Dilmah tea in Woolworths, Coles: Why Sri Lankan company in Australia despite no profit since 2009 

Dilmah Tea – a staple of Australian kitchens since founder Merrill Fernando made his first deal with Coles in 1985 – is in crisis Down Under.

Australia was the first country to which the Sri Lankan brand expanded with its packaged tea – rather than bulk – which is now sold in 104 countries around the world.

While Dilmah remains the 10th largest tea brand in the world, it hasn’t made a penny in Australia since 2009.

Chief executive Dilhan Fernando told Daily Mail Australia that Dilmah is still operating in Australia because of the “gratitude” the company owes the country.

“We have a very sentimental relationship with Australia because my dad (Merrill) launched Dilmah there,” he said.

“We owe the Australian consumer a huge debt of gratitude, that’s why we’re following… what on the outside seems like a foolish decision to stay on.’

Mr Fernando said Dilmah has been loss making in Australia for so long because they refuse to cut quality to provide the big discounts retailers expect.

“You can go into any store and you’ll find yourself lured in with 50 percent off, 40 percent off.” But if you focus on quality, that’s really not an option,” said Fernando.

‘It’s not possible, because in the end any reduction comes at the back of the employees or at the back of the environment.

“And if you refuse to compromise, as my father insists that we uphold our principles, it’s very difficult in this current environment.”

He said giant supermarket chains operated a “fundamentally unfair trading system” when dealing with producers and manufacturers.

“I have to stress that it’s not just Australia, it’s a structure of retail in general,” he said.

When the global financial crisis erupted in 2008, stores introduced “an increasingly unfair system for producers” that can reduce their ability to help their employees and environmental responsibilities.

“Our expenditures to ensure our product is sustainable, integrate worker and community livelihoods, and be at the forefront of climate change require significant investment,” said Mr. Fernando.

Sri Lanka, like Australia, has experienced both floods and droughts in recent years, each of which affected tea crop yields.

Mr Fernando said Dilmah and its producers were working to mitigate climate change and address food security priorities of increasing concern around the world.

“The (retail) system worldwide is at odds with this, because the producer needs a fair price,” he said.

“But ultimately the consumer is at the top of this chain and it is the consumer’s responsibility to pay a fair price.”

The refusal to offer discounts that would only be possible by cutting quality has resulted in Dilmah’s shelf space declining for more than a decade.

However, Fernando does not blame the supermarket chains for this.

“I think instead of being a deliberate attack on Dilmah, it’s instead the fact that the brands are willing to discount and are willing to come to the party when it comes to big discounts, which we don’t realize can afford and of course they get more time in the sun,’ he said.

Dilmah’s market share in Australia has halved since 2010 and its future here is at stake, but the company is hopeful it can turn things around.

“This year will be a decisive one (for the presence of Dilmah in Australian supermarkets),” Fernando said.

“Fortunately, we’ve been negotiating for the past few weeks and the retailers in Australia are probably significantly better than the many we’ve dealt with around the world.”

He said recent publicity, including a Daily Mail Australia article about the brand’s declining shelf space, has led to “a significant change in attitudes and attitudes” from Australian supermarkets.

It highlighted the situation. We had consumers reach out to us and show their support,” he said.

“And I think it’s mostly raised the issue of producers.”

Mr Fernando said he was aware that domestic producers, particularly milk suppliers, have also raised concerns and explained their costs to consumers.

Dilmah has pulled out of a country in the past due to rebate demands.

The Irish distributor was taken over by an American multinational who expected a lower price, but Dilmah refused and said it did focus was on quality and it would not compromise.

The teas are no longer sold in Ireland.

Australian Dilmah drinkers probably have nothing to worry about.

“We have an emotional connection with Australia and Australians, that’s why we keep going,” Fernando said.