Export Potential of Food, Feed & Beverages Industry in Sri Lanka

The food and beverages industry is an intrinsic component of the economic, social, and cultural tapestry of Sri Lanka. Located near the equator and benefitted by favourable climate conditions as a tropical island, Sri Lanka is ideal for both agriculture and aquaculture. Consequently, the country has long been exporting locally grown and manufactured food, beverages, and feed to major export markets around the globe. At present, the export value of the Sri Lankan food and beverage sector surpasses USD 250 million with India, Maldives, the United States, and the United Arab as the major export markets.

Exporting a multitude of products such as processed coconut, vegetables and fruits, concentrates and juices, ready-to-serve food, confectionery, bakery products, preparations of cereals and flour, processed gherkins, cocoa, meat, fish and crustacean preparations, etc, Sri Lanka also features animal feed-related products like bran, sharps, and oilcake that are mainly exported to animal feed producers in the Indian market, who, according to stakeholders, are “cleaning the Sri Lankan coconut residue market.”

Due to the gigantic export potential it entails, the local food and beverage industry has been recognized as one of the seven key priority sectors by the Sri Lankan government. Aptly dubbed a ‘sunrise industry’, the food, beverages, and feed sector has several backstage forces fueling its export potential.

Reputed for Producing Healthy Products

Sri Lanka has successfully secured an untarnished reputation for manufacturing and exporting healthy products and this serves as propulsion for the export potential of the sector. The food and beverages sector is constantly in flux and its demands and trends change in an unprecedented manner. Recently, there has been a shift towards healthy dietary options, and consumers across varying demographics are choosing to be more conscious about the nutritional value of the foods they consume and the future conditions they may lead to. This in return brought to the spotlight healthy food products and superfoods that retain their natural goodness and are unsullied by chemicals. And this is where the export potential for Sri Lankan products emerges. Made from premium quality raw ingredients, food and beverages products from Sri Lanka have an undeniable reputation for containing significant nutrients and are wide- sought after by healthy-eating enthusiasts. For example, coconut water, a healthy superfood from the tropics, is a product exported by Sri Lanka that has vast export potential, probably due to the increased demand it enjoys as a star- superfood.

Availability of Resources

Another factor behind the huge export potential of Sri Lankan food and beverage products is the availability of ingredients. As mentioned before, Sri Lankan territory and climate are ideal for cultivation and this is further contributed by the cessation of the 30-year-long internal conflict in 2009. With the end of the civil war, private and public organizations could access the northern provinces of the country and this meant enabled access to territory and manpower. Subsequently, many projects were implemented in previously war-affected areas and they actively contributed to the food and beverage industry of the country, producing F&D items like crustaceans, fish, and molluscs, for example.

Diverse Agro-climatic Conditions

Sri Lanka’s geographical location as a tropical country blessed with several climate conditions that benefit the year-long cultivation of fruits and vegetables is yet another reason behind the sector’s export potential. Vegetables and fruits grown and processed in Sri Lanka have a distinct taste and this becomes decisive in terms of the global demand for Sri Lankan F&D products.

The Island’s International Connectivity

The island of Sri Lanka is situated at the nethermost tip of India and its geographical location provides an unfair advantage for the country’s export sector. As a maritime hub, Sri Lanka stands at the crossroads of major maritime routes and has versatile harbours that accelerate the export process. The country is also accessible by air, another factor that drives Sri Lanka’s export potential.

International Trade Agreements that Benefit Local Exporters

Sri Lanka has entered several regional and global trade agreements intended to benefit local exporters. For example, Sri Lanka entered a free trade agreement with India which allows spices and areca nuts from Sri Lanka to be imported 100% duty-free with ‘Country of Origin Sri Lanka’ or with 35% value addition for imported products. Free trade agreements with Pakistan and Singapore further enable duty-free access for selected processed products exported to the said countries from Sri Lanka. Most of the processed food products have duty-free or reduced-duty access to EU countries when exported from Sri Lanka as well.

The Disparity Between the Realized and Unrealized Export Potential

Nurtured by these factors and many more, the food, beverage, and feed products from Sri Lanka have huge export potential, most of which is still unrealized. For instance, according to the International Trade Centre’s Export Potential, Map which assesses products with high export potential, agriculture products with the greatest export potential from Sri Lanka are tea and spices.

The value of tea exports from Sri Lanka is USD 1213. 75 million in 2021 and has great unrealized export potential. For black tea (fermented) and partly fermented tea in packages exceeding 3kg, the unrealized export potential to South Asia, Non-OECD, and OECD countries is 91%, 22%, and 82% respectively. The absolute difference between potential and actual exports in value for spices is USD 453 million and this total value comprises USD 203 million for cinnamon, USD 151 million for pepper, and USD 47 million for cloves.

According to ICT data 2021, countries with the greatest export potential for tea and spices include the USA, the UK, India, etc. The unrealized tea export potential to the USA and the UK are 103.5 mn and 87. 8 mn. The untapped spice export potential follows closely, with 178. 6 mn in India and 42. 6 mn in the USA, showing us that Sri Lankan food and beverages products have huge unlocked export potential.

Why the Unrealized Export Potential?

This staggering untapped export potential is due to numerous reasons. Some of the production-related barriers that hinder the realization of export potential include unforeseen climate changes, shortage of labour, high production costs, and low productivity. Policy makers’ indifference towards the ground-level realities and the lack of necessary regulation are also behind this unrealized export potential. When it comes to trade-related factors hampering the export potential, “exporter’s lack of awareness of difficulty in complying with product-specific market entry requirements, inability to match consumer preferences in a specific target market and trade barriers” are prominent.

Fortunately, most of these barriers are not without remedial measures. With strategic planning and implementation of diverse projects aimed at production, processing, and export levels, Sri Lanka will be able to unlock its unrealized export potential.