UNITY BRANDS GROUP

To be ‘fair’ is to be free of self interest, bias or deception.  In the context of trade then you would think fair trade would be free of these evils.  Unfortunately it is not so and, as Fairtrade - the organisation - has amply demonstrated, elements of the world’s trading systems are fundamentally unfair. It was not always so and I believe the solutions to the problem of unfair trade lie in history and ethical behavior.

By

Merrill J Fernando

Founder Dilmah TEA 

I have devoted my life to tea; a passion that is now shared by my sons. As a family engaged in the business of growing, packing and marketing our own brand of tea, we always understood that it is incumbent upon those that are blessed with success to share the benefits of their success with others who may not be so fortunate.

We never sought help in comprehending the basic concept that ‘business is a matter of human service’. At the beginning I did what I could and within the modest scale of my fledgling business, helped my staff and their families. Today by the grace and favour of God and the efforts of my staff and my family, our business has grown. It follows that my ethical obligation to share should grow in the same way.

A sea of acronyms, declarations and apparently well meaning organizations has arisen around the meaning of fair trade. Yet really there is nothing complex about the concept of being fair that requires such extraordinary effort and complex analysis.

Organizations apparently committed to the cause of fairness in trade seem to be missing a fundamental point. In any context human rights, worker welfare or social justice – whatever you wish to call it – cannot be assured solely by certification and the mountain of compliance documents that buyers heap on producers today. It is ultimately about the price that is paid to the producer for the goods or services.

In the main, producers know their ethical obligations to workers and, because they live among those workers and witness their socio-economic circumstances, they are more aware of that commitment than their Western customers. The reason they often default on their commitments is that they lack the means to do so. It is not that their product does not ultimately generate enough money to fulfill this commitment, but that the money ends up in the wrong pockets. Certification and documentation cannot address that.

London was established as the tea centre of the world during the British Colonial time.  Tea produced in Ceylon , India and Africa, the major producers, was consigned to London for sale by auction. At that time there were several small and medium family companies engaged in blending, packaging, branding and marketing tea in almost every country.  Families, who took pride in the quality of their tea and provided consumers a choice of good quality tea, never competed on price but on quality.  They were able to maintain the high quality of their blends.  This was still not a fair structure for the tea industry due to the control of value addition offshore, but producers received a fair price for their crop and, as a result, their workers were well looked after. Everybody in the supply chain was content. 

I witnessed London as a terminal market where producers were not offered the best possible prices and it became the largest blending and marketing centre of the world. London was where the ‘value addition’ process took place in the case of tea and many other crops. Ceylon tea packed and exported from London formed the base of nearly every brand of tea. The situation continued for almost 30 years after Ceylons independence and emergence as Sri Lanka.

Success of the tea business attracted large trading companies, which began to acquire all the small and medium sized companies many of which were family owned.  Those that would not sell, because they were fourth or fifth generation businesses, did not survive beyond the ensuing three or four years. 

Having acquired most of the companies’ businesses, big traders - today’s multinationals - made tea a commodity.  That gave them the opportunity to compromise on quality and focus on cost cutting in their bid to profit from their acquisitions. Three or four big traders began to dominate the market. This changed the character of the tea business. Quality was no longer the measure of success. It was replaced by market power and the size of advertising budgets. Consumers soon were attracted by celebrities talking of their ‘favourite’ brand of tea. The quality of tea in the cup began its decline. 

Concentration of marketing power also resulted in concentration of sourcing power, buying tea from producing countries.  The control of sourcing and marketing by multinational traders opened tea producers to exploitation.  As quality lost its significance, price became the most important factor.  Competition in the market place disappeared and tea producers were driven to sell tea at whatever prices the big traders offered.  That’s when ‘unfair trade’ strengthened its grip on tea.  

The colonial era was by no means fair, but what it evolved into was far worse. Having created unfairness, the very same brand owners are today resorting to pledging their support to one or more of the well meaning organizations that have sprung up in response to this demand for some legitimizing body.

In many cases the result of that union of unfair brand with legitimizing organization operates on the principle of making the consumer feel guilty. There is some form of price premium that is demanded in return for a ‘fair’ product. That is surely unfair in itself, for is it not a simple and basic form of humanity that every product has to be fair? The obligation to be fair lies very clearly with the brand owner. It cannot be delegated or passed on in any form.

Any premium paid by consumers actually further strengthens today’s unfair trade. It is shared by all the middlemen, leaving very little- about 10% for the producer and how it reaches the farmer is not quite clear. The cure is worse than the disease! It enhances profits of middlemen. It reinforces the role of middlemen. It perpetuates the present unfair trade model.

The only profitable segments of the tea industry are value addition (packaging at origin), branding and marketing- which are mostly entrenched in the grip of multinational traders.

Ultimately the fairest form of trade is one in which the producer earns enough from his crop to attend to the welfare of the workers involved, secure the future of his or her industry, and care for his family and possibly also shareholders. There can be no substitute to this reality, and the industry that has developed around the notion of fairness must be questioned in light of the simple and inescapable fact that there is nothing complicated about fairness.

Packaging Dilmah tea in Sri Lanka and retaining branding and marketing control has enabled our family to provide consumers the freshest and finest Single Origin Pure Ceylon tea and retain all the profits in Sri Lanka. We share the profits with our workers, the wider community and reinvest in making tea a sustainable industry.   That is ethical trade- the fairest trade of all.

Fair trade will become reality only when producers are empowered to add value, brand and market their tea without intervention of traders. Anything short of that would, in fact, perpetuate unfair trade.

Please visit www.mjffoundation.org &  www.dilmahconservation.org      

EXTRADT FROM PEOPLE FOR FAIR TRADE “

NEWSLETTER” OF JULY 2006.

“IS DILMAH TEA FAIR?

“Dilmah tea, which you will find in your supermarket shelves, promotes itself as an ‘ethical’ tea.  Their main support for this claim is that they produce a tea which is processed and packaged in Sri Lanka, where the tea is grown.  This ensures that more of the economic benefit from the product goes to the country where the tea is actually grown.  In addition, its founder Merrill J Fernando has established a charitable foundation that supports a number of projects, including projects aimed at improving the lives of workers in the tea plantation where Dilmah’s tea is grown.

We at PFFT place high value on products where the value adding takes place in the country of origin – we believe this is the key to economic development in countries highly reliant on commodities for their income. For this reason, we applaud Dilmah’s emphasis on selling value added tea. Likewise, utilising some of their profits for improving the living standards of their workers is commendable.  Our only criticism is that from our research, however, we were unable to find out just what percentage of their income or profit is set aside for community development projects.  We’d also like to learn more about the working conditions in their tea plantations.  Perhaps they will reveal more of this kind of information as time progresses.”

Dilmah websites, stated above, are updated regularly.

17th September 2008

The combined impact of large scale urban migration and the poverty of the migrants have created slums in Colombo, where poor hygiene, crime and other social, economic and environmental problems result in severe deprivation. Children living in these slums suffer most, being deprived of the right to a normal childhood, education, affection and the joys that make every childhood special. The MJF Foundation sought to address some of these problems in the worst affected areas and initiated a partnership with P.E.A.C.E. (Protecting Environment and Children Everywhere), an organisation that has fought against exploitation of children since 1991. Resulting from this partnership, children in five centres were given the opportunity to escape their underprivileged situation. They were nurtured in the MJF-PEACE Centres and encouraged in learning and playing on a weekly basis through free English classes, lessons in various vocational skills like cookery and sewing.  

The success of this programme evolved in March 2008, with the MJF Kids programme. The MJF Foundation established two MJF Kids Centres at its two suburban Colombo premises, in Peliyagoda and Maligawatte. 120 urban slum children benefit from the MJF Kids programme currently. These children survive under difficult circumstances of physical and emotional deprivation, making a normal and secure childhood an impossible feat. Their almost daily sessions at the MJF Kids Centres offer them solace and learning in a caring environment.