Visionary Leadership and the Case of Dilmah

D. C. Fonseka

Abstract

Merrill J. Fernando, the founder of Dilmah tea, is an icon in the global tea industry. He is a man who
revolutionized the industry which was dominated by multinationals, by bringing in quality and
integrity into tea. An ordinary man of humble beginnings, his passion and vision for tea remains
unchanged to date. He is a visionary who wanted to market his own brand of tea nearly four decades
ago, when branding and marketing were dominated by the multinationals. Today, Dilmah has
put Sri Lanka back on the global map as a destination, which grows the finest tea on earth, Pure
Ceylon Tea.

Dilmah is one of the eight global brands in the Medinge Group's top brands with a conscience.
Merrill Fernando pioneered the concept of single origin tea and incidentally is the world's first
genuinely Ethical Tea. The company remains Sri Lanka's number one manufacturer and exporter
of tea bags, accounting for over 21% of the country's total export of tea in bags. Dilmah is also the
world's first producer - owned tea brand.

At 78 years, Merrill Fernando is a legend in the tea industry with a wealth of knowledge gained
through a career spanning 58 years. A visionary leader, he built his company
Mr. D.C. Fonseka on family values, ethics and the knowledge he gained of the industry. Even
Chartered Marketer and
to date, these philosophies remain in the Fernando family and he assures,
member of the Chartered
Institute of Marketing, (U.K.). will continue to be so in the generations to come.
He possesses over 10 years
experience in the field of sales This management case study is based on the story of Merrill J. Fernando.
and marketing in the IT
industry. He is presently Through his vision he has changed the lives of many estate workers and
employed as a Corporate the poor while building a widely regarded fully owned Sri Lankan brand.
Account Manager, in a With Dilmah celebrating just over 20 years of business, Merrill Fernando
leading multinational. The
could proudly look back on a very tough mission; a mission accomplished.
article is a synopsis of the
case study submitted by him
as part of his MBA program. Key Words : Vision, Leadership, Values, Ethics

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1. The Origins of Tea

Tea is nature's gift to mankind. A beverage that heals, refreshes and protects, it is also infinite
in variety, changing subtly with the natural alchemy of sunshine, soils, wind, sand and
temperature. The origins of tea go far back as 5000 years when a Chinese Emperor first
discovered its benefits in 2737 BC. A few leaves of tea blown by chance into Emperor Shen
Nung's drinking water made a remarkable impact on mankind's drinking habits. With this
legendary discovery, tea was known as a medical drink healing many human ailments. The
habit of tea drinking slowly spread across the masses in China and by the end of the 6th
century the Chinese began to regard tea not only as a medical drink but also as a refreshment.
Nevertheless, it was Ceylon who made tea famous in the 19th and 20th centuries.

Ceylon tea was a front runner in the industry and was well accepted for its quality. However,
things changed when the Ceylon tea industry was taken over by the multinationals, about 45
years ago. The importance of quality was not given much prominence and instead the focus
was more on commercial and profit oriented factors. This was a time when Ceylon tea moved
away to multi - origin blended teas for cheaper products. It was an era when Ceylon tea lost
its global identity for its high quality and variety. During this time, a batch of Ceylonese tea
tasters was selected for the very first time to be trained in tea tasting at London's famous
Mincing Lane. Until then, a myth prevailed in the tea industry that the Ceylonese were not
suitable for tea tasting because they ate hot curries. This batch of tea tasters included a young
man of twenty who went on to conquer the world with his own brand of tea. This was the
beginning of a long and inspiring journey in marketing Pure Ceylon Tea.

2. The Early Years of Merrill J. Fernando

Born in May 1930 in Allansena village, six miles from Negombo, Mr. Merrill Joseph Fernando,
better known as Merrill J., was the youngest of five, three brothers and two sisters. Being the
youngest in the family, he was treated very kindly by his siblings as well as by his teachers in
school. So much so that on days he did not go to school, his teachers used to come and fetch
him from home. This was life in the village at that time, where people cared about each
other's well-being. Fernando's father, P. Harry Fernando, was a trader of very modest means
while his mother Lucih, a housewife was delighted in giving. He recalls his mother waiting
outside the verandah each morning calling out to the village people passing their house, on
the way to the fish market and shops, and giving them something for their children, usually
some buns or biscuits. His love for people and especially the underprivileged was deep
rooted in him from his early years. He started his school career at Maris Stella College in
Negombo ending at St Joseph's College, Colombo. After leaving school he got involved in
tea and was trained at Heath & Co, but at the time it was difficult for a Sri Lankan to find
employment, since the tea trade was dominated by foreigners. Therefore, he joined the
American Petroleum Company as an inspector. At American Petroleum Company he got the
opportunity to travel island-wide, and after a span of two years got back to the tea trade.
Though he initially wanted to enter Law School and become a lawyer, life had different plans
for him. A great plan indeed.

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Fernando had his initial training in tea tasting in London where most of the world's tea was
consumed. It was here that tea was bought and sold in a country that cultivated it overseas,
then imported and consumed most of the world's tea. It was here that he learned tea; a
finished product carefully handpicked and produced in a traditional and time- honoured
manner in Ceylon, which was benefitting the middleman in Europe much more than Ceylon.
He also learnt that this was a dysfunctional trade which was benefiting others and not the local
farmers. This made him think of developing his own brand someday, with the intention of
creating value for Ceylon tea and to the million or so workers, who made Ceylon tea possible.
This was a triggering event in his life, which made him look at the tea industry from a different
angle which, changed his outlook and eventually brought in new dimensions to Ceylon tea.

Upon his return from London, Fernando joined A.F. Jones & Co, a British owned company, and
managed its tea business, subsequently becoming its Managing Director within a few years.
He eventually bought over the British shareholders and ran the business with another partner.
In 1962, he set up his own company Merrill J. Fernando & Company, becoming one of the top
ten bulk tea exporters in Sri Lanka. Fernando recalls borrowing US$100 as a loan from his
father to start up the business, which he more than repaid by the time he was 33 years. He was
instrumental in supplying the first ever consignment of Ceylon tea direct to the then USSR. He
gained valuable experience in the tea trade and also developed a healthy relationship with his
buyers overseas, especially in Australia. This was at a time that saw many multinationals
entering the tea trade in Sri Lanka, and forcing many family-owned businesses to sell their
business or go bankrupt. The big companies introduced a culture of discounting and cheap
prices to eliminate competition. Tea became just a commodity and the trade was dominated
by three or four big companies. These companies' interests lay in sourcing products from
multiple origins at the lowest value regardless of quality and branding. The value of tea was
soon depreciating and consumers had very little choice in terms of experiencing pure Ceylon
tea. The big boys in the trade were more interested in the bottom line, and cared little about
the industry as a whole. Merrill witnessed this era where the tea trade was almost destroyed.
However, he stuck to his dream and vision and continued to supply bulk tea, developing his
contacts and gaining valuable insights into the industry, though he knew he could not continue
with this trend much longer. Fernando was different from many potential business leaders; he
was driven by a passion and not profit. His passion led him to look at things from a much
broader perspective and this eventually led to his success.

3. Merrill and His Initial Struggle

When Fernando bought his first tea plantation in 1971, the new socialist government had
been in power for less than a month. Their manifesto said they would nationalize all plantations
and take over their assets. In spite of this, he went ahead and bought a plantation in Dimbulla,
and spent huge amounts in developing it. Under the new government's Land Reform Act
during this time, no individual could own more than 50 acres, and hence the government
took over Merrill's estate, and in two years ran the business down. He was naturally disheartened
but was determined to continue with his vision for Ceylon tea. "At one stage nobody wanted
to know me; I was like a leper," recalls Fernando. He made every effort to convince the
government and let them know what he was doing, and soon the government began to give
incentives to exporters of value added teas.

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Going back almost 40 years, when Fernando was a bulk tea exporter, he served two terms in
the Ceylon Tea Propaganda Board (CTPB), the predecessor to the Sri Lanka Tea Board, as the
representative of the Colombo Tea Traders’ Association. During this time, members of the
CTPB were exclusively foreigners, and local employees of agency houses or multinational
traders. The little marketing knowledge acquired by Fernando impressed all his colleagues at
that time. At his very first meeting with the CTPB, he emphasized the importance of developing
our own brand names. This was an era when branding was hardly heard of, and naturally most
Board members ridiculed him for his ignorance of "the realities of the market place".
Nevertheless, he stayed true to his strategy. He strongly believed that if Ceylon tea was to
survive and avoid exploitation by multinationals, it had to be marketed through value addition.

Fernando recalls the dotted lion symbol introduced by CTPB, which was introduced to recognize
the local marketers, as a stepping stone in marketing Pure Ceylon Tea. However, CTPB made
a fatal error in allowing its use for 50% Ceylon tea. Therefore, blended teas with less than 50%
of Ceylon tea too carried the lion logo which gave a negative impression of Ceylon tea.
During his tenure at the CTPB he recalls speaking to the then Chairman and Managing Director
of Brooke Bonds on marketing our own brand of tea to which he responded saying, "Let's stop
talking nonsense; we cannot market tea from here." The challenges he faced were enormous,
and everyone around him did not believe in what he was saying. But Merrill J. never took a
back step, and proceeded to achieve his objective. During this time, he made a presentation
before the members of the Tea Board, outlining as best as he could, how he planned to
succeed. He took this opportunity to explain to the members that unless bulk tea exporters
were assisted to develop their own brands, the tea industry would continue to be subjected
to exploitation. Fernando continued with his project "Dilmah" , planning to launch it in Australia.
This was incidentally the very first attempt by a Sri Lankan company to launch a consumer
brand of Ceylon Tea. Unfortunately, a board paper was submitted recommending that due to
limited funds, 50% of project 'Dilmah" and all other future projects needed to be funded by
the exporter. This was contrary to the procedures followed. Unlike bulk tea exports, value
added tea requires huge investments in plant and machinery, packaging, advertising and
promotion. It was a daunting and uphill task for an exporter to fund so much money. After
much discussion it was finally agreed that the funding would be three way- Tea board, EDB
and Dilmah. This was indeed a challenging period to persuade the authorities concerned on
the value of brand marketing and to proceed with the project "Dilmah" , in the midst of many
obstacles. Even after the project was launched, challenges in terms of delayed payments to
promotional agencies and the likes needed to be dealt with. Fernando continued with his
project with sheer determination and faith, in developing a brand and marketing Pure Ceylon
Tea, with its true benefits to the consumer.

In the 1980s, Fernando imported the first tea bagging machine into Sri Lanka, in spite of
discouragement and opposition from the Tea Board and his clients. He was the pioneer who
initiated tea bags, which did not get much encouragement from either the government or
his peers. The machines were underutilized for several years. Merrill faced the wrath of bulk
tea customers who believed that Sri Lanka should remain a raw material supply source with
Europe, USA, Australia and New Zealand being the value addition points. During this time, Sri
Lanka was predominantly known as an exporter of bulk tea, and value addition was taboo.
Many raw material suppliers expected Sri Lanka to remain a bulk tea exporter, and not promote

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its origins as "Pure Ceylon Tea". Merrill Fernando was determined to change this notion. He
wanted to build a genuinely ethical brand of tea. In that era, for a bulk tea manufacturer to
move into branded tea, was a risk and a move that was discouraged by the marketplace. But
Fernando moved forward in pursuing and achieving his vision. Fernando was the fourth
largest exporter of bulk tea in the 1970's, and he moved into tea bags as part of his vision in
moving towards value added teas.

Fernando thought of introducing his own tea to the world, which would give consumers a
quality beverage, and farmers and workers a fair price. He thought if he was successful many
other entrepreneurs in the country would follow suit. It would have contributed to alleviating
poverty in the estate sector. With this thought in mind, in 1981, after several years in the bulk
tea export business, Ceylon Tea Services was incorporated.

4. The Birth of Dilmah

Fernando's dream was never to sell bulk tea and after 38 years in the industry saw the birth of
Dilmah in 1988, the first producer-owned tea brand, which was launched in Sydney, Australia,
a country that by then he knew quite well, with the contacts he had developed over the years.
He coined the name DILMA with an H added through a combination of his two son's names
Dilhan and Malik. In 1988, Merrill pioneered three important initiatives which today have
become hallmarks of Dilmah. It is distinct in being traditional tea that is single origin tea and
packed garden fresh. Traditional tea made in the orthodox style starts with handpicking the
leaves and continues through withering, rolling, oxidation and firing, a technique perfected
over the centuries. The alternative is CTC, a relatively recent method of production, which
Merrill describes as "tea without a soul". Single origin tea is important because one of the most
desirable features in tea is terrain -a sense of place. The alternative is to buy tea from wherever
it is cheap, and produce a multi - origin blend which is a lower cost option. "It works for coffee
but certainly not for tea," comments Merrill. In addition, tea which is garden fresh, guarantees
a rich and satisfying cup which is high in antioxidants. Dilmah was created on these foundations.
He believed that if the customers experienced Pure Ceylon Tea, which is 100% single origin,
that would be the clear differentiator and the success for his business.

When Dilmah was launched in Australia in 1988, the MJF Group at the time was the second
largest bulk tea exporter after Brooke Bonds. Merrill supplied tea to many small and medium
sized family owned businesses in Australia. So, he knew the Australian market very well and
he cultivated Coles as an account, since he knew they were getting their tea packed by the
multinationals. Thus, he worked on the buyer. He ensured that the quality of tea was of the
highest standard, and developed very close relationships with his buyers, thereby gaining
valuable insights into the Australian tea market. He learnt that Australia was a tag-less tea
market but gradually moving towards tagged tea bags. During this time, two of his friends
who were supplying Coles, approached him privately and requested him to supply tagged tea
bags for Coles and Tetley. Merrill at the time had two machines and he readily accepted the
order. As things progressed Merrill received more and more orders, and eventually Coles
visited his factory in Peliyagoda, and suggested some improvements. Coles were able to sell
Pure Ceylon Tea 15% to 20% lower than the locally packed tea since there were no middlemen

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involved. Gradually the demand for Pure Ceylon Tea increased, and soon Merrill was supplying
to almost all retailers in Australia including Woolworths and Franklins. Having been well
introduced to the market supplying private labels, he then decided to launch his own brand of
tea. He remembers the buyer saying, he didn't have a hope in hell of succeeding because the
big players knew what the consumer wanted and they did it well. But Merrill believed that the
big players knew what was good for their bottom line and not what the consumer wanted.

After nearly a year of convincing, he launched Dilmah. At the time the market leader was
selling 100 bags at $ 1.99 and Merrill wanted to price his tea at $ 2.90 since he believed the
quality of his tea were streets ahead. However, he was asked to bring his price down. "You
cannot disrespect the market leader, you must sell it below the market leader's price," was the
reply. Reluctantly he had to price his tea at $ 1.89. He never expected any hostility from any
competing brand, since Dilmah was tiny and hardly known in the market. To his horror and
amusement at the next promotion the market leader dropped his price to $ 1.49. It was a
price war and Fernando knew he could not sustain his business competing on price.
Nevertheless, he knew his tea was far superior to that of competitors and the consumers
would be willing to pay a premium since they recognized the difference. Since the consumers
were already exposed to the quality of Dilmah, when Merrill spoke to the buyers, they said:
"Merrill, we have great news, we had so many calls from customers thanking Coles for bringing
back Ceylon tea." Therefore, Merrill was in a position to continue with his Dilmah at a premium
which offered customers unmatched quality. Fernando never compromised on quality, since
he believed that was his strength which would eventually lead him to his success.

Dilmah brought back quality and integrity into tea. The focus of Dilmah was on quality and
freshness, which clearly differentiated it from the competitors. Merrill strongly believed that
if the consumer could taste his tea, they would know the difference, and what he was talking
about. Unfortunately, until Dilmah entered the market, consumers had hardly any choice.
They did not have an option to compare the quality of teas available in the market. With the
introduction of Dilmah, things were different. The consumers believed in the brand and it
remains the only brand that declares its origin as Pure Ceylon Tea. The consumers rallied
around the small man and told the supermarkets "Thank you" for bringing this tea back.
Fernando got numerous letters from consumers saying that this was the taste of tea that they
were brought up with, the kind that their mother and grandmother had. The word spread like
wildfire, and soon Dilmah was the talk of the town.

In the face of embarrassment the big brands in Australia came up with discreet campaigns
with the slogan "Buy Australian". Fernando goes on to say, their tea was no more Australian
than mine; it was all imported. He also claims that his factory to date is far better than any in
Australia and New Zealand, even at that time when he first launched in Australia. The big
brands tried every possible trick in the book to block Dilmah from succeeding in Australia. The
Australian trade went to the Labour government and claimed that they would lose thousands
of jobs if this project came through. But the government said that if it helped the consumer,
they would have no objection. Until Dilmah entered the market, consumers had no way to
judge the quality and integrity of tea, since all brands were practising the same. Consumers
started wondering why Dilmah was different. It reminded them of the quality of tea they had
many years ago, which saw the growth of Dilmah. Fernando always worked towards his vision

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of single - origin tea, and he never deviated from this vision notwithstanding the barriers he
encountered. Today, Dilmah is number two in the Australian market and catering to an elite
clientele who appreciates good quality Ceylon tea.

