Cinnamon holds the largest share of Sri Lanka’s total exports within the spice sector. For the last four months, the spice sector has seen the biggest growth. The spices sector is one of the biggest cash cows in Sri Lanka, which drives its export strategy led by increasing demand globally. Cinnamon is the most important and valuable product among all the spices in Sri Lanka. Sri Lanka occupies its sole dominant position in Ceylon cinnamon production. Ceylon Cinnamon grown and produced in Sri Lanka has a long-standing reputation in the international market due to its unique quality, color, flavor, and aroma. The country holds a monopoly in high-quality cinnamon production and exports to global markets.
Ceylon Cinnamon, also known as 'true' cinnamon, is very different from Cassia Cinnamon, the most commonly found cinnamon in the market. Cassia Cinnamon is mainly grown in China, Vietnam, and Indonesia, and the differences between the two are quite substantial in terms of quality as well as price. Ceylon cinnamon commands a premium price, that is, more than three times the price of Cassia cinnamon, as it is recognized that Ceylon cinnamon is inherently superior to Cassia cinnamon.
Ceylon Cinnamon in the Global Market
According to the EDB, export earnings from Spices and Essential Oils in April 2021 increased significantly compared to April 2020. The growth is mainly due to the increase of cinnamon, pepper, and cloves exports, which are the three main exported products. However, cinnamon has been the country's most exported spice for many years and the third-largest agricultural export product. Among the total volume of exported cinnamon by Sri Lanka, about 67% is of Ceylon cinnamon variety, which has an even more critical role in agricultural exports of Sri Lanka as a staple product from the country with international recognition.
In 2020, Sri Lanka accounted for 54% of the global export share of Ceylon Cinnamon and had an exported value of USD 107 million. It is estimated that 85% of the Ceylon cinnamon in the world is produced in Sri Lanka, mainly in the Southern coastal region. The leading importer of Sri Lanka´s Ceylon Cinnamon in 2020 was the US, with 24.3% of the export share, followed by Peru with 24.2% and then Mexico with 15.5%. Countries like Colombia and Guatemala have increased their Ceylon Cinnamon imports considerably over the last years. Despite the increasing growth rate of the product in recent years, Sri Lanka saw a considerable decrease in its exports over the previous two years that have created uncertainty in the industry and a sudden shift over the main destinations.
Source: ITC Trade Map, Tridge
Over 2019 and 2020, Sri Lanka´s Ceylon Cinnamon suffered from a considerable decrease in global demand for the product. Because Ceylon Cinnamon is considered to be a premium product, demand was impacted substantially during the pandemic, which brought a considerable decrease in exports in both years (2019 and 2020). In 2019, exports had a 16.5% decrease in value compared to the previous year. For 2020, a 23% decrease was seen from the last year, reaching a meager USD 107 million on exported value. