Technical Assistance Consultant’s Report
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
Project Number: 49273 July 2017
Sri Lanka: Small and Medium-Sized Enterprises Line of Credit Project (Financed by the Japan Fund for Poverty Reduction)
Prepared by
Pricewaterhousecoopers – Sri Lanka
Colombo, Sri Lanka
For Ministry of Finance’s Department of Development Finance
www.pwc.com
Value Chain Analysis of Key F&B products in Sri Lanka
July 2017
Table of Contents
Table of Contents
1. Executive Summary 4 2. Introduction 5
2.1. Food Processing and Beverage Sector in Sri Lanka 5 2.2 Current Status of Export in the F&B sector 5 2.3 Sri Lankan Advantages 6
2.4 Potential Commodities/Value Chain for F&B in the country 6
3 Value Chain Gap Analysis of Processed Pineapple and Mango 7
3.1 Processed Pineapple 7 3.1.1 Processing Market (for Processed Pineapple) 8 3.1.2 Packaging and Labelling (for Processed Pineapple) 9 3.1.3 Quality standards/certification requirements (for Processed Pineapple) 10
3.2 Processed Mango 12 3.2.1 Processing Market (for Processed Mango) 13 3.2.2 Packaging and Labelling (for Processed Mango) 13 3.2.3 Quality standards/Certification required (for Processed Mango) 14
3.3 Common Gaps for processed food and beverages 15 3.3.1 Infrastructure Gaps 15 3.3.2 Knowledge Gap 15 3.3.3 Gender Gap 15 3.3.4 Gaps in supply of quality raw material 16 3.3.5 Gaps in enterprises access to finance 16 3.3.6 Gaps in training and capacity building along F&B value chain 16 3.3.7 Ineffective marketing system 17
4 Value Chain Gap Analysis of Pepper 18 4.1 Overview of the pepper market 18 4.2 Value Chain Gap Analysis 21 4.2.1 Processing Market 21 4.2.2 Quality standards/Certification required 21 4.2.3 Inputs for pepper value chain 21 4.2.4 Knowledge Gap 22 4.2.5 Gender Gap 22 4.2.6 Marketing Gap 23 4.2.7 Other Major Pepper Value Chain Constraints 24
5 Conclusion and Next Step 25
Appendices 26
1.1 Appendix - Current Policies to Promote Food and Beverage Sector in Sri Lanka 26 1.2. Appendix – Pepper Quality Parameters 27
Executive Summary
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 4
1. Executive Summary
The Food and Beverage (F&B) industry is among the fastest growing industries in Sri Lanka, and has the
potential to grow even further. The industry has been identified as one of the seven key priority sectors by the
Government of Sri Lanka due to its potential to create market for export and its capability to generate
employment opportunities. Furthermore, increasing per capita income of the consumers, standards of living of
the rural population, narrowing urban-rural divide in the country, rapid growth in consumer spending and
massive influx of tourists into the country, is also increasing the demand for the food and beverage products.
Despite lack of technology, skilled labour, support infrastructure and un-availability of quality raw material, the
processed food and beverage sector has the potential for expansion considering the increase in domestic and
international demand. Currently the major export destinations are European countries like Germany, UK,
Netherland and France etc. Sri Lanka is also exporting to countries like United State, UAE, Thailand and India.
Objective of this study
The objective of this study is to carry out a detailed gender sensitive value chain analysis of the most potential
commodities (from export perspective) in the F&B sector. Among various products in the sector, , it is identified
that (i) pineapple prepared or preserved (canned), (ii) mango pulp and (iii) pepper are most potential products.
The report analyzes the current status of export of the identified commodities, their export trends, key
destination countries/markets and potential to enhance the overall export. The report also analyzes the value
chain and identifies key gaps along the value chain.
Key outputs of the study
In case of pineapple (canned), the key gaps identified are limited technological developments, lack of quality
raw material (required for meeting set quality standards), ineffective marketing system, inefficient operations
management and lack of infrastructural support. In case of mango pulp, the key gaps are limited availability of
quality raw material, lack of cold chain infrastructure, non-availability of proper machinery & packaging
material and lack of knowledge for mango pulp production. Similarly in value chain of pepper the key
constrains identified are lack of quality raw material, lack of post-harvest infrastructure, lack of technology and
mechanization etc. In addition training and capacity building of stakeholders and limited accessibility to
finance for entrepreneurs in processed pineapple, mango and pepper sector are also major constraints in Sri
Lanka.
The report also present the role played by women along the value chain. The report highlights that women are
majorly involved in the activities at the field level (like farming, harvesting, grading and sorting) and work as
labour in processing facilities. There are only a few women entrepreneurs in processing and export of value
added products in Sri Lanka. The key factors impeding empowerment of women are the limited access to
resources such as finance, land, business support etc. and established social and cultural norms.
Introduction
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 5
2. Introduction
2.1. Food Processing and Beverage Sector in Sri Lanka
The F&B industry in Sri Lanka is widely recognized as a “sunrise industry” having huge potential for uplifting
agricultural economy, creation of large scale processed food manufacturing and food chain facilities, and the
resultant generation of employment and export earnings.
The F&B Industry in Sri Lanka is one of the evolving and lucrative industries in terms of production,
consumption, export and growth prospects. Earlier, food processing was largely confined to the food
preservation, packaging & transportation, salting, curdling, drying, pickling, etc. However, over the years, with
emerging new markets and technologies, the sector has widened its scope. It has started producing many new
items like ready-to-eat food, beverages, processed and frozen fruit and vegetable products, marine and meat
products, etc. Demand for processed and convenience food is increasing constantly due to urbanization,
changing life-style and food habits of people. As per Sri Lanka’s department of census and statistics data for
2013, the average household expenditure on food & beverages has increased by 15.8%1 since 2010. This clearly
indicates the changing behavior of the domestic consumer and increasing demand for food and beverages. In
addition, in the 1st quarter of 2016, F&B sector has a weightage of 39%2 to the entire industrial segment.
Recognizing the growing demand, Government of Sri Lanka has given a high priority to commercialization and
value addition to agricultural produce, for minimizing pre/post-harvest wastage, generating employment and
export growth. Currently Sri Lanka’s F&B industry covers a wide range of products, viz, fruit and vegetables;
meat and poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other
consumer product groups like confectionery, chocolates and cocoa products, soya-based products, mineral
water, high protein foods etc. Further in order to ensure the quality of the processed products, the Food
Advisory Committee under the Ministry of Health functions as the governing and advisory body to the industry
on food safety and consumer protection. Please refer to the key initiatives under National Budget 2017 in
Appendix 1.1. It should be noted that 100% FDI is permitted in this sector, which could facilitate the creation of
large scale processed food manufacturing and food chain facilities by foreign companies.
2.2 Current Status of Export in the F&B sector
The share of food and beverages in total export of Sri Lanka, over the years, is provided below:
Year Total export from Sri Lanka (in million USD)3
Total export under food sector from Sri Lanka (in million USD)4
Total export under beverages sector from Sri Lanka (in million USD)5
Share of Food and Beverage sector in total export (in %)
2011 10011 361 6 3.7% 2012 9370 307 6 3.3% 2013 10005 219 9 2.3% 2014 11296 246 15 2.3% 2015 10440 222 21 2.3% Source: UN-Comtrade, EDB and Industry Capability Report 2016
From the above table, it is evident that the share of F&B in the total export of Sri Lanka has declined from 3.7%
to 2.3% in last 5 years despite the growing international demand. This clearly shows that the country is yet to
realize its true export potential.
