Sri Lanka is well positioned geographically and climatically to produce quality speciality coffee and take advantage of growing demand in the global market, the latest report on ‘Sri Lanka’s Arabica Coffee Chain Analysis’ commissioned by the Market Development Facility (MDF), a flagship private sector development program in Australia stated.
According to the findings, nearly 80 percent of the speciality coffee produced in Sri Lanka originates from smallholder farmers and backyard farmers, who are mostly women. This system of smallholder production of Sri Lankan coffee positions it well to take advantage of the growing demand for quality and diversity in the global market.
The detailed analysis of the value chain of Arabica plant varieties identifies Arabica as the best investment choice for speciality coffee in Sri Lanka.
This is because Arabica plant varieties are well suited to grow in the vast mid and upper highlands and fare best when growers inter-crop the plants, especially with tea.
The specialised characteristics of domestically cultivated Arabica are a major selling point as quality and specialised niche products are becoming more attractive to consumers – local and international, the report stated.
This suggests specialty coffee could become a thriving export industry for Sri Lanka, particularly from Arabica plant varieties.
As it currently stands, Sri Lanka cannot produce enough coffee to meet international demand, with market demand five times higher than current production. This demonstrates the potential future for the industry as international consumers are interested in paying a premium for Sri Lankan coffee. Examples include, Japanese companies and European investors interested in Sri Lankan coffee.
A risk for the market is that currently it is susceptible to shocks. Respondents of the MDF study said that the overarching challenges related to currency fluctuations, electricity interruptions, political instability, the decline in tourism after the Easter Sunday terrorist attacks in 2019, and the current COVID-19 pandemic have affected the entire value chain, the revealed.
The global specialty coffee market provides enormous opportunities for coffee producers, with the market estimated to grow from USD 35 billion in 2018 to over USD 80 billion by 2025. In line with this increasing demand, Sri Lanka’s coffee exports have increased in recent years, growing 84 percent from 2017 to reach nearly USD 355,000 by 2019 as per Export Development Board (EDB) data. The coffee industry has attracted increased investment from the private sector and increased local demand and consumption of locally grown coffee in hotels, restaurants and cafes.
The MDF report is one-of-a-kind, in-depth analysis into Sri Lanka’s specialty Arabica coffee sector. The study collects information from bean to cup, charting the pathways to scale and identifying the opportunities for growth in the Arabica coffee sub-sector in Sri Lanka. The recommendations of the report can be used by all stakeholders to align their efforts to achieve sustainable growth in this niche industry.