Why is Dilmah not certified as Fair Trade?

The Ethical Tea Society

We would not join the Fair Trade movement as Dilmah tea goes far beyond Fair Trade.

Fair Trade does not address the fundamental weakness of the tea industry. Although well intentioned, in the case of tea, Fair Trade perpetuates the outdated colonial model of raw material being imported into and packaged in the UK, where all the significant branding profits lie.

Only a small fraction of the Fair Trade premium charged to consumers for tea is paid to the grower, typically only 7% of the shelf price finds its way back as the total payment for tea supplied.

Dilmah returns a minimum of 15% of pre-tax profits to growers, distributed via the MJF Foundation (see www.mjffoundation.org). This has a far greater impact on the tea growers and the Ceylon Tea Industry than Fair Trade. MJF Foundation funds are used to ensure, among other things, child nutrition, midday meals, educational scholarships, hospitals and school facilities as standard provisions for the Dilmah workforce.

The Ethical Tea Society

Fair Trade is also not about quality, it’s a seal of approval to sell at a premium price appealing to consumer consciences. Any new brand wanting to sell an average quality product at a premium price can apply for the Fair Trade mark and start a “virtual marketing” firm that outsources tea packaging and sourcing of the tea to other UK firms.

This means there might be up to 5 or 6 middlemen between the grower and the retailer with very little invested back to the tea growers. Dilmah is the antithesis of this model.

Dilmah Tea is entirely packaged and branded in Sri Lanka without middlemen in the West. In any industry, the fairest form of trade is for the producer to offer their product to consumers using as few intermediaries as possible. In the case of Ceylon Tea, gathering and retaining the product’s value at origin benefits the grower in the form of a fair price for a product that requires effort, expertise and dedication to produce; it benefits the tea industry, which is ailing from years of exploitation and deprivation of a fair share of the revenue from the sale of its produce; and, in our case, it benefits the under-developed economy of Sri Lanka. Importantly, it also benefits the consumer in presenting a better quality tea.

Much of the Fair Trade movement focuses on worker conditions and moving towards an acceptable quality of life for workers. In Sri Lanka, standards in tea garden worker conditions have been legally enforced for over one hundred years as it is the most established global tea producer.

What is your view on the Fair Trade movement?

The Ethical Tea Society

Fair Trade is a relatively recent development in the West and has now become a brand in its own right.

In the last thirty years, multinational brands have switched the origin of their tea from Sri Lanka/Ceylon to cheaper sources in Africa to save costs. In Africa, tea growing is a more recent phenomenon and is largely Smallholder/Cooperative based.

The Fair Trade scheme is designed largely for Cooperatives and Small Holders, which are more common in Africa than in Sri Lanka.The assurances that Fair Trade holds out to consumers on worker welfare are all minimum standards that are enforced by law in Sri Lanka.

The Ethical Tea Society

Fair Trade states that it assures worker representation, ensures unionization, overtime, no child labour etc. Meanwhile, these stipulations are all mandated by law in Sri Lanka and stringently adhered to. We have a very strong, politically influential labour union in Sri Lanka which empowers workers.

As for The Ethical Tea Partnership that the major brands like Twinings, Yorkshire Tea etc. joined in response to Fair Trade; the ETP writes to growers with a long questionnaire stating criteria that must be adhered to in order to trade with them. When the growers enquire if fairer prices will be paid to enable improvements, they are informed that if they don’t comply they won’t buy their tea. Still, the ETP logo appears on packs assuring consumers that the brands are doing their bit! Very little Ceylon Tea is purchased by UK brands now due to its relatively high cost so the impact of any scheme would at best be negligible.

Dilmah claims to be the world’s first ethically sourced tea, what does this mean?

The Ethical Tea Society

Dilmah Tea is entirely produced in Sri Lanka. Profits are retained in Sri Lanka and are reinvested to improve living standards among tea estate workers and the community at large through the MJF Foundation.

A simple but inescapable fact is that every product should be fairly traded. Eliminating middlemen and giving the producer access to markets would result in ethical and fairly traded products being offered to consumers without any premium and with the right quality. In eliminating the middleman, Dilmah Tea can offer consumers a better quality product, benefit the growers, their industry and its future and the economy of Sri Lanka.

What do you pay your workers (in monthly US$)?

The Ethical Tea Society

The plantation workers receive an average of Sri Lankan Rs.7,500 per month, which approximates to US$75. This is low by UK standards but in Sri Lanka it is a fair wage compared to an urban worker. The average wage in Sri Lanka is approx. Rs.6,000 per month.

In addition to the wage, the plantation workers receive numerous other benefits. Monetary benefits include annual attendance bonus, holiday pay, performance bonuses, pension, and funeral aid. Furthermore, free housing, medical facilities and crèche facilities add to the total package of a plantation worker. A plantation worker, in comparison with a worker in any other manufacturing industry, receives an attractive total monthly package. Including the benefits outlined, Dilmah plantation workers receive a wage package equivalent to approx. US$100 per month. This makes for above average purchasing power in Sri Lanka.

How does Dilmah guarantee that all workers receive an adequate income?

The Ethical Tea Society

Plantation workers are strongly unionised and all government regulations on worker conditions and wages are strictly applied to all workers.

Unions renegotiate wages every two years with any increases unrelated to the fortunes of the tea industry.

How is profit from the tea distributed? What percentage is returned to the workers versus the percentage retained by the company?

The Ethical Tea Society

10% of profits before tax are distributed to the MJF Foundation to fund its various activities amongst tea estate workers. This is apart from substantial endowments from the Founder of Dilmah from his personal wealth. The MJF Foundation has a 100% distribution rate, in that all operational costs are met by Dilmah hence all funds received are spent on the needy.

Additionally, by packaging the end product in Sri Lanka, a large workforce is also engaged as production workers, engineers and support staff for the packaging process as well as those involved in supplying packaging materials to Dilmah. This provides an additional socio-economic benefit compared to supplying bulk tea to be packed outside Sri Lanka.

How does Dilmah ensure the wellbeing of their workers? Specifically, how does Dilmah provide housing, electricity, running water for its workers?

The Ethical Tea Society

Worker wellbeing is addressed by the welfare activities of the MJF Foundation, the Plantation Companies itself and through other organizations such as the Plantation Housing Welfare Trust, which specifically looks after housing issues. The long established industry in Sri Lanka ensures the absence of exploitation, unlike in new tea growing countries where there is less structure. Dilmah operates under the strict controls of the Sri Lanka Tea Board, Tea Research Institute and the strong plantation worker unions (of which there are 3 main ones).

Dilmah’s Human Resource Development is currently working hard to encourage long-term employee retention given the opportunities in Sri Lanka’s vibrant garment industry.

What is Dilmah’s position in regard to child labour?

The Ethical Tea Society

Child labour is illegal in Sri Lanka and is not practiced on any of Dilmah’s estates or factories.

What is the Dilmah Ethical Tea Society?

The Ethical Tea Society

The Ethical Tea Society was established by our family tea company, Dilmah, in recognition of the importance of sharing one small but important aspect of the work of the MJF Charitable Foundation; that is the deep sense of fulfilment that is an indirect benefit of the process of changing lives.

Why support an Ethical Tea Society?

The Ethical Tea Society
  • By partnering with Dilmah your clients know that you support Ethical trade, which is the real fair trade and CSR
  • You are able to engage in and initiate promotional activities that highlight your business while supporting an underprivileged person or community
  • You are able to engage in meaningful CSR which focuses on mutual benefits to you and those less privileged.