1 Department of Census & Statistics, Sri Lanka 2 Index of Industrial Production for 1st quarter of 2016, Department of Census & Statistics Sri Lanka 3 UN Comtrade 4 Industry Capability Report 2016 & EDB data 5 EDB data & UN Comtrade
Introduction
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 6
The key export destinations for F&B products from Sri Lanka are different for different product categories. An
overview of the key importing markets for Food & Beverages and Pepper are provided below:
Genre Key Importing countries
Processed Vegetables, Fruits and Juices United States, United Kingdom, Germany, Australia and Japan
Pepper India, Germany, United States, United Kingdom
2.3 Sri Lankan Advantages
Sri Lanka has following comparative advantages for the F&B sector:
• Diverse agro-climatic conditions supports the production of diverse fruits and vegetables which in turn
provides a good raw material base for food processing companies. The factors such as quality, taste and
flavor which are unique to Sri Lankan products play a vital role in creating demand for Sri Lankan
product worldwide.
• Increasing per capita income, standards of living of the rural population, narrowing urban-rural divide
in the country, rapid growth in consumer spending, expanding middle income segment in the economy,
massive influx of tourists into the country is also boosting the demand for the food and beverage sector,
contributing to further growth of the sector.
• International connectivity of the country by air and sea is well developed. The logistical infrastructure
within the country is satisfactory, which is an added advantage for exporting processed products to
different countries.
• Sri Lankan Universities conduct advanced courses on Food Science and Technology to introduce
qualified human resources to the industry.
• Sri Lanka is currently on an aggressive path for investment in infrastructure, packaging and marketing.
2.4 Potential Commodities/Value Chain for F&B in the country
The Sri Lankan industry has more than 110 food and beverages manufacturing and marketing companies6.
Based on current export trends, export potential and other factors, the team, in consultation with Export
Development Board, shortlisted (i) processed pineapple (canned) & mango (pulp) and (ii) pepper as
targeted products for the detailed value chain analysis. The following sections analyze gaps in the value chains
of these shortlisted products.
Processed pineapple, mango and Pepper products exported from Sri Lanka
6 Food and beverages e-brochure: http://www.srilankabusiness.com/pdf/food-and-beverages-ebrochures-1.pdf
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 7
3 Value Chain Gap Analysis of Processed Pineapple and Mango
This section analyzes gaps along with the value chains of processed pineapple and mango. The analysis for fresh
pineapple and mango is provided in another report under the TA “F&V Gap Analysis Report”.
3.1 Processed Pineapple
Although there is strong production base of pineapple in the country, currently the level of processing of
pineapple in Sri Lanka is at a nascent stage. Out of the total production of pineapple in Sri Lanka, only 3-4
percent is exported7 either in fresh or processed form to international market. The key processed pineapple
products include juices, cordials, jams and dried/preserved (canned) pineapple. The export data is provided
below:
Category 2013 2014 2015 Total export value of Processed fruits, vegetables and juices (in ‘000 USD)
13125.04 16846.1 21625.4
Total export value of Canned Pineapple (in ‘000 USD) 697.9 1121.9 838.8 Total export value of Pineapple juice (in ‘000 USD) 442.2 287.9 220.3
The export data indicates that the CAGR (from 2013 to 2015) for export earnings from canned pineapple is
growing at a rate of 10% while that of pineapple juice the CAGR is negative 29%. The high growth rate can be
attributed to increase in demand from major European markets like Germany and UK.
An overview of the typical processed pineapple value chain in Sri Lanka is illustrated below:
Figure 1: Processed Pineapple Value Chain
Source: HARTI, PwC Analysis
In terms of the processed products, the share of canned pineapple in the overall export of processed pineapple
products is maximum. The table below shows the export value of canned pineapple exported from Sri Lanka.
7 A study on value chain of pineapple and banana in Sri Lanka – HARTI report 2012.
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 8
Pineapple prepared or preserved export from Sri Lanka (Quantity in MT, value in USD ‘000)
2013 2014 2015
Quantity Value Quantity Value Quantity Value
340.8 697.9 507.9 1121.9 314.2 838.8
Major export destination of canned pineapple from Sri Lanka is provided below:
Exports from Sri Lanka in USD thousand(200820: Pineapple prepared and preserved)
Destination 2013 2014 2015
Germany 629.6 1054.5 616.4
United Kingdom 22.4 8.7 9.1
UAE 4.7 4.9 0.4
Canada 9..0 3.9 5.1
United States 1.5 42.4 184.3
World 697.9 1121.9 838.8
Germany is major export market for canned pineapple from Sri Lanka and the export to the US is growing.
At a global level, Sri Lanka stands far behind in the world export of canned pineapple, with top 4 countries
accounts for more than 89% of the world canned pineapple exports (by value). The data below shows that there
is a huge scope for increasing the destination countries for export of pineapple and also increase the existing
quantities being exported.
Figure 2: Major Exporting Countries of Processed Pineapples
Source: UNCOMTRADE, FAO Stat, PwC Analysis
US, Germany, Spain and UK are the leading importers of canned pineapples in the world. Among these
potential markets, Sri Lanka is only exporting to Germany, US and UK. Therefore Sri Lankan exporters should
be encouraged to explore other potential markets than Germany. In addition, the share of Sri Lanka export of
canned pineapples to the existing countries is still small. In 2015, Sri Lanka is catering to 0.6% of the total
imports by Germany and less than 0.1% of the total import of pineapples by US8. This clearly indicates that Sri
Lanka has huge potential to cater to the canned pineapple export market.
3.1.1 Processing Market (for Processed Pineapple)
Current status of processing
Canning is the methods of preserving food in an airtight container for a longer period. Typically canning
improves the shelf life of the product from one year to five year, but time period of storage varies differently for
8 In value terms by UNCOMTRADE
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 9
different types of products. Canned pineapple usually last for 1-2 years depending upon the condition of
storage. The process involved in turning fresh pineapple into canned product is illustrated below:
Figure 3: Process for turning pineapple in canned product
Source: PwC Analysis
The harvested fruits are sorted on the basis of their shape, size, freshness and ripeness. The sorted fruits are
then washed carefully without damaging the skin and ten peeled for removing the outer skin. The peeling is
usually done manually and after peeling again sorting is done to remove blackened pieces, bits of peel etc. After
sorting, the fruit is cut into variety of shapes depending upon the requirement (like round, small pieces etc.)
and filled into a jar containing additional sugar syrup. The specification of the syrup is provided on the can.
After filling, the jars are sealed through vacuum sealing process and then they are either pasteurized (above 800
C) or sterilized (above 1000 C). The jars are then cooled to 400 C using water and then labelled and stored.
Currently, the level of processing has not attained its full potential due to limited technological developments.
There are inefficiencies in the existing production system, due to the inability of small players to invest in
technology up gradation and diversify into alternate product categories.
Key Gaps in Processing
Due to limited technology up-gradation the cost of production/processing increases, which results in losing
competitiveness in the domestic as well as international market. In addition, there are limited fiscal incentives
to encourage technology up gradation of existing facilities and investment in development of ancillary
industries like research and development, packaging, food processing equipment manufacturing etc. Adoption
of new technology has the potential to reduce the cost of production, production losses and make the process
more efficient. In addition to private sector, the Government should also focus on investing in Research and
Development (R&D) for development of food processing sector in Sri Lanka.
The other major constraints faced by the processors in the country are high fluctuation in international selling
prices, high cost of labour, lack of skilled and trained manpower, electricity and lack of other key inputs (like
packaging material, storage etc.).
3.1.2 Packaging and Labelling (for Processed Pineapple)
In order to export to European and US market, the canned fruits are packed into single or wholesale packages
(bulk) made of glass or aluminum/tin cans. It is mandatory to mention all the contents of the jar on the label.
The key information required to be displayed in the jar is:
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 10
• Product name (Trade Name) which will include name of the fruit with or without the extra description
– according to the fruit content. For e.g. Pineapple slices, lightly sugared etc.
• Type of product including style (whole, halves, quartiers, slices, pieces, dices et cetera) and declaration
the fruits are ‘peeled’ or ‘unpeeled’
• Composition of the product
• Name and address of the manufacturer, importer, exporter or product trader and country of origin
• Net weight
• Packaging and Best before dates
• Batch number/Lot identification number
• Handling information
• Temperature symbol with indication of temperature range
The can should be stored in a dark room at low temperature (about 15 0C). Under optimum conditions the
canned pineapple can be stored for 1 year (when pasteurized) or 2 years (when sterilized).
Key Gaps in packaging
Majority of the packaging material for processed foods is imported by Sri Lanka. This in turn raises the cost of
packaging material and results in losing price competitiveness in international market. For instance, tin cans
for packaging pineapples are not widely available in the country and is imported from other countries. This
increase the overall cost and makes the product less price competitive in international market.
Currently in Sri Lanka there are few tin can manufacturers like TinPak (Pvt) Limited and, GM metal packaging limited etc. which are manufacturing tin cans in Sri Lanka. So there is scope for private sector entrepreneurs to explore this opportunity as the current firms showcase that Sri Lanka can domestically produce cans. However, as stated above the number of such domestic manufacturers are limited.
Further, in terms of alternative packaging material, glass can be a good substitute of tin for packaging pineapples. But in order to pack sliced pineapple in glass, a lot of system modifications needs to be incorporated (like sterilization of glass, an opaque covering on glass etc.) which will in turn will increase the cost of production.
3.1.3 Quality standards/certification requirements (for Processed Pineapple)
The Processing / Manufacturing facilities owned by the export companies comply with local standards (SLSI)
and also with International Quality Standards such as ISO, HACCP, and EU Standards. In order to export
canned fruits to Europe the key requirements are:
• Products must be safe in terms of pathogens and harmful micro-organisms.
• Only approved additives must be added to the food products.
• The canned product must be free from harmful contaminants, such as pesticide residues or excessive
levels of mycotoxins or preservatives.
• Cans and other materials used for packaging must be corrosion resistant and free from contaminants
such as cadmium or Bisphenol-A (BPA).
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 11
Sri Lanka is adjusting well to the stringent ISO 22000 series and to the health & safety regulations stipulated by
the European Community. Although farmers are also constantly trained to adopt Good Agricultural Practices
(GAP) at the nurseries and at the field, their full adoption of GAP is still not sufficient (See discussion in the gap
analysis report for fruits and vegetables sector). Further, for processed pineapple food certifications such as
HACCP and ISO 22000 are also advantageous as many buyers from the European and U.S.A region desires for
this requirement.
Key gaps in quality certification
The canned pineapple value chain in Sri Lanka is confronting a major challenge in the form of lack of testing or
certification facilities. Many countries have tightened the quality standards on the import of agro-industrial
products. For instance the European Union (EU) has significantly tightened phytosanitary requirements on
imports of processed fruits and vegetable products. Due to limited quality testing facilities in Sri Lanka many
small and medium agro-enterprises are unable to get their products tested and certified.
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 12
3.2 Processed Mango
Mango is another major fruit crop in Sri Lanka. However, currently the processing of mangoes is not done on a
large scale in Sri Lanka. The key value added mango products exported from Sri Lanka include mango pulp,
mango nectar, dried slices etc. but mango pulp is the major product exported from Sri Lanka. A typical
processed mango pulp value chain in Sri Lanka is illustrated below:
Figure 4: Mango Pulp Value Chain
Source: PwC Analysis
The table below shows the export of mango pulp from the country.
Mango Pulp export from Sri Lanka (Quantity in MT, value in USD ‘000)
2013 2014 2015
Quantity Value Quantity Value Quantity Value
0.8 26.1 1.05 28.5 0.3 9.5
From the above tables, it is evident that currently Sri Lanka export very small quantities of mango pulp as
compared to total production of mangoes in the country. This can be majorly attributed to low level of
processing of mangoes in the country. India is the leading exporter of mango pulp in the world followed by
Mexico and Colombia. The major mango pulp importing regions are the Middle East, South-East Asia and
North America. Sri Lanka is currently catering to European countries and has very limited accessibility to the
aforementioned potential regions. The major countries importing mango pulp from Sri Lanka are given below:
Exports from Sri Lanka in USD thousand (20089910: Mango Pulp, in bulk packaging)9
Destination 2013 2014 2015
Germany 14.04 21.5 3.9
Switzerland 0.8 0.9 1.9
Australia 0.1 0.8 1.4
Norway 0.3 0.2 0.5
France - 2.0 -
From the above table it is observed that Sri Lanka is majorly exporting mango pulp to Germany and some
quantities to Switzerland and Australia. However it should be noted that with the increase in the production of
TJC variety (TJC mango has a substantial advantage to compete with alphonso of India, which is the major
exporting variety by India) there are good prospects for export of processed mango products from Sri Lanka.
9 Potentials and opportunities for Dutch horticultural sector in Sri Lanka (NEA)
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 13
3.2.1 Processing Market (for Processed Mango)
Current status of mango processing
Fully matured mangoes are harvested, transported to the fruit processing plant, inspected and washed. Selected
high quality fruits go to the controlled ripening chambers; Fully Ripened Mango fruits are then washed,
blanched, deseeded, pulped, centrifuged, homogenized, concentrated (when required), thermally processed and
aseptically filled to maintain sterility. The pulping process includes cutting, de-stoning, refining and packing.
The finished products is either packed aseptically or packed in cans, for export to other countries. Pulp is also
heated/ pasteurized (the temperature for pasteurization varies from 90 oC to 105 oC depending upon the final
use of mango pulp) to ensure that the natural flavor and aroma of the fruit is retained in the final product. An
overall process for preparing mango pulp is illustrated below:
Figure 5: Process of making mango pulp
Source: PwC Analysis
The processing of mangoes is not done on a large scale in Sri Lanka and majority of processors have small scale
units. Currently only a handful of processors are into processing and export of mango products.
