Merrill J. Fernando, the founder of Dilmah Tea, passed away in Colombo Thursday morning. He was 93.
His sons, Dilhan and Malik, after whom the company was named, announced the passing on Thursday afternoon.
Fernando was born on May 7, 1930 in Pallansena, Negombo, in the west of Sri Lanka, to P. Harry and Lucy Fernando, described in Dilmah’s history as ‘a middle-class couple of modest means’.
He attended Maris Stella College in Negombo, and St Joseph’s College in Colombo, and his first job was with a US petroleum company, as an inspector. After independence from Great Britain in 1948, when Ceylon became Sri Lanka, the mercantile professions that were once reserved for the British began being opened up. Fernando applied to be a tea-taster in 1952 and was in the first batch of trainees to be sent to Mincing Lane, London.
What he observed in what was once the “mecca” of the tea trade was dysfunction. He recalled to this author in 2014, ‘I was very disappointed, because I regarded British people of that era [as possessing] very high integrity, but I saw them mixing Ceylon teas with other teas and labelling them “Ceylon tea”. These would include cruder teas from Africa. Ceylon tea was a major employer and a foreign-exchange earner, but there were African companies undercutting us, and would usurp its reputation. The thought of having my own brand haunted me.’
Fernando briefly worked for a tea business in London before returning to Sri Lanka, joining A. F. Jones & Co., a British-owned tea business. Within four years he had been appointed a director; and when the British owners decided it was time to return to the UK, Fernando and a partner purchased their shares. He even helped supply the first consignment of Ceylon tea to the Soviet Union at this time. After selling up his shares in A. F. Jones, in 1962, he founded his own firm, Merrill J. Fernando & Co., with the aid of a US$100 loan from his father.
He recalled how the tea was being supplied to reputable family companies in plywood tea chests initially, but soon, multinationals moved in to the field. They were buying the family-owned businesses in Sri Lanka, forcing the smaller ones to go out of business through discounting. ‘There was an annihilation of small businesses,’ Fernando said. ‘Globalization only benefited the big boys in developing countries, and mass unemployment resulted.’
The acquisitions resulted in poorer quality as the corporations continued their approach of mixing teas from different origins, ‘making tea a commodity. They took away the right of consumers to buy Ceylon tea, and they were forced to pay extra for a brand name.’
The dysfunction also meant that the producers in Sri Lanka benefited little, with the value-added components all being done in Europe. Middle-men and the multinationals were the winners in the transaction.
Nevertheless, Merrill J. Fernando & Co. continued to supply bulk tea, resisting the multinationals, and made useful contacts around the world. It became one of the top 10 bulk-tea exporters in Sri Lanka, and the only locally owned one.
He purchased Melton Estate, a tea plantation, to begin vertically integrating his operation in 1971.
However, the socialist government that had just come into power decided to nationalize all plantations. Coupled with increasing regulation, Fernando sold the business with the intent to emigrate to Ireland, but was persuaded by friends and clients to remain in Sri Lanka. Having decided to stay, he established MJF Exports Ltd. in 1977, and lobbied the government to give incentives to exporters of value-added teas. In the 1970s, it became the fourth-largest exporter of bulk teas. He imported the first tea-bagging machine into Sri Lanka, and faced heavy criticism from other Sri Lankans and from his customers, who believed the country should remain a commodity supplier. ‘It was hard to innovate in the late 1970s,’ he recalls. ‘I do not know what made me do that … to start doing the process of value addition in Sri Lanka.’
The machine remained under-utilized for years and Fernando had to weather those forces who wanted to keep Sri Lanka a supplier of raw materials. However, he persevered with his vision that if consumers wanted Ceylon tea, that was what they should have, not what certain multinationals passed off as Ceylon tea. By supplying consumers from the point of origin, the tea could be fresher and of higher quality. A few were convinced, and decided to stick with Fernando and his vision.
The MJF Group, as it became, wound up being a key stake-holder in over 50 of Sri Lanka’s best tea gardens. It controlled the second-oldest tea broker in the country, Forbes & Walker.
He continued to push the idea through the 1980s, supplying Coles, Tetley, Woolworths and Franklins through OEM deals in Australia, while learning about the market-place. In 1988, Dilmah Tea was launched, the first producer-owned tea brand from Sri Lanka, at substantial risk and criticisms from some of his buyers saying that he would never succeed because he was not close enough to the customer. ‘I started with very little money,’ said Fernando. ‘I realized if it failed, I would have lost all the money I had made.’ He credited his Christian faith: ‘There was somebody encouraging me, guiding me. Divine guidance directed me to do everything right.
‘I named the brand after my children: that showed total dedication. Conviction is the only way a country can benefit from agricultural crops, to stop foreign traders driving people deeper into poverty.
‘For trade to be fair, the packaging must be done in the country, not by third parties. When traders do it [with other brands], they keep the people poor.’
But it wasn’t just about selling the tea: it was everything about value creation. ‘There were no graphic artists and no three-colour printing. No one could advise about designing labels or packaging. I invested $180,000 buying an American-manufactured printing press.’ Today, the printing company Fernando set up with Krishnamurthy R. Ravindran is one of the top five printing–packaging facilities in the region.
Fernando said, ‘I set an example of how a producer country could retain, in the country, all the profits taken away by traders in branding, marketing, printing and packaging, that had been done in industrialized nations. There have not been any serious followers, because of the investment, and the people.
He made a promise to share his earnings with the poor, the disabled, and with the Sri Lankan community, which he followed through.
His MJF Charitable Foundation was formally set up by an Act of Parliament in 2002, locking in its ongoing benefits to those working in the Sri Lankan tea trade. It has helped the most deprived in the community, through programmes created in consultation with the people they are meant to help. The programmes are also designed for economical and environmental sustainability. In 2004, it won a Brands with a Conscience award from Medinge Group, the humanistic branding think-tank.
By the beginning of the 2010s, the Foundation helped the workers’ 3,000 children in development centres, providing them with lunch each day (a programme which began in 2007). Special-education classes in maths, English and science reached 8,500 children. Sanitation projects, prisoner rehabilitation, health care, the preservation of Ayurvedic medicine and elderly care have also benefited from the Foundation. There have also been programmes for disabled children, a Women’s Development Programme, and a Small Entrepreneur Programme. All told, the projects have helped hundreds of thousands of people.
Fernando was active in his business till he was 91, when he stepped down in favour of his sons. He kept a supervisory role till his death.
He was surrounded by his sons and his grandchildren when he passed. His remains will rest at the Restpect Funeral Parlour on Friday, July 21, from 8 a.m. to 8 p.m., and Saturday, July 22, from 8 a.m. to 12 p.m. A private burial at Our Lady of Sorrows Church, Pallansena, Negombo, will follow.
Jack Yan, who first met Merrill J. Fernando in 2005, is founder and publisher of Lucire. He wrote extensively about Merrill J. Fernando and Dilmah Tea for the book Brands with a Conscience: How to Build a Successful and Responsible Brand, from which some of the above obit was taken.