Trouble brewing: Beloved tea bag brand could be pulled from supermarket shelves amid bitter dispute with Coles and Woolworths
- Price dispute with Coles and Woolworths leaves a bitter taste
- Sri Lankan tea producer refuses to compromise quality for cost
Dilmah Tea is threatening to remove its popular products from supermarket shelves in Australia amid a bitter price dispute with Coles and Woolworths.
Chief executive Dilhan Fernando said major supermarkets are “demanding discounts” and refusing to pay a premium for their handmade, single-origin Ceylon tea bags.
If the trend continues and no agreement is reached, the Sri Lankan company could refuse to supply Australian supermarket chains.
While Dilmah remains the 10th largest tea brand in the world, it has not made a profit in Australia since 2009 and is seeing its market share shrink.
Over the past five years, sales in Australia have fallen from $37 million to $29 million.
Mr Fernando said the way Australia’s supermarket giants operate is essentially an ‘unfair trading system’.
Dilmah Tea is threatening to remove its popular products from supermarket shelves in Australia amid a bitter price dispute with Coles and Woolworths. In the photo: a woman drinking Dilmah tea
Chief executive Dilhan Fernando said major supermarkets are ‘demanding discounts’ and refusing to pay a premium for their handmade, single-origin Ceylon tea bags (pictured)
‘The manufacturer must be enabled to passionately offer a product that does not cut corners. That is only possible if a fair price is paid for the product,’ he said The Australian.
Consumers are looking for quality. But the directions we’re being pushed in are an abandonment of this… It’s insane. We are forced to chase our tails to deliver the next big thing when what we have in our hands is so substantial.”
Dilmah, sold in 104 countries around the world, has been a fixture in Australian supermarkets since the first deal with Coles in 1988.
The company refuses to weaken its commitment to sustainability and ethical sourcing in order to offer Australian supermarkets a lower price.
Mr Fernando, whose father Merrill founded the company, said consumers want quality single origin tea (not blended tea) but that this is being ignored by supermarkets looking only for higher profits.
Another reason Dilmah is unwilling to cut spending is that it feels a responsibility to Sri Lankans to support the estates and workers that supply its produce. 95 percent of this is exported.
This has become even more important due to the difficult economic times Sri Lanka has experienced in recent years, with an inflation rate of 50.6 percent in February.
Dilhan Fernando, CEO of Dilmah Tea, pictured left with his father Merrill, the company’s founder
Pictured are workers hand-picking tea leaves at the Dunkeld Tea Estate operated by Dilmah Tea in Dickoya, Sri Lanka’s Central Province
The tea industry employs about 10 percent of the Sri Lankan workforce, making it critical to the country’s economic recovery.
Mr Fernando said maintaining quality is critical, especially as Sri Lanka is also on the frontline of climate change.
He believes Dilmah has a “responsibility” to care for the soil and develop sustainable farming methods, even if it means taking them off Australian supermarket shelves.
By trying to force the company to cut costs and cut costs, “you would be undermining and destroying an industry that has endured millions for 150 years,” he said.
Daily Mail Australia has contacted Coles and Woolworths for comment.