Competitive strengths and challenges of Sri Lankan Cinnamon industry with special reference to Matara district.

Abstract

Cinnamon is Sri Lanka's leading spice in terms of foreign exchange earnings and employment. It commands over 80% of world production of true cinnamon. The other cinnamon exporting countries provide value added products rather than its raw form. We have lost our markets in Europe and North America to Cassia, which is a cheap substitute for true cinnamon. Therefore we should be alert about the threat posed to our cinnamon export by value added products preferred by many of the global customers; and cassia, the prices of which are extremely low when compared with those of cinnamon. It is obvious that if the brand identity for Sri Lankan cinnamon could be secured, it can be ensured the sustainable growth of the cinnamon industry. This can be done through facing successfully the challenges and problems faced by the main players in the sector: family owned plantations, plantation companies, smallholder producers, processors, traders, exporters, industrialists, R&D organizations, brokers and other stakeholders. The focus of this study is to analyze the competitive strengths, challenges and issues of the cinnamon industry as a small and medium scale industry and forward strategies to increase the competitiveness in the global market. High competition in the export market, availability of the value added cinnamon based products and the substitutes in the export market, changing consumer preferences for cinnamon, high level of customer sensitivity to product quality are major challenges of the cinnamon industry in Sri Lanka. Among the problems in the cinnamon industry, lack of knowledge in product quality, new technology, and global market trends, raising cost of production, shortage of skilled and non-skilled labour, bad ethics of the producers and exporters, and the absence of a proper network among the major players in the cinnamon industry are the most important aspects to be considered in developing the cinnamon industry in Sri Lanka.