Key Gaps in Processing
The key challenges faced by the processors includes limited technological developments (like lack of aseptic
technology, IQF technology), quality raw material, lack of packaging material and lack of basic infrastructure
like (like pack houses, cold storage infrastructure, electricity, water etc.).
3.2.2 Packaging and Labelling (for Processed Mango)
While exporting to various countries, mango pulp must be packaged in a material which can
• Protect the organoleptic properties of the product,
• Prevent bacteriological and other contamination, including contamination from the packaging material.
• Protect the pulp from moisture loss and dehydration.
• Protect the contamination from external odour, taste, colour and other characteristics.
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 14
Particularly exporting to Europe, the most common options for bulk packaging are bag-in-box, bag-in-drum,
drums, and tins. The first two types of aseptic packaging are acceptable by industry standards, although some
buyers may prefer one to the other. Drum sizes vary between 180 and 275 kg. Bags packed in boxes are usually
5, 10 or 20 kg in size for mango pulp, and 25 kg for concentrated mango pulp. Bag-in-box packaging also
provides the option of storing frozen mango pulp for extended shelf life.
In terms of labelling, the product must be labelled as ‘mango pulp’ or ‘concentrated mango pulp’. When
sweeteners are added, products have to be labelled ‘sugar(s) added’. Labelling of retail packaging must comply
with the EU Regulation 1169/2011 that came into force on 13 December 2014.
Bulk packaging for exports must be labelled with the same information as required above, either on the
container or in accompanying documents. ‘Mango pulp or concentrated mango pulp’ and the name and address
of the manufacturer/importer or packer must be stated on the container.
Key Gaps in packaging
Packaging is an important element in pricing a product in both local and foreign markets. The limited capacity
in the domestic market to produce high quality packaging material raises costs (due to high import tariffs) and
results in losing competitiveness in international market. For instance, aseptic packaging material for storing
and exporting mango pulp is not widely available in the country and is majorly imported from other countries.
This increase the processing cost and makes mango pulp less price competitive in international market.
3.2.3 Quality standards/Certification required (for Processed Mango)
Sri Lanka is majorly exporting mango pulp to European countries. The basic quality requirements for mango
pulp to be exported to European countries are defined by various parameters, the most important of which are:
• Brix level (sugar content of an aqueous solution): The usual brix level of mango pulp is between 13 and
18. European Union Juice Directive defines 13.5 brix as the minimum for importing pulp from different
countries.
• Acidity level affects the quality and price of the product. Acidity levels depend on the variety of mango
used in pulping and vary between 0.2% and 1%, and in concentrated pulp can reach up to 3%. The brix-
to-acid ratio is another quality indicator and varies between 37 and 50 for pulp, and above 8 for
concentrated pulp.
Key gaps in quality certification
In order to verify whether the quality specifications for exporting to various countries are met by the final
products, there is a requirement to check the quality of the product before exporting. But due to lack of quality
testing facilities in the country, the agro-enterprises are unable to carry out quality inspection. As a result such
agro-enterprises fail to comply with the strict quality standards and lose business competitiveness.
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 15
3.3 Common Gaps for processed food and beverages
The followings are common challenges for processed food and beverages, including processed pineapple and
mango.
3.3.1 Infrastructure Gaps
Sri Lanka is endowed with a well-established road and rail network and also has good connectivity through air
and sea routes with the rest of the world. However, the country lacks support infrastructure for agro based
industries. For instance, the country lack suitable industrial sites, especially in the rural areas, for setting up
value added industries. Although the Government has established few industrial estates and industrial parks,
but the agro based industries are unable to take full advantage of these sites due to lack of specialized
warehouses, cold storages and waste disposal facilities. Many of these sites lack access to other support
infrastructure like water, electricity, and telecommunication facilities.
3.3.2 Knowledge Gap
In case of canned pineapple and mango pulp value chain, technical information about the processing, packaging
and storing the final product is required to be disseminated along the value chain. Currently there are limited
sources of information for entrepreneurs. Despite various programs and initiatives being undertaken by various
agencies like, the exporter association regularly conducts various seminars and trainings to disseminate
information pertaining to formalities, certifications, procedures etc. to potential exporters, but there is still a
potential gap in the existing value chain.
The flow of knowledge and information along the value chain is illustrated below:
Figure 6: Knowledge and information flow along the value chain
Source: PwC Analysis
3.3.3 Gender Gap
Currently the role of women in processing sector in Sri Lanka is very limited. There are very few women
entrepreneurs in processing of fruits and vegetables. The involvement of women is majorly in the production
stage i.e. as a labour in the processing plant. The key aspects impeding empowerment of women are the limited
access to resources and established social and cultural norms. An overview of the role of women along the
canned pineapple or mango pulp value chain is provided below:
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 16
Figure 7: Role of women along the value chain
Source: PwC Analysis
3.3.4 Gaps in supply of quality raw material
Agro-industries require a continuous supply of high quality agricultural raw materials. Sri Lanka's small
producer’s ability to meet this demand depends on their access to appropriate seeds and planting materials.
However, the lack of appropriate seeds and planting materials to produce high quality fruits is a major
constraint to the development of domestic agro-industries.
3.3.5 Gaps in enterprises access to finance
The availability of credit is a major challenge for agro based industries in Sri Lanka. It should be noted that agro
based industries in Sri Lanka are generally small enterprises with limited resources, therefore they are
sometimes unable to provide collateral against their loans. This increases the risk associated with the borrower
which in turn makes it difficult for the formal financial institutions to lend to smaller enterprises. It should be
noted that land is the most commonly offered collateral for credit from banks and lack of proper title for the
land prevents SMEs from offering them as collateral at the time of applying for loans. Each time a piece of land
is used as collateral, a lengthy search for all deeds recorded during the last 30 years must be undertaken to
provide title to land. Records are often poor, and this results in frequent disputes.
Agro based industries in Sri Lanka are usually small, family-owned businesses, run or managed by one or two
individuals. These individuals typically know their business well, but lack’s the skills to produce written
business & financial plans to avail loans. In addition, extensive documentation requirements of banks
discourages them to apply for loans from formal financial institutions. Another main constraint in accessing
finance is the cost of finance. Costs such as legal fees, valuation charges, stamp duty, etc. make bank lending
expensive for SMEs. The enterprises are also constrained by the lack of branch network, especially in the rural
areas. Most of the banks are confined to urban areas resulting in limited availability of financial
facilities/services to SME’s in rural areas.
3.3.6 Gaps in training and capacity building along F&B value chain
The technology in food processing sector is quite sophisticated and is constantly upgraded. While in Sri Lanka,
it has been observed that there is lack of knowledge about new processing and value addition technologies
among the entrepreneurs. In addition to technology, entrepreneurs also lack information about various quality
standards required to export processed products to various countries. They also lack information about good
manufacturing practices to enhance the overall quality and safety of processed food. In addition to technical
knowledge among entrepreneurs, the absence of business education and training in various business aspects
like business finance, financial modelling etc. impedes the growth of entrepreneurship. The lack of qualified
trainers for entrepreneurship development and absence of effective linkages between existing and potential
entrepreneurs poses a challenge for entrepreneurship development in the country. In the implementation stage,
the TA will address these gaps by coordinating with existing training providers.
