due to the hostility the project faced at the outset.

Dilmah did not receive a fraction of the generosity extended to several hundred bulk tea exporters towards supporting foreign brand names which have become our biggest competitors today, many not using an ounce of Ceylon Tea now. I received not even basic recognition for pioneering the value addition of Ceylon tea.

Million of dollars invested by the Tea Board on various projects, over approximately 50 years, have failed in their objective. Dilmah, as the solitary success story, attracted unfair, negative attention. Most of my colleagues in the industry understand the reasons for my determination and the value of Dilmah for the Ceylon Tea industry.

Dilmah paves the way for other Sri Lankan brands today by establishing in the minds of consumers the fact that Ceylon Tea is a high quality product. One has only to observe several Sri Lankan brands that have entered Australia, Vietnam, Poland and other markets in which Dilmah strongly re-established the quality image of Ceylon Tea, to understand the extent to which they borrow from the Dilmah Story to build their own brands. That is to be expected, although they disregard the most important aspect of Dilmah, which is to offer a quality product at a premium price, providing funds for proper marketing, advertising and promotion.

Dilmah invests US$ 6-8 million per year on advertising alone. Our advertising highlights the quality of Ceylon tea and rebuilds its image for the benefit of all.

My references are strictly to the bureaucrats of the Tea Board of the 1980’s. Fortunately, that era is history. I have great respect for the Tea Board and its staff of subsequent years and now.

Dilmah and its initial struggle - Letter