The Competitive Context of the Sri Lanka Spice Industry

Field Trip to Matale Spice Village	Food Writers Spice Tour (Feb '07)

Food Writers Spice Tour (Feb '07)

The American Spice Trade Association defines a spice as “any dried plant product used primarily for seasoning purposes.” Spices include “tropical aromatics,” leafy herbs from the temperate zone, spice seeds, and dehydrated vegetables that may be used to add flavor or aroma to foodstuffs, beverages, pharmaceuticals and cosmetics, as well as household and personal care items (e.g., air fresheners). All spices exported from Sri Lanka are tropical aromatics and they come in three forms: Whole, Ground (powdered or fragmented form of the whole spice), and Derivative, (including essential oils, oleoresins). The growing and processing of spices provides cash income to a large proportion of rural Sri Lankans, particularly smallholders. The main spice crops include cinnamon, pepper, cloves, cardamoms, nutmeg and mace, and cinnamon accounts for over 50% of total spice exports. The main markets for Sri Lanka spice exports are India, Mexico, USA, Peru & Colombia. In 2003, the value of Sri Lankan spice exports was equivalent to 1. % of total national exports, 7.6% of agricultural exports, and 50%of the value of agricultural exports other than tea, coconuts, and rubber.

Smallholders play an important role in the spice value chain where 70% of production comes from smallholder units of less than one hectare of land. There are approximately 400,000 smallholder farm units in the country. The highest concentration of pepper and clove cultivation is found in the Central Hills of Sri Lanka while cinnamon is grown predominantly in the Southern Province. Sri Lanka has the biggest market share for “Ceylon Cinnamon” or “true” cinnamon, and Mexico is its main destination.

Despite being a small player in the global spice trade, Sri Lanka is the leading exporter of true cinnamon, which faces competition from the similar, but lower-priced substitute product- “Cassia”. Sri Lanka also exports pepper and cardamom, sales of which are rising. Some members of Sri Lanka’s spice industry, especially new entrants, have invested in superior distillation equipment, creating a general interest in the export of derivatives. Most Sri Lankan exporters sell whole spices through a broker or a commission agent in the importing country. The importer then sells to a grinder or processor, including those who blend spices into dry seasoning mix. The grinder and the blender then sell the ground and blended spices to food manufacturers and food service companies. Specialized blenders pack spices for retail sale.

Spice Industry Statistics

EXPORTS OF SPICES - VOLUME (Tons) and VALUE (Rs. Million.)

The Spice Council

The Sri Lanka Spice Cluster was formed in 2001 with the assistance of the U.S. Agency for International Development (USAID) funded program- The Competitiveness Initiative. The Cluster was formed in response to challenges, both global and local, facing the spice industry in Sri Lanka and was comprised of representatives from across the industry value chain. Participants included growers, traders, distillers and extractors, exporters, brokers, associations, industrial technology institutes, as well as government ministries and agencies, such as the Export Development Board (EDB) and the Department of Export Agriculture (DEA). On December 9, 2003 the Spice Cluster formalized itself by incorporating The Spice Council (TSC). TCS’s membership now serves as a proxy for the industry.

Industry Vision

To place Sri Lanka within the top five branded and value added spices & allied products marketers in the world.

Mission of The Spice Council

	Facilitate and implement competitive strategies to achieve the Industry Vision by 2010.
	Act as apex body for the Sri Lanka Spice Industry and meet the aspirations of all stakeholders by unifying their efforts to realize the Industry Vision.
	To be highly innovative and customer value driven.
	To promote Sri Lanka’s position in global markets and contribute to national economic growth.

Key Strategic Initiatives

The Sri Lanka spice industry’s overall strategy is to position its products increasingly in niche markets and be recognized for its distinctive offerings.

The Industry seeks to achieve this objective by:

	Marketing distinctive, natural spices. This initiative aims to help Sri Lankan marketers of whole spices compete in attractive markets, serving buyers that cater to consumers who appreciate the distinctive taste, aroma, or color of whole spices.
	Marketing spice derivatives. This initiative aims to help Sri Lankan marketers of essential oils, oleoresins, isolates, and nutraceuticals compete in attractive markets serving buyers that cater to consumers who appreciate the distinctive taste, aroma, color, or other more flexible uses and product applications of Sri Lankan spice derivatives.
	Improving the quality, quantity, and consistency of the spice supply. This initiative seeks to strengthen linkages between exporters and processors and organized smallholders, stimulate plantation interest in spices, and improve agronomic services to growers.

Contact Information

Offices:
The Spice Council
c/o, The Agribusiness Council
503, Sri Jayawardenapura Mawatha.
Ethulkotte
Sri Lanka.
Telephone: 94-11-4300619
Fax: 94-11-2862335
E-mail: info@srilankaspices.org

Contact:
Nilanthi Wijewickrema
Executive Officer
The Spice Council
Website: http://www.srilankaspices.org