Value Chain Gap Analysis of Processed Pineapple and Mango
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 17
3.3.7 Ineffective marketing system
Marketing is a major challenge faced by ago-processors in Sri Lanka. The key reasons for inefficiencies in
marketing system for processed food sector in Sri Lanka are:
• Since there are only handful of packaging, branding and tin manufacturers in Sri Lanka, the cost of look
and feel of the product becomes higher compared to a similar quality branding of the same product in
neighboring countries
• Very few processed food players are registered in Alibaba or other reputed online platforms to
promote or market their products online outside Sri Lanka
• The dependence on manual labour and low technology usage affects turnaround times at ports,
including cost and hence marketing the product using strategies such as shorter delivery timeline
is difficult
• There is insufficient marketing information, especially from processing companies, regarding grades,
quality, quantity requirements, trends in demand, prices and consumer preference.
• There is also a lack of systematic and reliable statistics on market demand and supply so that
promoting/exporting agencies are not in a position to foresee what form of processed food is in
demand, the quantities needed and the prices likely to be paid to farmers. This makes it difficult for the
exporters to develop satisfactory working relationships with the processors and to enable them to enter
into agreements with farmers to market particular product.
The situation is further exacerbated by irregular supply of raw materials due to the lack of market information
provided at the farm level, lack of processing and packaging facility closer to the farm, lack of cold storage
facilitates and un-organized nature of the domestic market.
All the above factors lead to high cost of marketing the processed food, which in turn raised the price of
the finished products to both domestic as well as importers/foreign consumers. The high cost associated with
the production of value added products makes the domestic SMEs lose their competitiveness in the
international market. As a result, the country is able to export its goods to specific countries which are offering
good prices to cover the costs. The effect of inefficient marketing system is more severe for domestic market
oriented agro-industries. Unlike the export-oriented agro-industries, which compete for a small share of the
large world market, the domestic oriented agro-industries have to compete within the narrow confines of the
domestic market. The lack of large scale, together with the dispersed nature of the domestic market, limits the
opportunities for such industries.
Value Chain Gap Analysis of Pepper
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 18
4 Value Chain Gap Analysis of Pepper
4.1 Overview of the pepper market
Pepper known as the “King of Spices” is the top exported commodity from Sri Lanka both in terms of volume
and value10 . It is mainly used in culinary as a spice and flavoring agent. Most of the pepper cultivated is dried to
produce black pepper. Other products of pepper are white pepper, green pepper, pepper oleoresin and pepper
oil. In Sri Lanka, pepper is cultivated in wet and intermediate agro-ecological zones up to an elevation of about
800 metres above the mean sea level. The major pepper growing areas in Sri Lanka are located in Kandy,
Matale districts in Central province, Kurunegala district in North Western province, Badulla, Monaragala
districts in Uva province, Kegalle, Ratnapura districts in Sabaragamuwa province and Galle, Matara districts &
part of Hambanota district in Southern province. The production of pepper in Sri Lanka is given in the table
below:
Year Area ( In Ha) Production (in MT) 2010 30,93111 16,63012 2011 31,16213 NA 2012 31,66714 18,60415 2013 39,493 26,727 2014 39,650 27,847 2015 44,450 35,459
Pepper is generally intercropped with other spices, coffee, cocoa, rubber and coconuts. The peak harvesting
season is from November to January which accounts for about 70 percent of the total harvest. However,
farmers tend to harvest the pepper berries prematurely because of fear of crop theft while the berries are still on
the vine. Another reason for premature harvest is the need for quick cash.
During harvest period the farmers, collect the berries and dry it in their own backyard or cement slab and take
it to the traders in the nearby town where the farmers get payments based on the quality of the peppers. The
farmers in this case generally get a higher price for their produce since they are able to do value addition to their
produce by means of drying.
Yet another mode of harvesting is practiced among Sri Lankan pepper farmers wherein the traders approach a
farmer and negotiate the value of the crop while it is still on the vine. The traders then harvest the berries from
the vine and then transport the produce to a drying facility. The berries are then separated from the spikes with
the help of threshers. In this case the price of the pepper with the farmer is fixed and quality of the berries do
not have an impact on the prices paid to the farmers.
The produce from the farmers (raw/limited processing- drying & cleaning) is sold to the collectors from where
it is sold directly to exporter or processor based on the end use. The collectors also carry out minimum post-
harvest operations such as cleaning, drying and grading and sell it to the local wholesaler for local consumption.
In case of processed pepper such as pepper powder, white pepper and other value added products such as
oleoresins, the collectors/whole sellers sell the produce to processers who in turn process pepper as per the
market demand and sell it to exporters or to the local markets. In certain cases, the exporters themselves
directly buy from collectors/whole sellers, process it and export.
Traditionally, In Sri Lanka farmers go for production of black pepper. The current price of black pepper is Sri
Lankan Rupees 1300/Kg, whereas white pepper fetches a higher market value at Sri Lankan Rupees 2500/Kg.
10 As of 2015 11 http://www.ijhssi.org/papers/v2(4)/version-4/G243644.pdf 12 http://www.ijhssi.org/papers/v2(4)/version-4/G243644.pdf 13 http://www.ipcnet.org/admin/data/ses/1329381004thumb.pdf 14 http://www.exporterssrilanka.net/seminar/downloads/spice-presentation-by-mr-fazal-mushin.pdf 15 http://www.exporterssrilanka.net/seminar/downloads/spice-presentation-by-mr-fazal-mushin.pdf
Value Chain Gap Analysis of Pepper
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 19
White pepper is produced after the berries are allowed to fully ripen on the tree followed by removing the outer
skin. Since black pepper has a ready market, the farmers do not produce or sell white pepper. However, if the
farmers are given an assured market for white pepper, they can be convinced into producing white pepper
which will help in better price realization. In certain farmer associations, farmers produce white pepper by
soaking pepper in fermentation tanks for 4 to 5 day and thereafter removing the outer skin and later selling it in
the market at higher prices. The figure below show a pictographic representation of the pepper value chain in
Sri Lanka
Figure 8: Pepper value chain in Sri Lanka
Source: PwC Analysis
Current status of pepper export
Pepper can be processed and exported as raw whole black pepper, crushed & ground pepper, white pepper,
green pepper, pepper oleoresin. However in Sri Lanka, mostly raw dried pepper is exported currently and very
limited value addition is done16. The total pepper export from Sri Lanka is give in table below.
Pepper export from Sri Lanka (Quantity in MT, value in USD ‘000)
Pepper Product 2013 2014 2015
Qty. Value Qty. Value Qty. Value
Dried pepper ( excluding crushed or ground)
20523 124478 6894 66236 15292 140032
Pepper (crushed or ground)
807 2193 1035 2935 1365 4034
Fruits of the genus capsicum or pimento, dried, crushed or ground
Dried, neither crushed nor ground
253 517 226 440 147 370
Crushed or Ground 112 358 172 560 162 577 Total 21695 127545 8328 70172 16966 145013
Pepper forms a major part of the spices export of Sri Lanka. The major export spices along with the total export
volume and export value is given in the table below17:
16 Value addition in terms of oil and oleoresin extraction 17 http://www.srilankabusiness.com/blog/product/spices.html, total spices include Cinnamon, pepper, cloves, nutmeg & mace and essential oils
ConsumerFarmer
Local markets
RetailerWholesalerCollector
ProcessorExporter
Export market
Local markets
Processed pepper (black pepper and white pepper)
Value Chain Gap Analysis of Pepper
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 20
Spices export from Sri Lanka (Quantity in MT, value in USD ‘000)
Products 2013 2014 2015
Qty. Value Qty. Value Qty. Value
Pepper 21694 126000 8328 70000 16900 144000
Cinnamon 13866 132000 13692 132000 13548 131000
Cloves 5478 49000 1231 14000 5518 48000 Nutmeg & Mace 2042 20000 1837 19000 2000 14000 Essential Oil 604 23000 643 26000 784 33000
Total 43684 350000 25731 261000 38750 370000
Pepper export from Sri Lanka
Year World export (quantity in ‘000 MT) World Export (value in million USD)
2013 21.69 127.5
2014 8.32 70.2
2015 16.96 145.0
As of 2015, Sri Lanka stands at 9th rank with a total export value of USD 144.6 million. In the same year, it
constituted about 3 % of the total pepper exports. The top 15 countries in pepper export constitute about 92 %
of the total value of exports and the rest constitute the remaining 8 percent.
Figure 9: Leading exporters of Pepper in the world
Source: PwC Analysis18
In terms of imports USA is the largest importer with a total import value of USD 1062.9 Million, followed by
Germany with an import value of USD 353.2 million, followed by Singapore with import value of USD 214.3
Million. In terms of current destination countries, Sri Lanka is already exporting pepper to the top two potential
countries in the world. But the current concern is the share of Sri Lanka export to these markets. Currently Sri
18 UNCOMTRADE
CountryExport Value (2015) in USD million Share in world export
Viet Nam 1262.8 25.0%
India 877.7 17.4%
Indonesia 559.2 11.1%
Brazil 349.9 6.9%
China 318.4 6.3%
Singapore 189.3 3.8%
Germany 174.6 3.5%
Spain 155.1 3.1%
Sri Lanka 144.6 2.9%
Malaysia 136.9 2.7%
UAE 116.1 2.3%
Netherlands 115.0 2.3%
Peru 99.5 2.0%
Mexico 79.0 1.6%
USA 77.7 25.0%
Rest 388.7 7.7%
Viet Nam
India
Indonesia
Brazil
China
Singapore
Germany
Spain
Sri Lanka
Malaysia
UAE
Netherlands
Peru
Mexico
USA
Rest
Value Chain Gap Analysis of Pepper
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 21
Lanka is catering to 0.6% of the total imports by USA and 2.6% of the total import of pepper by Germany19. This
clearly indicates that Sri Lanka has huge potential to cater to the pepper import market and an increase in
production will find a ready export market.
Name of the country
Total import in 2015 (in USD thousand)
Share of Sri Lanka in total imports (in USD)
Percentage share
USA 1062904 6725 0.6% Germany 353206 9115 2.6%
Sterilization of pepper is of crucial importance in case of pepper exports. This is generally carried out by
blanching of pepper.
Lack of Value Addition (Exports): Most of the pepper is exported without much value addition, whereas
pepper oil and pepper oleoresin have a high demand in Western markets. Hence, development of value added
products are required to expand the market20. Though the government currently promotes value addition of
produce, it requires more effort.
4.2 Value Chain Gap Analysis
4.2.1 Processing Market
Currently, the farmers do very minimal or no processing before selling pepper to the market. In certain cases,
the farmers enter into a selling agreement with the traders while the berries are still on the tree. The traders
pick the berries directly from the trees and pay the farmers for the unprocessed berries. The farmers usually
enter into such an agreement because of immediate cash requirements or because of fear of crop theft while the
berries are still on the vines. Even in cases when, the farmers decided to pluck the berries and sell to the
collectors, there is very little postharvest processing involved. Even at the processer and exporter level, there is
limited or no extraction of oleoresin from pepper. It is mostly exported as dried, crushed/not crushed pepper.
Oleoresins and pepper oil have a high value in the European market which can be tapped if the processors
involve in oleoresin and pepper oil extraction.
4.2.2 Quality standards/Certification required
The pepper sector is characterized by a lack of Good Agricultural Practices (GAP), Good Manufacturing
Practices (GMP) and other standards and quality criteria in production and processing. It is also observed that
there is a gap in research and development work in new technologies and mechanization. The farmers also do
not have a clear understanding of the international market requirements and quality standards need for
branding of Sri Lankan pepper, which will help in fetching a higher price in the international market21.
4.2.3 Inputs for pepper value chain
Most of the pepper cultivation takes place in home gardens with mixed cropping. Farmers apply little or no
chemical fertilizers or agro chemicals. Pepper is most often attacked by Pepper Yellow Mettle Virus (PYMV)
which is very harmful to the crop and results in drastic decline in productivity. Since the spread of disease is
through vectors such as pepper lac bugs, mealy bugs and infected planting material, it is suggested that the
farmers be provided healthy disease free planting material and agro protection to check the disease spread in
case of PYMV incidence. This will result in increase in productivity and production. Post cultivation, the
harvesting and separation of pepper is done manually followed by sun drying and packing in jute or poly bags.
19 In value terms by UNCOMTRADE, Sri Lanka Export Development Board 20 Structure, Conduct and Performance analysis of Cinnamon, Pepper, Coconut and Tea Market By L.P Rupasena, Bandara Rathnayake, T. Ravichandran available online at http://dl.nsf.ac.lk/ohs/harti/21849.pdf 21 Spice/Alternative Tourism in Sri Lanka: An analysis of poverty sensitive value chains, paper contributed by Richter, Value Chain Promotion Project, GTZ – integration, Sri Lanka
Value Chain Gap Analysis of Pepper
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 22
Access to mechanical threshers will help the farmers a higher turnaround time in berry separation. Also, access
to artificial driers and blanching equipment would help the farmers to add value to the produce and in turn get
a better remuneration for the product. The government could provide a support for increasing post-harvest
facilities to the pepper farmers.
4.2.4 Knowledge Gap
The farmers are generally unaware of the international market requirements and the standards. Besides,
farmers also lack knowledge of market prices pepper. As is the case in most of the agricultural value chains,
there is little or no linkage between the producers and the exporters which results in the produce passing
through multiple stakeholders before reaching the exporters. In such a scenario, the farmers are offered very
low prices by the middlemen and majority of the profit margin is taken away by them. Hence, an effective
linkage between the producers and the exporters need to be made, which will help the farmers get higher profit
margins. Moreover, there is reduction in quality of the produce when it passes through several hands along the
value chain.
The below value chain shows the information flow between various stakeholders. There is a need to further
streamline the information flow along the chain so that producers are well aware of the various value chain
factors affecting them and how to increase their profitability. The flow of knowledge and information along the
value chain is illustrated below:
Figure 10: Flow of Knowledge and information along the pineapple value chain
Source: PwC Analysis
4.2.5 Gender Gap
Women are generally more disadvantaged than men in value chain operations. A general observation in various
value chain across agricultural produce is that women are often excluded in horizontal linkages (relationships
within one stage of the chain and within one organization, group of producers or self-helping groups) as well as
in vertical linkages (relationships with actors of the value chain stages below and above such as buyers and
suppliers)22. Similarly in pepper value chain women are mainly concentrated at the lower levels of value chain
22 Trade Winds of Change: Women Entrepreneurs on the Rise in South Asia, Background country study – Sri Lanka – UNDP available online at http://www.asia-pacific.undp.org/content/dam/rbap/docs/Research%20&%20Publications/poverty/RBAP-IG-2016-TWoC-Sri-Lanka-Country-Study.pdf
Value Chain Gap Analysis of Pepper
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 23
such as farming, harvesting, sorting berries and drying. Studies suggest that household responsibilities, lack of
mobility and lack of enthusiasm are the main reasons for women to concentrate in lower levels of the value
chain.
Another main barrier for women in moving up the value chain is the lack of enthusiasm. Studies suggest that
women entrepreneurs at the lowest levels of value chain are content with their present operations and do not
have a clear understanding of their own potential to grow as an entrepreneur.
Figure 11: Role of women along the value chain
Source: PwC Analysis
Factors such as training, extension, awareness campaign, a forward looking social policy, package of free
education and health services etc. could ensure narrowing the gender gap in the value chain.
4.2.6 Marketing Gap
The Sri Lankan Government’s involvement in trade of pepper in the international market is mainly on market
promotion, quality assurance, developing standards. The Spice Council (TSC) and the Spices and Allied Product
Producers and Traders Association (SAPPTA) are the main private sector organizations involved in marketing.
The Department of Export Agriculture (DEA) and the Export Development Board (EDB), the Department of
Commerce of Sri Lanka are closely working with private and government organizations to improve the
prevailing marketing system in the country as well as abroad.
Some of the current marketing challenges and gaps for pepper and spices exporters arise from the farm level.
Nearly 70 per cent of the industry are smallholders who cultivate less than one hectare and there is lack of
support provided to them to move from subsistence farming to commercial agriculture. If this happens the
country could double the production of the pepper and other spices with better agriculture practices.
Further, there are very strict hygiene and quality standards have to be met in exports of pepper and other
spices, which is currently limited to only handful of exporters.
Also most of the processed pepper and spice exporters are unable to attract the global market because value
addition to the product is missing, which is one of key differentiating factors in today’s global market.
Value Chain Gap Analysis of Pepper
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 24
Also very few pepper exporters are marketing their products global online platform like Alibaba, which is
imperative to reach out to more geographies and clients.
4.2.7 Other Major Pepper Value Chain Constraints
In order to increase the efficiency of the pepper value chain and thereby increase exports, there is a need to
identify the gaps and constraints in the value chain and address them.
Inadequate Training: Financial Support. The farmers receive technical know-how extension services
from Department of Export Agriculture. However, most pepper farmers still are involved in traditional
cultivation of pepper which results in less productivity and production and lack knowledge about the latest
advancements and improved cultural operations in pepper cultivation. There needs to be an extensive lab to
land programme which involves training the farmers. Besides, studies also suggest that extension personnel
also lack up to date knowledge on technology transfer and adult learning techniques. Hence, the extension
workers should also be trained in the latest crop production technology practices and other post-harvest
technologies in pepper.
Lack of primary processing facilities: Most of the farmers sell the produce with little or no post-harvest
operations such as cleaning, drying and grading resulting in lesser price realization. Farmers if provided with
post-harvest facilities, can do some preliminary processing and get a better price in the market.
Conclusion and Next Step
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 25
5 Conclusion and Next Step
Canned pineapple is a major product exported from Sri Lanka in Food and Beverage product category. The
potential for this product lies in increasing the total outreach of the product and by enhancing the overall
quality. In addition, the limited processing is a major constraint in expanding the market for canned pineapple.
It has been observed that limited technological upgradation and limited knowledge (technical as well as
business acumen) among the entrepreneurs are the major reasons behind limited level of processing and export
from the country. Therefore in the coming years, Government of Sri Lanka should focus on incentivizing the
technological upgradation and implement capacity building programmes to attain full processing potential in
pineapple.
In terms of mango pulp, it has been observed that currently Sri Lanka is exporting insubstantial amount of
mango pulp as compared to total production of mangoes in the country. The limited level of processing and very
limited accessibility to potential market are the major reasons for low level of exports. However, the increasing
production of TJC mango in the country and high international demand for mango pulp, provides good
business opportunity for export of the product. In order to realize the full potential for mango pulp, Sri Lanka
needs to provide support for large scale processing. In order to overcome the challenge of low level of
processing, more technological upgradation and capacity building programmes of the entrepreneurs should be
implemented in the country.
Pepper is also a major product exporter from Sri Lanka. However, currently raw dried pepper is exported
majorly and very limited value addition is done to pepper. It should also be noted that Sri Lanka is exporting
pepper to the most potential markets in the world but its share in total exports is not substantial. Therefore, in
order to increase its market share, Sri Lanka has to increase its production base and undertake more value
addition activities along the pepper value chain. In order to strengthen the pepper value chain, capacity
building programmes for all major stakeholder along the value chain needs to be inducted.
Currently the F&B sector in Sri Lanka is grappling with various challenges like inadequate infrastructure, non-
availability of technology, high import dependence for packaging material, lack of knowledge and training etc.
But majority of these challenges can be overcome by introducing new interventions, policies, programmes and
infrastructure support. The prospects for food and beverages in Sri Lanka are quite optimistic considering the
country’s stable economic environment. The growth prospects for the economy is improving continuously and
considerable opportunities are available for business expansion to take place. Therefore, industry players in the
F&B sector must seize this vast opportunity and obtain maximum benefits from the favorable economic
environment. The way forward for the F&B sector will be to introduce more technological upgradations and
capacity building programmes specifically focused at strengthening the value chain linkages.
Draft
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 26
Appendices
1.1 Appendix - Current Policies to Promote Food and
Beverage Sector in Sri Lanka
Key incentives provided under National Budget 2017
The Government of Sri Lanka is promoting Food and Beverage Sector by providing incentives to the sector. The
key incentives provided under national budget 2017 are:
• Removal of import duties pertaining to processing machinery and equipment
• 50 percent interest subsidy to farmers, farmer organizations and agro processing establishments for
upgrading the sector through infusion of productivity enhancing technologies and practices.
• Allocation of Rs. 1,000 million to improve rural sanitation facilities, agro based industries, agriculture
support services, etc. in the Southern province.
Draft
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 27
1.2. Appendix – Pepper Quality Parameters
Basic Parameter Black Pepper (All forms)
White Pepper (All forms)
Dehydrated Green Pepper (All forms)
General Size/ Shape
Whole dried Black pepper berries shall be unbroken with wrinkled pericarp. Diameter 2.5 –7.0 mm (approx.) and in Globular shape.
Whole dried White pepper berries shall be smooth surface, slightly flattened at one pole and small protuberance at the other. Diameter 2.0 -6.0 mm (approx.) and in Globular shape.
Whole Dehydrated Green Pepper berries shall be unbroken, with or without wrinkled pericarp. Diameter 2.0-6.0 mm (approx.) and in Globular shape.
Colour Brownish to dark brownish or blackish colour and free from added colouring.
Matt grey to brownish to pale ivory white and free from added colouring.
Characteristic green, greenish or dark greenish and free from added colouring.
Sensory property
The flavour shall have a penetrating odour and hot, biting pungent taste characteristics of Black Pepper excluding mouldy and rancid odours. The product shall be free from foreign odours, flavours and free from any other harmful substances.
The odour and flavour shall be characteristic of White Pepper, slightly sharp and very aromatic, excluding mouldy and rancid odours. The product shall be free from foreign odours, flavours and free from any other harmful substances.
Pungent odour and flavour characteristic of Green Pepper, free from rancidity, mustiness, bitter taste and extraneous flavour. The product shall be free from foreign odours, flavours and free from any other harmful substances.
General Size/ Shape
Whole dried Black pepper berries shall be unbroken with wrinkled pericarp. Diameter 2.5 –7.0 mm (approx.) and in Globular shape.
Whole dried White pepper berries shall be smooth surface, slightly flattened at one pole and small protuberance at the other. Diameter 2.0 -6.0 mm (approx.) and in Globular shape.
Whole Dehydrated Green Pepper berries shall be unbroken, with or without wrinkled pericarp. Diameter 2.0-6.0 mm (approx.) and in Globular shape.
Pepper is classified into Grade I, Grade II and Grade III based on the physical and chemical properties after
processing at appropriate levels. The quality specifications of the above products defined by IPC are:
Whole Black Pepper
Parameters Grades I II III
Physical Bulk Density (g/l), min 550.0 500.0 450.0 Light Berries/Corns(m/m)%, max 2.0 5.0 10.0 Extraneous Matter (m/m)%, max 1.0 2.0 2.0 Mouldy Berries/Corn(m/m) %, max 1.0 3.0 3.0 Insect Defiled Berries/Corns(% by wt.), max 1.0 2.0 2.0 Whole Insects, dead or alive (by count), max Nil Nil Nil Mammalian or/and Other Excreta (by count), max Nil Nil Nil Pinheads or broken berries % (m/m), max 1.0 2.0 4.0 Chemical Moisture (m/m)%, max 12.0 12.5 13.0 Total ash, % (m/m), max, on dry basis 6.0 7.0 7.0 Non-volatile ether extract % (m/m), min, on dry basis 7.0 7.0 7.0 Volatile oil % (ml/100 g)min, on dry basis1 2.0 2.0 2.0
Draft
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 28
Parameters Grades I II III
Piperine content, % (m/m), min 4.0 3.5 3.0 Moisture (m/m)%, max 12.0 12.5 13.0 Total ash, % (m/m), max, on dry basis 6.0 7.0 7.0 Non-volatile ether extract % (m/m), min, on dry basis 7.0 7.0 7.0 Volatile oil % (ml/100 g)min, on dry basis1 2.0 2.0 2.0 Piperine content, % (m/m), min 4.0 3.5 3.0 Microbiology Escherichia coli (MPN/g), max <3 <3 <3 Salmonella (detection / 25g) Negative Negative Negative Aflatoxin Aflatoxin Total (µg/kg), max 20 20 20
Whole White Pepper
Parameters Grades I II III
Physical Bulk Density g/l, min. 600.0 600.0 550.0 Light Berries/Corns (m/m)%, max. 1.0 2.0 2.0 Extraneous Matter (m/m) %, max. 0.8 1.5 2.0 Dark Coloured Berries/Corn (m/m), %, max. 2.0 5.0 10.0 Mouldy Berries/Corn (m/m) %, max. 1.0 3.0 3.0 Insect Defiled Berries (% by wt.) Max. 1.0 2.0 2.0 Whole Insects, dead or alive (by count), max. Nil Nil Nil Mammalian or/and Other Excreta (by count), max. Nil Nil Nil
* Broken berries %(m/m)max 2.0 3.0 3.0
Chemical Moisture (m/m) %, max. 12.0 13.0 14.0 Total ash, % (m/m) max, on dry basis 3.5 4.0 4.0 Non-volatile ether extract % (m/m) min, on dry basis. 6.0 6.0 6.0 Volatile oil % (ml/100 g), min, on dry basis 1.5 1.5 1.0 Piperine content, % (m/m), min 4.0 3.5 3.0 Microbiology Escherichia coli (MPN/g), maximum <3 <3 <3 Salmonella (detection / 2g) Negative Negative Negative Aflatoxin Aflatoxin Total (µg/kg), max 20 20 20
Ground Black and Ground White Pepper
Parameters Grades I II
Chemical Moisture (m/m) %, max 12.0 13.0 Total ash, % (m/m) max, on dry basis 6.0 3.5 Acid insoluble ash, % (m/m) max, on dry Basis 1.2 0.3 Non-volatile ether extract % (m/m), min, on dry basis 6.0 6.0 Volatile oil % (ml/100 gm),min, on dry Basis 1.0 0.7 Piperine content, %(m/m), min on dry Basis 3.5 4.0 Crude fiber, insoluble index, % (m/m) max, on dry basis 17.5 6.5 Moisture (m/m) %, max 12.0 13.0 Microbiology
Draft
Value Chain Analysis of Key F&B products in Sri Lanka DC02 PwC 29
Escherichia coli (MPN/g) <3 <3 Salmonella (detection/25 gm) Negative Negative Heavy Metal Arsenic mg/kg, max 5 5 Lead mg/kg, max 10 10 Cadmium mg/kg, max 1 1 Aflatoxin Aflatoxin Total (µg/kg), max 20 20
Whole Dehydrated Green Pepper
Parameters Grades I II III
Physical Insects (by count) % max NIL NIL NIL Extraneous matter % (max) 0.5 1 1.2 Dark coloured berries % (max) 1 2 5 Chemical Moisture % (mm) max 8 8 9 Total Ash % (m/m) max on dry basis 5 5 5 Acid Insoluble Ash % (m/m) ,max on dry basis 0.3 0.3 0.3 Sulphur Dioxide (ppm), max 500 500 500 Microbiology Escherichia coli (MPN/g), max <3 <3 <3 Salmonella (detection / 2g) Negative Negative Negative Aflatoxin Aflatoxin Total (µg/kg), max 20 20 20
This report contains information derived or obtained from a variety of sources (as indicated in the report). PwC has not verified the accuracy
of this information and accepts no liability or responsibility for any error or omission. The evidence presented in this report are based on
information obtained from various publicly available information and discussions held with stakeholders and industry experts, and does not
necessarily reflect any views or opinions of PwC.
The report is based on information collected during the period from November 2016 to February 2017. Economic conditions, political
conditions, legislative factors, market factors and performance change may result in the report becoming quickly outdated and may require
updating from time to time.
This report is not intended to constitute investment advice. Readers should not rely on this report in making investment decisions. PwC
accepts no liability or responsibility to the contents of this report or any reliance placed on it.