Cinnamon has a long history of being the prime spice in Sri Lanka. Right now, Sri Lanka is the world’s largest producer and exporter of pure cinnamon to the world, with suppliers dominating 90% of the global market share.
Official statistics released by the Export Development Board (EDB) indicate that export earnings from spices and essential oils have increased by 11.47% Year-on-Year (YoY) in July 2021, with a significant 11.09% increase in cinnamon.
Commenting in this regard, Department of Export Agriculture (DEA) Director – Research Dr. G.G. Jayasinghe told The Sunday Morning Business that despite challenges experienced in the global market, Sri Lanka was able to export 10,000 metric tonnes of Ceylon cinnamon as of July 2021, with a return of Rs. 22 billion.
Cinnamon has two types and it differs both physically and chemically. Ceylon cinnamon referred to as both sweet cinnamon and true cinnamon, is considered superior to the variety known as Cassia – a cheaper and inferior product due to its supreme health benefits such as control of blood sugar levels, slowed tumour growth, ability to fight off bacteria, and anti-inflammatory agents with potential in treating dyspepsia, gastritis, and inflammatory diseases.
Speaking to us, The Spice Council of Sri Lanka Chairman D.A. Perera stated that the demand for cinnamon is significantly rising in comparison to last year as people have started to become more health-conscious as a result of the Covid-19 pandemic.
“People have started to recognise the difference between the two types of cinnamon. We are currently producing 20,000 metric tonnes of pure cinnamon right now but with the rise in demand, the department is expecting to increase upto 25,000 metric tonnes of production in the near future,” Perera optimistically said.
According to him, with the result of rising demand, the exports of the spice industry had increased in the first quarter by Rs. 26.3 billion worth of cinnamon exports being recorded in comparison to the previous year which was Rs. 13 billion.
Expressing similar views, speaking to The Sunday Morning Business, Impex Corporation Director – Exports Yamuna Perera in February this year said “cinnamon is mainly used in terms of getting health benefits such as to manage cholesterol, in pharmaceuticals, and it is also used for drinking in the form of cinnamon powder which is why there is an increased demand”.
She also noted that Impex Corporation is trying to expand its portfolio to products such as cinnamon powder and coriander, cinnamon powder and tea leaves, and also cinnamon powder and ginger. “These are the new ventures which we are hoping to embark on this year,” she added.
Further, the other reason as to why Ceylon cinnamon is succeeding in the global market is due to its unique method of processing which entices the characteristic flavour of pure cinnamon. Nevertheless, the traditional preparation of cinnamon quilts handed down from generation to generation never fails to captivate the global audience.
What’s holding back the existing market?
Like most industries, the cinnamon industry also faces challenges in terms of production in the local market. Explaining a few of the main challenges, Dr. Jayasinghe said that the first is to deal with the low productivity problem in Sri Lanka.
According to his expertise in the field, he shared that Sri Lanka is only producing about 600 kg per hectare on a national average when it has the potential and capacity to produce up to 1,500 kg per hectare. “Due to bad management practices, the production levels are lower than the potential production capacity. We are trying to teach new methods but it’s difficult as farmers are learning very slowly,” he explained.
The second problem is the lack of skilled peelers available in the industry, as of today only 25,000 people are employed whereas the industry needs at least about 35,000 peelers to support the traditional method practised by the past generations.
The third is the problem of quality assurance. Dr Jayasinghe elaborating this stating that Sri Lanka is currently exporting to countries mainly such as Mexico, America, and South African countries, but with the right better quality assurance, the country would also be able to target countries such as Japan, and the European Union (EU), and get more export revenue in return.
Another challenge Sri Lanka also faces is the problem of the value addition of raw materials exported by Sri Lanka. Explaining, he stated that even though the raw materials are being exported, the value addition is generally done by the importing country. “The product diversification and value addition are very less. If we manage to do this, Sri Lanka can sell a kilo at the price of Rs. 10,000-15,000 rather than at just Rs. 3,000 at the global market.”
