“Specialty coffee can be the next big thing for Sri Lankan coffee…we have the soil, we have the weather conditions, and the samples which we have done as micro lots have fetched good results. I think all that tells us the story that we actually have the potential to be a serious specialty coffee player in the market!”

Kushan Samararatne (Chairperson – Lanka Coffee Association)

Visitors to Sri Lanka are invariably greeted with the island’s signature beverage—an aromatic cup of Ceylon tea. Few will know that tea was the second choice for Sri Lanka, which was until the late 1800s the world’s third-largest coffee exporter. A disease outbreak in 1868 shifted the country’s focus to tea, and Sri Lankan coffee became an afterthought. Fast forward to 2025, and coffee is once again gaining ground—this time with a focus on quality over quantity.

The journey of Sri Lanka’s coffee industry has been far from simple. Since the early 1990s, smallholder farmers in the scenic Central Highlands have been growing in small pockets, in their backyards and home gardens. In fact, most “coffee farmers” were actually tea farmers with a few old coffee trees. These farmers harvested coffee cherries, processed them using traditional methods and sold the resulting coffee green beans at low prices, with little regard for quality. This coffee would go to Colombo’s central trading houses, to be sold at the going price. High-end cafes and hotels imported coffee, bypassing local producers.

Despite this, a few businesses continued to see the promise in, and invest in, Sri Lankan specialty coffee (Arabica).

Around 2017, the Australian Government’s Market Development Facility (MDF) recognised the potential of the sector to not only generate foreign exchange, but also contribute to the development of smallholder livelihoods. MDF identified that for Sri Lanka to compete in the global coffee market, it would need to differentiate itself. The answer lay in the specialty coffee segment—a niche market driven by quality and premium pricing, rather than volume and achieving economies of scale. With the ideal environmental conditions for growing Arabica, Sri Lanka was well-positioned to step up.

Better processing leads the way

Processing is an essential step of the coffee value chain. Coffee can be dry-honey, or washed-processed, but each method must be conducted precisely to ensure a high degree of quality. Sri Lankan smallholder farmers were processing coffee at home, resulting in patchy quality. In 2020, MDF partnered with a business to pilot a centralised green bean processing center, to which the farmers supplied ripe red cherries. This saved farmers the time spent on home processing, yielded better prices for red cherries and ensured that businesses could maintain consistently high-quality processing. Other businesses soon followed suite—some with MDF support, others independently. The result was a significant improvement in coffee quality, which in turn sparked demand for local coffee from cafes, hotels and roasters.

The industry was quick to recognise the potential impact of climate change on processing. Irregular rainfall, in particular, can lead to wastage and significantly affect quality. MDF worked with its coffee partners to design and develop climate-adaptive “drying houses” to combat this threat; several coffee producers saw the value in this and invested in their own. The drying houses strengthened the value-add of centralised processing and is a vital contributor to quality.

Growth of the sector and new opportunities

As coffee quality improved, new opportunities emerged: cafes and hotels demanding more local coffee, smallholders planting more coffee, agriculture businesses diversifying into coffee, and new support services being offered, among others. Large tea plantation companies also joined the fray, expanding efforts to diversify into specialty coffee.

There has been a substantial increase in investments by coffee companies in their supply chains, to increase production volumes and quality.

“We always thought Sri Lanka deserved better coffee. Hence, we started investing heavily in processing in order to control our coffee production. Over the past couple of years, we have been able to produce some amazing coffees—[from] naturally processed coffees to washed coffees, which have won the hearts of many customers worldwide and [was able] to bring Sri Lanka to the map for specialty coffee.”

- Yasas Kodithuwakku (CEO/Director of Fits Retail and Damn Fine Coffee)

The Government of Sri Lanka through its Department of Export Agriculture, announced that coffee would be prioritised to explore export markets and allocated resources towards increasing coffee sapling production, promoting new planting and providing farmers with extension services (information such as how to grow and harvest coffee). A thriving coffee industry is also a boost to Sri Lanka’s rebounding tourism industry, fuelling domestic demand and paving the way for the development of new tourism products such as coffee-based experiences and tours. Exports have also been slowly picking up. Some MDF partners have already secured export orders, signaling Sri Lanka’s entry into the global specialty coffee market.

Women at the heart of the transformation

A key, often overlooked, aspect of this transformation is the role of women. Around 60% of coffee farmers are women, and they play a critical role in ensuring the quality of the final product. Women played a lead role in moving processing from the farm to a central location, as they realised that the move would free up their time for other activities, including household management and other income generating activities, making coffee a lucrative crop for them to invest in and manage. Furthermore, the shift in social norms in the communities were led by women who took up non-traditional roles as collector and lead farmer and, in some cases, setting up their own nurseries and starting businesses to sell coffee packaging material.

Since women manage the coffee crop and its sale, they were able to control how the revenue is used. In most cases, the women MDF spoke to used it for general expenses, children’s education or savings. There were also instances where women used this additional income from coffee for community projects in their villages.

“The women in this village can now earn a good income by growing coffee and working in the fields rather than relying on their husband’s incomes. These women now have their own money and their income is substantial during the coffee season. As a result, this has become a great opportunity for unemployed women in the villages to earn a good income, and they are content with it.”

- Chamilka Kumari (Coffee farmer from Belton, Kotmale.)

Link: https://www.youtube.com/watch?v=v3H6YMbx-xw

Brewing a path to progress

While Sri Lanka still has some ways to go to become a well-known specialty coffee origin, the domestic coffee sector is on a growth trajectory. Businesses, government and the industry body are working in collaboration to solve multiple challenges, including increasing coffee volumes so that export demand can be met.

MDF’s work in the sector has been instrumental in driving growth and identifying opportunities across the value chain. Much of this has not been about ‘reinventing the wheel,’ but highlighting the business case for the private sector to invest in specialty coffee. Small, incremental investments have been key.

Perhaps those gaining the most are smallholder farmers – the work on this project alone has benefitted over 2,400 farmers through increased incomes and new opportunities. More than 1,200 women have benefitted. As Sri Lanka’s coffee makes its comeback, its most valuable champions will not be left behind.

Based in Colombo, Tharindri Rupesinghe is MDF’s Communications Director, and Vishan Rajakaruna is a Business Adviser with MDF’s Sri Lanka Specialty Coffee team.

Links:

From Bean to Cup docu - https://www.youtube.com/watch?v=rZpN3Si1tIQ

Women in Coffee: Changes in income, decision making and social norms (MDF Annual Report 2024) - https://marketdevelopmentfacility.org/wp-content/uploads/2025/05/Women-in-Coffee.pdf