Dilmah Ceylon tea: Market development in Australia
Introduction
Dilma Ceylon Tea has its origin from the MJF Groups that dates back to the early years of 1950s
when Sri Lanka gained its independence from the British government. Sri Lanka was known as
Ceylon then, thus the Ceylon tea. The founder of the group, Merrill J. Fernando devoted most of
his life developing the tea business that was the core of his family business operation. Sri Lanka
is famous for its ideal climate for tea cultivation whose taste, appearance and quality are
uniquely distinct from other regions. It emerged the frontrunner in the tea industry, its unrivalled
quality and variety was an instant success in Australia and in most other countries during the
eighties. Dilmah Pure Ceylon Tea brand was introduced in the Australian market in the year
1984 where its quality was very popular but the market was dominated largely by multinational
brands such as Harris, twinings, Lanchoo, Lipton and Bushells. Dilmah Pure Ceylon Tea was
introduced in the Australian market ostensibly to revitalize its dwindling fortunes in the tea
market where it originally hand the upper hand and controlled almost 70% of the Australian
market in the early years before the 1980s. Dilmah Pure Ceylon Tea was branded as the original
tea from Sri Lanka. This concept allowed it to gain tax concessions from the Australian
government. Any tea that was brought in the Australian markets from the country of origin
attracted no taxes or import duties as they were exempted. These also made the Dilmah Pure
Ceylon Tea to compete favorably as its prices were subsidized by the tax concessions and they
could sell at relatively lower prices than their competitors and still make enough profits. (Byron
Sharp, 2013)
In the 1990s, most of the major brands that were being consumed in the Australian market were
mostly imported from different countries, blended and packed as their own brands. Teas from
original destination were also available in the Australian market for instance tea from Papua New
Guinea, Indonesia and East Africa. These brands added a lot of competition which the Ceylon
Pure Tea was unable to compete with effectively. The market of Dilmah Ceylon Pure in the
Australian market dropped to almost 8% in the sales market and almost 12% in terms of volume,
in the year 1983 as compared to its 70% dominance in 1960s and 1970s. (Retail World, 2010)
Ceylon Tea brand needed a complete restructuring in its marketing strategy in order to survive in
the market. Ceylon Tea brand had to reposition its image as a superior brand and to identify new
2 Marketing
markets and repose the lost ground. Ceylon Tea had its own cost advantages as it operated in a
country with low cost of production and packaging expenses. The Sri Lanka Tea Promotion
Bureau (a department of the Sri Lankan government) in the city of Melbourne, Australia,
initiated the development of the new marketing strategy with the support of the Sri Lankan
Export Development Board which is also funded by the Sri Lankan government. The Tea
promotion Bureau commissioned some marketing research studies and analysis which focused
entirely on the rebranding, advertising and effective promotion. Dilmah was differentiated in
terms of quality and freshness. Dilmah was initially launched as teabags but eventually other
brands were also introduced in the market namely the original gardens teas, the green tea, the
decaffeinated tea, organic tea among others. (Dilmah, Australia). These efforts were spearheaded
to reintroduce the trust and confidence that Dilmah Tea once enjoyed in the early 1960s and
1970s. These concerted efforts were strategically introduced and aggressively implemented but
they were a little late as the market had already been saturated with the foreign multinationals
which had captured the market and some of their brands had already developed customer loyalty.
The major reason why Dilmah Pure Ceylon Tea lost its tea market was mainly because it failed
to adopt new changes in its marketing strategies and also failed to rebrand its products with the
changing consumer demands. Products are essentially purchased because they are beneficial to
the purchaser. Consumers are only interested on the benefits to derive from the product rather
than the characteristics in the actual physical nature. All products have a life cycle. The products
life cycle creates two major problems for the companies. First, since all the products eventually
decline in value, companies must develop ways or processes of finding other new products to
replace the ageing ones i.e. new product development. (Reenen, Panhuysen, Weiligmann, 2010)
The company must be able to explain how its products are ageing and adapt ways of modifying
the products marketing strategies as they go through different stages in their life cycle. New
products fail in the market because of in sufficient market analysis and appraisal measures. Bad
timing, ineffective market support, overlooking the business and market environment, higher
costs, lack of customer satisfaction and failure to take into consideration the strengths of the
competitors are also the major reasons why products fail. (Foxall, James, 2003)Dilmah Tea
should also consider modern marketing methods like applying the segmentation, targeting and
product positioning. STP is a tool that provides the management with up-to-date information on
the target markets, the strengths of the competitors, the customers’ preferences and segments.
Segmentation, targeting and position (STP) allows the simultaneous data visualization at a
glance i.e. in one map and also facilitates accurate, timely and decisions. STP allows easy and
intuitively interpretation of information which enhances the internal communication between the
different stakeholders and the users of the processed data. (Foxall, Yani-de-so-Riano, 2005)
Dilmah pure Ceylon Tea product differentiation strategy helped its marketing department to
relaunch its products in the diminishing market. Australia is renowned for its wide market in tea
consumption, which makes it a competitive location for the investors in the tea industry.
However, it’s expected that the major growth in the tea sector will come from the strengthening
of the market trends that are emerging in the current market, for instance, the value added drinks
like the flavored tea, green tea are already outselling the original plain tea associated with the
early years. The second growth opportunities have also emerged from the development and
marketing of the use of the teabags in markets where people have been using the loose leaves or
tea particles. (FAO, 2010)
3 Marketing
To conclude, Dilmah Ceylon Pure Tea strategies may not be very successful currently but would
have made a lot difference if the strategies would have been adopted much earlier, for instance in
the early 1980s. By that time the market was not very saturated with the foreign products and
different brands. It would have given the Ceylon tea a head start in the tea market. The task now
is to market its brand in an effort to outdo the rest of the competitors in the market. This is a
herculean task that may prove to be a tall order for the Dilmah Pure Ceylon Tea.
References
Foxall, G. R., Yani-de-so-Riano, M. M. (2005) Situational influences and behaviour, Journal of
Business Research, V58, p. 518- 525.
Foxall, G. R., James, V. K. (2003) The behavioral ecology of brand choice: how and what do
consumers maximize? Psychology and marketing, V20, p. 811 and 836.
FAO (2010) Intergovernmental group on tea.19 th session.
Reenen, M., Panhuysen, S., Weiligmann, B. (2010) Tea Barometer 2010, Tropical Commodity
Coalition. Pg 6
Retail World (2010) Grocery market sales and shares, Annual report, Dec, pp. 46-7
Byron Sharp (2013) Marketing: Theory Evidence Practice: Oxford University Press.