Lastly, Dr Jayasinghe stated that the industry might face a crucial challenge in the near future, as several Sri Lankan nations have reportedly started sharing important details related to cinnamon production techniques and other relevant matters to several competing countries that have started growing pure cinnamon, namely Tanzania.
Meanwhile, the study and master plan for the Ceylon cinnamon value chain in Sri Lanka also explicitly states that reasons for the loss in competitiveness in the industry are due to the low productivity due to inadequate efficiency on crop management and processing practices and the lack of peelers resulting in high labour costs, non-recognition of skilled capabilities of the workforce, migrating for employment in non-agricultural industries, low volumes, poor quality, and non-application of food safety standards.
Further, the report mentions that the lack of knowledge and skills in processing cinnamon safely and hygienically, low marketing skills, absence of financial support, deteriorating grading practices causing low-grade quills for international markets as well as the complex supply chain system are further challenges faced within the Ceylon cinnamon industry.
To understand the challenges faced by the export companies in Sri Lanka, we spoke to Saviour Route (Pvt.) Ltd. Founder Surani Gamage who also expressed similar concerns as mentioned above.
However, as a company that buys raw material from local producers and then processes it at its own factories, Gamage said that one of the biggest challenges is to deal with price hike problems as the sellers skyrocket the price rates as they wish since the industry is not regulated.
Expressing the concerns as a new company established in this cinnamon market, she stated that it is quite difficult to penetrate the existing market due to the bigger giants that exist in the market and also to find the right buyer from the global market to sell the products.
“Cinnamon is a good market, but peelers and farmers should be educated more by the regulating bodies. The quality should be further improved upto the standard, and the support for logistics and connecting with global clients should also be improved to a certain extent for local businesses to succeed in the market,” Gamage emphasised.
What measures are taken to overcome challenges?
Commenting on this, Dr. Jayasinghe stated that the DEA and other official bodies involved in the cinnamon industry have taken several measures to overcome the challenges the industry is facing right now.
Firstly, addressing a solution to improving productivity, the DEA has a targeted focus on providing a Good Manufacturing Practices (GMP) certificate along with training, incentives, knowledge, and all the other support required by the stakeholders of the industry.
Secondly, to encourage peelers, the DEA had introduced the National Vocational Qualification (NVQ) certificate with an intention to raise the standard of the employees existing in the market, but with the aim of attracting youngsters, uniforms and other benefits were also given as a recent measure.
Providing an alternative solution, the report notes that to mitigate the depleting skilled workforce, mobile harvesting and peeling enterprises can be established. “Their services can be one ideal solution for up-scaling cinnamon processing and plantation management in line with international food safety and hygiene standards,” the report added.
Thirdly, Dr. Jayasinghe stated that the DEA has continuously worked to its utmost level with regards to improving the quality standards of the cinnamon products exported. Elaborating, he said that the main component identified to uphold the Sri Lankan quality standard is by implementing the Geographical Indication (GI).
“When Sri Lanka exports cinnamon, importers mix our products with cassia and then later sell it at a higher price but with the GI implementation, importers will not be able to mix our product with anything else hence resulting in keeping our quality standard high in the global market,” he said.
Finally, expressing the measures taken to improve the value addition and product diversification, Dr. Jayasinghe said that with constant training, encouragement, motivation and enough knowledge about the profits that could be earned, the producers in Sri Lanka will eventually start expanding.
Accordingly, the master plan states that since Sri Lanka is mainly exporting cinnamon quills in bulk with 90%, the focus on value addition is just 10%. “Value addition of raw spices is essential to increase competitiveness in international markets. Many other countries sell their products in bulk form, but enjoy higher production capacity, higher productivity and can thus offer their cinnamon at lower prices. Adding value to cinnamon in Sri Lanka itself can be a viable option to increase income with sales to niche markets in Europe, Japan and the US,” the report added.
However, Dr. Jayasinghe emphasised that even if competitors producing pure cinnamon come up in the global market in the future, the Sri Lankan quality could never be achieved or replaced by any of them as Ceylon Cinnamon is unique and indigenous.