5. A Strategic Move- Going Direct

Though Dilmah was first launched in Australia, its story, in a way, began in New Zealand,
because it was an idea from the advertising gurus that changed the way Dilmah did business
globally, personifying the brand. For Fernando, the decision to peg his entire brand on himself
was risky and not an idea that he liked. But it first happened in New Zealand. For the first two
years in the Australian market, the company used TV commercials fronted by a Sri Lankan
model. But there was a constant plea from his ad agency in New Zealand to try the direct
approach. After much persuasion from family and friends, Fernando decided to give it a try.
During this time, Dilmah had a 3.9% market share in this market. Fernando recalls a moment
at Sails Restaurant at dinner speaking to a lady. "Look, if I go on TV, and talk about tea, what will
you think, will you buy it?" She said, "Yes, because if you tell us this is your tea, we will trust you
and buy it. If the product is good, we will stay with you. If it is bad, you will lose your integrity".
That very night the first ad was recorded. The script included how he dedicated his life to tea
and ended with a catchy phrase, "Do try it." This was in July. In September, the market share of
Dilmah had grown to 9%. Even now, Fernando recalls people calling out "do try it", when he
was on the streets in New Zealand and Australia.

With the hype created by the media, Bell Tea, which was the major player in New Zealand,
found that Dilmah sales were growing and was eating into its market share quite rapidly.
Therefore, the Bell brand launched a Ceylon tea called Rosemount, which failed, and then
launched Ceylon Gold Tea to counter the threat from Dilmah. Nevertheless, consumers
recognized the difference between the teas and increased its patronization of Dilmah. The
response was phenomenal and the people from New Zealand had the opportunity to taste
quality Ceylon tea. Fernando recalls undertaking his own marketing and putting his face on a
pack of Dilmah as the most sensible thing he did in his life and the greatest investment he
made in his brand. He is probably the only person who endorses his own product in the
present context. Over the years, consumers did patronize Dilmah with the image of Merrill J.
Fernando. It brought in a face to the brand in comparison to the faceless multinationals.
Dilmah at present is the market leader in New Zealand and has been number one for the past
four years with a commanding market share of approx 26%.

Due to his dedication, Ceylon tea was soon available in supermarkets in many countries. The
multinationals who were by then marketing Ceylon tea was concerned with profit , and
hence looked at options of cutting prices and quality, and invariably procured less Ceylon tea
which was high in quality and price. Cutting costs and cutting the heart out of a brand are two
worlds apart. These were brands built on Ceylon tea, though the consumers could not enjoy
the benefits of Pure Ceylon Tea. When Dilmah eventually emerged in tiny supermarket shelves,
the multinationals slashed their prices below Fernando's production cost with the intention of
wiping him out of the market. But by then, consumers had experienced the difference and
knew what Pure Ceylon Tea really meant.

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Fernando goes on to say, "I risked every penny I earned to launch Dilma. When I look back I
realize I took risks I normally wouldn't have to". The initial rejection of the business and the
hard work put into making it successful gave this business tycoon a thick skin to meet any
challenge fearlessly. In a category dominated by multinationals, when no one would dare to
take on the challenge, Merrill with his brand Dilmah challenged the market with quality
premium tea. Nearly four decades since then, Fernando has been able to create a brand that
has created a niche for itself in terms of quality, known the world over and associated with
many multinational organizations. Dilmah at present is marketed in over 90 countries
worldwide. The journey to date has been filled with many challenges and hardships which
Fernando has been able to survive through dedication and commitment.

6. Giving Back To Society

Fernando's vision now is that the value adding industry he initiated will influence the economy
of some Asian and African countries which place reliance on tea for their prosperity. He has
changed a regime of exploitation to one of hope and promise of a better life in the Third
World. Fernando believes that business is a matter of human service. Giving back to society
and especially to the less privileged in the industry was part of his long-term vision. Fernando
has a philosophy of sharing his profits and family wealth with the less fortunate. This is also
reflected in the management of the MJF Group. His philosophy goes further, as he says, "We
bring nothing with us and we take nothing with us. Therefore, the wealth we acquire while
we serve here, must be given to those who work with us, to the needy and towards alleviating
poverty." He has set an example by establishing The Merrill J. Fernando Charitable Foundation.
Some of his wealth has been transferred to the Foundation already, and all of it will be
transferred over the next few years. Fernando emphasizes that no individual could single-
handedly establish and build a business, and that the endeavor would only succeed with the
goodwill, involvement and dedication of the workers and the community. Fernando believes
that his love for the community and the people he works with is a result of his mother's love
and kindness shown to the villagers in his early days.

He relates how his family treated the domestics as part of the family. "Isabel, our middle aged
domestic, looked after us and scolded me if I made any mistake. My mother would side with
Isabel if I argued". He says that his mother taught the five children discipline, value and
respect for all. That was the culture in many villages at that time with no difference between
master and servant. He still makes it a point to visit the village once a year to give away dry
rations to about 200 people in memory of his parents. As Merrill grew up, these customs and
habits grew in him. "There was no jealousy, no enmity. If one family was more successful than
the others, people admired that family," he recalls. Today, more than half a century later,
Merrill's business Dilmah Tea is flourishing and he has not forgotten the pledge he made in the
1950s; his business is genuinely ethical, and he shares his success with his workers and the
community through his MJF Charitable Foundation. It touches the lives of more than 10,000
underprivileged each year. He thought that his business should also benefit those other
participants. Clearly his vision and passion were the main drivers of his achievement, but he
understood that vision and passion alone could yield little without the combined effort and
participation of many others. Therefore, he was determined that his business should be a
matter of human service.

