For the past 150 years, Ceylon Tea has been Sri Lanka’s most famous export. Yet arabica coffee thrived in the rich highland soils before tea was introduced. With the right infrastructure and specialty coffee processes in place, experts believe the time is ripe for a second success story with Sri Lankan coffee.
When 167-year-old preserved coffee beans were unearthed recently in an archaeological excavation in Melbourne, it was discovered that some hailed from Sri Lanka. This may come as a surprise to readers, but for those versed in Sri Lankan history, it makes perfect sense. For while the island nation is renowned for exporting quality tea – indeed, Ceylon Tea is a brand unto itself – it was once synonymous with exceptional coffee. And there’s reason for this to be the case again.
According to Nimmi Galearachchi, Coffee and Agronomy Lead at Market Development Facility (MDF) in Sri Lanka, Sri Lanka’s foundation in coffee cultivation – coupled with the experience and network that exists from tea production – sets the stage for a modern coffee renaissance.
“Not mainstream coffee, but specialty coffee – this is the market that we are focused on, because it’s appreciated by consumers for having distinctive, nuanced flavour profiles and because of the expectation for transparency and inclusivity in the value chain,” clarifies Nimmi. “Sri Lanka’s distinctive weather patterns, elevation and soil conditions provide a unique flavour profile for the coffees grown.”
An emerging specialty coffee sector
In the past decade, tourism brought an enthusiasm and appetite for coffee to the forefront and served as a catalyst for local investment into smallholder-based and plantation grown coffee.
“The upsurge in private sector investment has driven improvements in the quality, volume and consistency of coffee produced, which has led to an emerging specialty coffee sector,” says Nimmi. “There is significant potential and support for businesses looking to invest in any part of the value chain.”
As Deputy General Manager of Colombo Coffee Company (CCC) – Sri Lanka’s largest end-to-end coffee solutions provider – Kushan Samararatne agrees that there is substantial potential in specialty coffee exports and in investing into the value chain.
“We see major potential in exporting green beans – it’s a completely untapped market that can easily be reached with the right product, and we believe that Sri Lankan specialty coffee can be that product,” he enthuses. “Which is why CCC is taking the route of going further down the value chain. We have extension (training) officers working closely with smallholder farmers to provide training and improve their harvesting techniques and farm management.”
Importantly, MDF has been working with private enterprises such as CCC to improve and sustain quality control. One of the ways they’ve been able to achieve this has been in shifting smallholder farmers away from the practice of processing the coffee themselves.
“Instead, we’ve introduced a cherry purchase model, whereby the farmers sell the coffee cherries only, rather than processing it and selling it in bean form to a collector,” explains Nimmi. “This benefits the farmers because it saves them time and labour, but also improves the quality of the green bean because it’s taken to a proper processing facility.”
Smallholder farmers – and the big picture
In fact, smallholder farmers stand to benefit most from growth in the specialty coffee sector, which is why MDF sees the value in investing in this segment. The objective of MDF – an Australian Government funded initiative – is to promote market-led solutions that can bring about higher incomes for people in vulnerable communities.
“Smallholder farmers will always be at the core of what MDF does and specialty coffee offers great value for this segment,” says Nimmi. “The value chain is inclusive – most smallholder farmers are women who cultivate coffee alongside other crops in their backyard gardens.”
MDF estimates that almost 80 per cent of specialty coffee originates from smallholder or backyard farmers and about 20 per cent in large-scale plantations. For commercial enterprises such as CCC, the incentive to invest in different parts of the value chain is that when the overall quality of export improves, everybody wins.
“The idea is that all stakeholders are benefitting from elevating the quality of the coffee for export,” explains Kushan. “At the end of the day, our business will benefit from having a higher quality product that we can market abroad, but so will the standards be lifted for the farmers. That’s the bigger picture that we are looking at.”
Quality is ‘excellent’ per SCA scores
The strategy is paying off. MDF initiated the process of qualifying Sri Lanka’s arabica coffee by commissioning international service providers to do cuppings. These have returned positive results, notably with the Lakparakum arabica variety that is widely grown in the country. This variety is renowned for its resistance to leaf rust and the berry borer pest. According to Nimmi, cuppings are returning scores in the mid to high eighties – “Which is landing within the excellent range of the Specialty Coffee Association’s scoring system!”
A unique origin investment opportunity
Noting the positive development of the specialty coffee sector, financiers such as Hiran Embuldeniya, Managing Partner in Ironwood Capital, believe Sri Lanka offers a unique investment opportunity. This is underlined by the fact that the necessary infrastructure, such as coffee plantations, processing plants, roasting operations and export mechanisms, are already in place.
“The groundwork has been laid out – the infrastructure exists, and Sri Lanka has established itself as a place that can successfully cultivate these types of crops, in fact you could use Ceylon Tea as a benchmark to assess the viability of marketing specialty coffee,” he explains. “Sri Lanka has the plantation network, labour power and market credibility.”
Hiran trusts that Sri Lanka will become a niche coffee destination. He posits that with the country’s current economic crisis, the industry is ripe for new investors.
“The combination of Sri Lanka’s history with coffee, success with tea, and the fact that a lot of infrastructure is already there should make it an appealing option,” he says. “In addition – and this is from a purely financial point of view – the timing is great for investors. With the rupee at all time low, if there was ever a time to invest, that time is now because those investment dollars will go so much further.”
Likewise, Kushan adds that Australians – as big coffee drinkers – will appreciate the Sri Lankan specialty coffee offering.
“Australians are discerning coffee drinkers and I think for all the reasons we’ve talked about this offers a special opportunity for investors to get in now and be part of Sri Lanka’s second coffee success story.”
To learn more about Sri Lankan specialty coffee and investment opportunities, and to experience a tasting, visit the Market Development Facility stall (#243) at the Melbourne International Coffee Expo (MICE) 2022.