Beyond Sri Lanka’s scenic charm, the island nation etched a significant mark in the coffee world as a prominent producer and one of the largest coffee-growing countries in the 1860s. Despite not being a household name in coffee history, Sri Lanka has a hidden treasure - a perfect tropical climate for coffee.

Unlike many other coffee-producing countries, Sri Lanka's climate offers a harmonious blend of moderate temperatures, well-distributed rainfall, and diverse elevations, creating an optimal environment for cultivating coffee. This unique combination contributes to the development of nuanced flavours in coffee beans and sets the stage for the country's thriving specialty coffee industry.

Sri Lanka's coffee journey began in the 17th century when Muslim pilgrims introduced it for ceremonial occasions, and it reached its peak in 1864 in the midst of colonialism. A coffee leaf rust outbreak in 1868 shifted focus to tea, but recent investments are revitalising the sector's productivity and quality.

Stirring Success

In the past decade, the specialty coffee industry has grown significantly. Private investment has focused on enhancing quality, expanding production, and benefiting smallholder and backyard farmers, particularly women. Sri Lanka is well positioned to tap into the increasing global demand for inclusivity and diversity, while also benefiting poverty-stricken communities.

However, for most smallholders, coffee remains a minor income source, making up about 10% through an average of 100 trees. Lack of knowledge and incentives hampers their progress. To address this, the Market Development Facility (MDF) teamed up with private sector investors and companies to uplift the sector, focusing on increasing coffee production, enhancing quality, and fostering industry coordination.

MDF, an Australian Government funded initiative implemented by Palladium, promotes sustainable economic development through higher incomes and connects individuals, businesses, governments, and beyond to strengthen inclusive economic growth. The initiative has been working in Sri Lanka for 8 years.

“We’ve identified opportunities in crop management, post-harvest management, farmer knowledge, and adaptation of modern, innovative agricultural techniques and technologies to support the local coffee value chain to become more resilient and reliable in the future,” explains Maryam Piracha, MDF Sri Lanka Country Director.

For MDF, the goal was to establish Sri Lanka as a specialty coffee destination while also empowering smallholder farmers. It turns out there is significant unmet demand for coffee saplings, and so MDF co-invested with a business partner to pilot the commercial sale of saplings to farmers to demonstrate that sapling production can be a profitable business model. In 2022, MDF identified more private nurseries with the potential to produce and sell seedlings commercially, and it plans to co-invest with up to five of them to increase the availability of coffee seedlings.

MDF also supported coffee processors and provided them with technical expertise to improve the quality of the coffee they produce. The team engaged a consultant from Colombia and organised training sessions for coffee processors.

Sri Lanka’s First Coffee Association

To further strengthen industry coordination and the promotion of Sri Lankan specialty coffee, MDF played an instrumental role in the establishment of Sri Lanka’s first-ever national coffee association; the Lanka Coffee Association (LCA) in 2021. The association was spearheaded by the private sector and formed to expand the export profile of local coffee through industry-wide collaborative efforts. Membership almost doubled during the first year of operation.

In 2022, MDF and LCA brought together representatives from the local coffee sector for the first-ever annual ‘Sri Lanka Coffee Festival’. Following the success of this inaugural event, and in continued partnership with Jetwing Group, the second Sri Lanka Coffee Festival was hosted in May 2023.

The festival provided an excellent platform for coffee growers, processors, and roasters to showcase their products and engage with potential buyers and investors. The event, attended by the Australian High Commissioner, featured a variety of activities, including panel discussions on the “Upward Journey of the Coffee Industry in Sri Lanka,” a mini exhibition of leading local coffee producers, and the finals of the inaugural LCA Barista Championship.

Making Waves on the Global Stage

To further recognise the comeback of the industry, Sri Lankan specialty coffee was showcased for the first time at an international forum; the Melbourne International Coffee Expo in September 2022. The event provided a platform to showcase the high quality of Sri Lankan coffee. Feedback from attendees at the expo, including green bean buyers, roasters, and enthusiasts, was positive, highlighting the unique flavour profiles that Sri Lankan coffee offers compared to other regions.

The team says it’s generated interest from green bean buyers and investors, leading to discussions with local companies in Sri Lanka to evaluate the potential for coffee sourcing opportunities. At the expo, MDF launched “Sri Lanka’s Coffee Renaissance: A Guide to the Speciality Coffee Industry”, a report that highlights insights into the local specialty coffee sector and reveals potential investment opportunities.

Brewing a Sustainable Future

The journey of Sri Lanka’s specialty coffee market has continued to thrive, largely driven by domestic factors despite its many challenges, including recent economic downturns. “In 2022, due to a depreciating currency and the increasing cost of imported coffee, many cafés shifted to domestically grown coffee,” explains Piracha. ”The quality is high and and the sector is responding to this new domestic demand by expanding production and processing.”

“Domestic coffee buyers and processors are now prepared to pay more for quality, encouraging more smallholder farmers to expand their cultivation of coffee. Increased business interest in coffee cultivation is also fuelled by the declining productivity of tea estates, with coffee seen as a diversification and risk mitigation opportunity.”

So far, MDF’s work in the specialty coffee sector has benefitted over 580 farmers in 2022 alone. “Our vision is for Sri Lanka’s speciality coffee market to be driven by domestic and foreign investments, enabled by government policies that lead to exponential growth,” Piracha concludes. Sri Lanka's journey in the specialty coffee industry has been remarkable, and with the right support, the industry holds the potential to solidify its position as a key player in the global coffee market, while uplifting its local communities.

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