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It took Fernando just under 40 years to bring his family tea Dilmah to consumers. The concept
of a young, middle class Sri Lankan seeking to establish an ethical, producer - owned tea
business was at the time both controversial and fiercely opposed. Then, as now, big
transnational businesses controlled the tea industry. During the four decades he fought to
achieve his dream, he continued to fulfill the commitment of caring for his staff and workers
as comes naturally to any family business. As his business was blessed with success, his
company and consequently his social justice obligation grew. Fernando says, "I decided that
while I'm still around I would like to share that wealth with those who helped me get it, and
that was why I created the Merrill J. Fernando Charitable Foundation in 1999."

The MJF Charitable Foundation represents an alternative economic model, and it is much
more than a charity because it represents a genuinely sustainable and fair way of doing
business. This 'way' acknowledges that social justice and the environment are integral elements
in any business process. Not as options and not as part of a marketing led Corporate Social
Responsibility (CSR) strategy, but as a core feature of the business objectives.

Everything should have a 'reason for being' and business is no exception. Most successful
businesses achieve that success not due to the lone effort of one or more individuals but due
to the combined impact of its workers, management, the community and the environment.
A gesture of thanks is, therefore, the least they should expect. Merrill Fernando, a man of
ordinary means who started with nothing, devoted his life to fulfilling a dream which took him
more than three decades to achieve. Merrill achieved his dream with the encouragement,
support and commitment of his workers, colleagues, community and Mother Nature. The
Foundation is the fulfilment of another dream of Merrill's, in giving back to those who gave
him success in such generous proportions.

7. Passion for Tea

In the case of Merrill J. Fernando, passion blended with "dedication". A man who dedicated
his life to tea and the tea drinker, his passion over the years has remained unchanged. Passion
is a differentiating ingredient that has led great men and women to excel through their
dedication and commitment to a cause, whether a product or a philosophy or both. In the
achievements of these individuals, it is clear that passion is more than an emotion which fuels
individual drive and offers individual fulfilment. When directed towards a generally good
objective, it has the potential to change lives, for passion involves a complex of other factors
which, through a simple but fierce commitment, can have much wider implications and
benefit. As the passion of the individual nurtures and shares what is best in their area of
dedication, that passion can be a powerful force for good.

Merrill J. Fernando proudly announces, "I have devoted my life to tea." At the age of 78, he still
makes his own cup of tea out of which the Ceylon supreme brand is his favourite. His vision
may be unsophisticated; tea after all is just a herb. But tea has a rich heritage of more than
5000 years and offers protection against many diseases. Therefore, how can a product of this
nature be considered only as a herb? The strength and passion of Fernando's commitment to
tea did much more than fulfill one person's dream. Although he may not admit it, that passion

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and the single-mindedness with which he fought, disbelieving government ministers and
officials, multinational and other vested interests, have driven along with it the fortunes of an
industry. His passion for tea ignited in him a desire to offer the real tea that he knows to
consumers, minus the blending, cost reduction and other corruptions of his beloved tea. That
led to the first genuinely producer- owned tea brand in the world.

It is passion that has kept Dilmah afloat, and interestingly has now given other producers the
courage to bring their own brands to the market. Fernando believes that it is the producer and
the consumer who drive the business. The consumer has the power to change the destiny of
the producer through his or her purchases and the producer has the ability to change the lives
of the consumer through quality, authenticity and well-being. The passion to succeed and the
passion to achieve his goals and objectives, have made him the man he is today. There are
many leaders in this modern world who drive their businesses through his or her subordinates
or with the advice of experts. It is rare to find a leader who believes in himself and his vision,
and strives hard to achieve the targets without hesitation. Merrill stayed true to his promise to
consumers throughout his career and his vision has remained unchanged. To date many
consumers comment, "You are not a faceless multinational, Dilmah has a face to it."

8. A Visionary Leader

Titles are granted, but it is your behavior that wins your respect. Exemplary leaders know that
if they want to gain commitment and achieve the highest standards, they must be true
models of the behaviour they expect of others. True leaders model the way. Fernando clearly
knew what he wanted. He wanted to build a brand which represented quality, heritage and
ethics. Every decision and action he took was guided by his vision, to build a brand of his own.
At a time when many thought that building a brand for tea was not a feasible proposition and
in fact used various means to discourage the work of Fernando, he challenged this notion and
marched forward to make his dream a reality. "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 with 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 'the realities of the market
place'. Nevertheless, I stayed true to my strategy for eight years." These very own words of
Merrill Fernando describe the vision he had for tea and for creating his own brand name. Now,
Dilmah is a renowned brand of tea globally and is the highest exporter in Sri Lanka.

Though the MJF Group is a family-owned company, its staff shares the same vision and goals
of its founder. The workers take pride in getting involved with a global brand. Fernando has
been successful in creating a vision for his organization, which includes all his staff members.
He lives, breathes, drinks and talks of nothing but the goodness of tea. This 78-year-old man is
a formidable encyclopedia of all things to do with tea. It is his single-minded passion that has
made Dilmah a 100% Sri Lankan brew and the number three brand of tea in the world.
Donning an apron with his name embroidered on it, Fernando to date tastes up to 5000 cups
of tea a month and is one of the very few makers of tea who develops his own tea. This is the
level of dedication and passion he has for tea. Moreover, another first would be the regular
overseas visits Merrill still makes to meet buyers across Dilmah's top selling markets.

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 Visionary Leadership and
the Case of Dilmah

Being the visionary he is, apart from developing his own brand, he had a vision to eradicate
poverty in the developing world and replace it with wealth creating self sustaining economies.
Many might think it is a hopeless vision or at least one that will take decades or centuries to
achieve. But Fernando is quite hopeful that some day he could make a difference. It took him
nearly three decades to realize his dream for tea; hence his vision remains unchanged.
Fernando is no feather-headed idealist; he is a visionary who believes anything is possible if
you commit yourself to it. He has taken on the world's largest multinationals, who today are
his biggest competitors. Fernando's vision is based on what he has himself achieved in a
business career that is as long as it has been successful, building a brand that is sold direct to
the consumer, and reaping the rewards from the value added end of the tea trade.

Better known as the CEO who makes his own tea, Merrill Fernando wanted to bring back
quality, authenticity and ethics, which were fast diminishing, to tea. He believed that the tea
drinker had the right to know what they were drinking and hence pioneered the concept of
single origin tea. In this process, he was challenged by the multinationals that were focusing
more on bulk tea and lower prices than quality. As at now the company is Sri Lanka's largest
exporter and manufacturer of tea bags accounting for over 21% of the country's total exports.
His vision was based not on the politics of development, but rather on the simple fact that by
supplying consumers direct from origin, the quality and freshness of tea could be improved
without additional cost in every market. Naturally, the multinationals thought differently since
their interests lay in sourcing products from multiple origins regardless of quality, and branding
the commodity in a manner so that origin would not be of relevance. At present, other tea
growing countries are beginning to follow in Fernando's footsteps.

Leaders inspire a shared vision. They have the desire to make something happen, to change
the way things are, to create something that no one has ever created before. In some ways,
leaders live their lives backwards, they see pictures in their mind's eye of what the results will
look like even before they have started their project, much as an architect draws a blueprint
and an engineer builds a model. Their clear image of the future pulls them forward.
Nevertheless, a person with no constituents is not a leader, and people will not follow until
they accept a vision as their own. Leaders cannot command commitment; they can only
inspire it. To enlist support, leaders must have intimate knowledge of people's dreams, hopes,
aspirations, visions, and values. Fernando's vision for tea and the tea drinker was unique and
different. He ensured that his customers shared this dream along with his team at Dilmah.
Fresh tea is richer in antioxidants and Fernando wanted to offer his consumers tea that was
garden fresh, picked and packed at origin. At the time there was no clear origin for tea with
many of the multinationals involved in multi-origin blends. Many wouldn't have believed in
his idea in taking up the challenge to big multinationals. But Fernando believed that he had a
unique vision that no other in the industry thought was realistic. Therefore, he worked his way
hard to achieve this ultimate objective. Fernando says, "The companies, the staff, right down
to the tea pluckers, are dedicated to making sure we put out only the finest quality of tea."

All leaders challenge the process. They are pioneers who are willing to step out into the
unknown. There is also an element of risk that needs to be taken to be successful as a leader.
Yet not everybody is comfortable with risk and uncertainty. At the time Fernando was
challenging the "realities of the market place" there was a significant risk in his idea of starting

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Volume 14, Number 2

up his own brand of tea failing. In that era Sri Lanka did not have many marketers who could
have built a brand that would have conquered the world. He also did not have the support and
encouragement from the Tea Board and his peers. Even as a member of the Ceylon Tea
Propaganda Board (CTPB) he did not hesitate to point out flaws in administration, and suggested
corrective action towards making it a dynamic arm of the tea industry.

Leadership is a team effort. Exemplary leaders enable others to act. They foster collaboration
and build trust. They engage all those who must make the project work and in some way all
those who must live with the results. Leaders make it possible for others to do good work and
they work to make people feel strong, capable and committed. Fernando now shares his
empire with his two sons Dilhan and Malik, who he believes, will continue his vision in the
years to come. He strongly believes the Fernandos have the passion he shared for tea several
decades ago, and hence the company and brand will continue generation after generation.
Merrill J. Fernando believed that Ceylon tea should be paid a higher price to what it was
offered; he felt that the tea growers in Sri Lanka deserved it. Therefore, he pioneered the
concept of single origin tea. Many multinationals that are very successful do not have a vision
or a passion for the business compared to Fernando. Dilmah is probably the only brand of tea
which has a rich story and heritage, which they share with their consumers. It takes hard work,
dedication, discipline and commitment to build a business on ethics and values and more
importantly compete with multinationals.

9. Family Values

Merrill Fernando and his sons Dilhan and Malik built Dilmah on a foundation of family values.
These family values, also known as the five pillars of success, have been a hallmark of Dilmah,
and is the basis of making their business a matter of human service.

Integrity: Merrill Fernando built his empire on five key philosophies which to date remain
unchanged and are shared by his staff members. He developed a culture where
honesty and integrity in every contact with customers, partners and retailers were
maintained. The concept of single origin tea which is the key differentiator of
Dilmah is still maintained in every pack. Fernando claims that customers of Dilmah
know exactly what is in their pack and what they expect from Dilmah. Together
with his sons he shares his story simply and openly on television and print media,
endorsing his product which was built around passion and integrity.

Ethics: Fernando acknowledges that no one could single handedly establish and build a
business, and any business would succeed only with the dedication and
commitment of the workers and the community. Therefore, going beyond just
business and ensuring the welfare of the underprivileged in the worker community
is a pledge he has kept for more than three decades. The MJF Foundation, Dilmah
conservations and the environment are a result of his vision of giving back to
society who has contributed to his business. Dilmah is a brand with a conscience
bringing a smile to the faces of hundreds of workers in the community through its
sales. These ethics also apply to its customers and communication.

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 Visionary Leadership and
the Case of Dilmah

Quality: Maintaining the highest standard of quality for its products, beginning from the tea
offered to consumers and extending it to the equipment used to manufacture and
package them to industry leading standards has been a continuous practice at the
MJF Group. As at now the factory is equipped with the most modern machinery,
and is kept up to date with the latest technologies. The factory is ISO 9002 and
HACCP certified, and has been admired even by their competitors. Life has become
a compromise in tea. It has become a compromise between quality and tea. Quality
is one aspect that will not be compromised at MJF, since it is this quality that made
the difference in the industry, and which continues to do so.

Customer:Fernando makes it a point to reply personally to each and every customer complaint
or comment while each pack carries a personal guarantee by Fernando reflecting
his sincere commitment. Dilmah ensures that its customers receive the highest
quality and ensures customer expectations are met at all times. Going further,
Fernando always tries to accommodate customer requests and suggestions and
ensures feedback in case it cannot be implemented.

Tradition: The Fernando family built their business around their love for tea; today Dilmah is
the only vertically integrated tea company with its own tea gardens, some of
Ceylon's best tea estates and state of the art printing and packaging facilities, tea
packing and investments in every segment of the industry. As Fernando often says,
"My family cares for your tea, from the tea nursery right to your tea cup." Innovations
at Dilmah are respectful of the traditions of an industry that is centuries old. Moreover,
Dilmah is committed to protecting these traditions, communicating them to the
world through the industry service projects and the MJF Foundation. While
commoditization continues among the big brands, Dilmah is distinct in being
traditional tea that is single origin and packed garden fresh.

10. Quality and Ethics a Key Differentiator

Merrill Fernando's vision for tea was unique and significant. It was a different vision for tea and
the tea drinker. He wanted to bring quality, authenticity and ethics back to tea. Fresh tea is rich
in antioxidants and so he wanted to offer his consumers tea that was garden fresh picked and
packed at origin. He strongly believed that consumers had the right to know exactly what they
were drinking and so he pioneered the concept of single origin tea. The multinationals
continued to source the product from multiple origins regardless of quality, but Dilmah
challenged this notion and explained the reasons to the tea drinkers. In this process, the brand
created a segment in the tea market that was driven not by price but quality. Dilmah is a living
brand; it represents traditional values of humanity and the passion of a family and a team of
dedicated individuals who care for Dilmah tea from the tea nursery right to the tea cup. The
founder of Dilmah guides his brand by his philosophy of giving back to the community and
rewarding the workers that make Dilmah possible. That philosophy drives a vision for quality,
authenticity, innovation and healthfulness; all these are reflected in the quality of Dilmah
while bringing back real tea, with a quality and taste enjoyed decades ago when people with
vision and commitment offered quality tea in their brands.

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Sri Lankan Journal of Management
Volume 14, Number 2

Fernando's Dilmah tea guaranteed consistency in its quality and taste. Most brands, even
those which built their names on quality Ceylon tea, have abandoned Pure Ceylon Tea in favor
of multi origin blends. Teas are blended in this manner as a cost reduction exercise since teas
from Ceylon are generally the most expensive. While multi origin blends benefit the brand
owner by reducing their cost, the consumer loses the guarantee of consistency, quality and
authenticity that unblended teas like Dilmah offer. Since the birth of the Ceylon tea industry
in the late 1800's, Ceylon has been recognized as the home of the world's finest teas. Some
years ago most international brands relied entirely or very largely on Ceylon tea for their
quality. Growing demand and competition in the market place drove these traders to cheaper
sources for their tea. They used less and less Ceylon tea and today, most of them use no
Ceylon tea at all in their packs. This means their teas taste different and contain different tea
from different sources, even though the packaging remains largely the same.

Dilmah tea is packaged into consumer units within days of picking fresh leaves in the tea
gardens. Most other international brands are packaged in consuming countries. That tea is
generally eight to twelve months old by the time it is blended, packaged and delivered to
supermarkets. Tea that has aged in this way, travelling thousands of miles from growing
countries to blending centres around the world, lack freshness, flavour and have few or no
antioxidants. Research has shown that important antioxidants in tea deteriorate after around
five months and completely vanish after a year. Fresh tea is, therefore, richer in healthful
antioxidants and is better for the consumer. Dilmah was built on this principle of giving the
consumer true value. Dilmah Ceylon Black Tea is packed at source in Sri Lanka, right where it
is grown and shipped refreshingly fresh to supermarkets around the world. Being packed and
shipped direct from origin means that revenue from the sale of Dilmah tea comes back to Sri
Lanka to benefit the industry and its workers. It also means that Dilmah teas have a richer,
more authentic flavor and character whilst being more healthful. As a family company with a
commitment to honesty and tradition, Dilmah remains with traditional tea. Fernando goes on
to say, "We are the only vertically integrated company in the tea business in the world, we
have farmers bringing our crop to the market, with no middlemen, just the family and our
workers, and of course the all important customer. Our workers benefit because the most
important aspect of our family business is that we retain in Sri Lanka all the benefits of value
addition that go to foreign companies in respect to all other brands." The stepping stone for
value addition was in 1980, when Fernando imported what he claims to be Sri Lanka's first tea
bagging machine, an asset acquired after much political wrangling. Since then there has been
no turning back for Dilmah teas.

Dilmah is different to all other teas, in its quality, in its taste and freshness and in the philosophy
behind the brand. It is a living brand, representing traditional values of humanity and the
passion of a family and a team of dedicated individuals. Dilmah brings back real tea, with a
quality and taste enjoyed decades ago when people with vision and commitment offered
quality tea in their brands. Merrill J. Fernando built his brand on ethics which he strongly
believed in and he ensured that his customers shared the same passion.

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 Visionary Leadership and
the Case of Dilmah

11. Humility and Professional Will

Merrill spends most of his time tasting teas, replying to consumer letters and occasionally
going out to the plantations. Dilmah places major emphasis on product developments and
continuous improvements. His son Dilhan goes on to add, "The weekends we devote to the
Foundation activities and the weekdays to Dilmah."

Merrill says that he generates ideas when he travels overseas, since in Colombo he has no
peace. His typical day would start at 5.a.m and go until 8 p.m. Of course with his current
health, he has minimized his time at work but still puts in his best effort whenever required.
When he is away, he sets aside a day from his programme to generate new ideas. He goes on
to say, "Very foolishly most of our people stand out displaying wealth with five or six cars and
sons going mad zooming all over." He says, "All you can do is to provide your children a decent
education. At the time I was building my business, I could not look beyond the next three
years or whether I will have a business or not. I decided I would provide my children with a
good education." People try to paint different industries with the same brush, which is not the
case with Dilmah. Fernando never tries to get publicity for the charitable work he does, unless
it is tied up with an international organization. He has helped hundreds of families through his
Foundation, which is not known to the public in general. His Foundation has been supporting
the hospices in New Zealand and after addressing a convention he recalls a man calling out at
him saying, "You know Mr. Fernando, I must congratulate you and thank you for what you have
done. The greatest thing in what you do is that you never asked us for anything in return. You
just gave."

A leader with a blend of professional will and humility, Fernando is a person who looks out of
the window and not in the mirror to apportion credit for the success of the company. As he
says, no individual can build a business of his own; he gives credit to his staff and his workers
in the estates for making Dilmah a global success. Leaders of his calibre are also known to be
selfless and channels ambitions to the company and not to one's self. Throughout his career,
Fernando has made every effort to revive the tea industry in Sri Lanka and bring back the
quality of Pure Ceylon Tea. A characteristic of a good leader would always be to build successors
for success. In this aspect, Fernando has groomed his sons providing them with a sound
education and family values to take over the business and is confident that his grandchildren
will also follow suit. A person who demonstrates an unwavering resolve to achieve whatever
it takes in the long term, Fernando has worked all his life to build his empire and to achieve his
dreams and aspirations amidst many challenges.

It is not hard to see why this self-made tea baron is so successful. He readily admits to wanting
to slow down and take things easier, but that day is yet to arrive. Admitting to not being a
fitness fanatic, he plays a lot of tennis on the home tennis court and the occasional round of
golf and the odd swim. It is easy to see that Fernando has impeccable taste, which reflects
well in the quality of his tea and his well groomed demeanor. Always nattily dressed, he has
a self confessed craze for designer ties, shoes and socks.

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Sri Lankan Journal of Management
Volume 14, Number 2

12. Conclusion

Today, the bulk of the work at Dilmah is being carried out by Merrill's sons, Malik and Dilhan.
While most things in life have brought him immense joy, there is regret in this great man's life.
He is saddened that no one has followed the example of Dilmah in marketing good quality
Ceylon Tea. Twenty years ago, nine out of ten packs of tea in the supermarket shelves in the
UK displayed Ceylon Tea. Today hardly anyone declares it other than Dilmah. After all, Merrill
through his vision brought back Pure Ceylon Tea which was fast diminishing at the hands of
the multinationals. It benefited the tea industry in general but no one wanted to build on this
foundation. In one of his speeches at the Melbourne University, he said, "I manage my business
and marketing in my own way. I have not read any books on marketing or on business ethics.
The values my parents built into me in the little village I was born in, remain my strength and
my guide."

Merrill humbly says, "I'm a bad example, because I have tried to get into the big world of
multinationals and big corporations in the world of tea, which even today some people I talk
to say I can't do. But then I ask how I did it? They say I'm an exception. But I'm no exception. My
advice is, get into a business that you know and which you have control of. If you rely on
others to provide the expertise while you just watch and fund it, that rarely works. You need
to target you ambitions in an area saying, I know the product or project well, and even though
I will need engineers and other skills to develop it I know I'm the brains behind it. If you are
going to compromise your quality by growing bigger, that's a fatal mistake. Keep your ambitions
in control and within a degree that you have control over. If you try to capture the whole
world, you are destined to fail," concludes Fernando.

The journey of Merrill J. Fernando has been very painful, humiliating and at times frustrating.
But he remained with his vision and passion throughout his life. If there is a lesson in Dilmah,
it is quite simple. Merrill Fernando followed his dream relentlessly and honestly and he shared
it with his customers. Every aspect of his business revolved around this dream and vision he
had. He brought in a new dimension to the tea industry, in spite of the large multinationals
dominating it. Dilmah is a niche tea and is undoubtedly one of the top ten global brands. Now,
Merrill J. Fernando and his sons Dilhan and Malik together with the team at Dilmah are
offering tea drinkers around the world a truly different experience. Dilmah presents an
unmatched collection of teas each tasted and selected with the benefit of decades of
experience in tea, and most importantly, marked by genuine innovation and a passion for
quality. "Do try it".

References

Annual Report (2007/8) Ceylon Tea Services PLC

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 Visionary Leadership and
the Case of Dilmah

Dilmah and Its initial struggle, (2007. October 14). The Sunday Times, Financial Times
http://sundaytimes.lk/071014/FinancialTimes/ft309.html

Fernando D.C. (2008). Passion, Talking tea, The Journal of Dilmah tea
Gunawardena, N. (2006. June) The Dilmah Story. The Chartered Marketer, p.34-41
Giving it all away just his cup of tea. (2005.September) Australian Financial Review, p.61
High Tea (2003, January). Australian Gourmet Traveler, p.125
Merrill Fernando. (2004. December) Espy Magazine, p.31-33
Mather, R. (2005. March) Dilmah, Quality is an Obsession. Business Today, p.14-22
Merrill Fernando, Dilmah tea tycoon. (2006. April) Portfolio, p.34-38
Master of the cup of life, (2007. September) UK Lanka Times, p.24-28
Paradkar, S. (2008. May) Brewing success for Dilmah tea, Gulf news
http://archive.gulfnews.com/articles

Revolutionary Dilmah Teas. (2001. December) Plantation World

Tea Market Update. (2008. December) Publication of Market Intelligence and Resource
Division, Sri Lanka Tea Board
Wishart I. (2008) Qualitea, IntegriTea, Talking tea, The Journal of Dilmah Tea
www.dilmahtea.com
www.dilmah.com
www.integritea.org
www.dilmah.pl
www.historyofceylontea.com

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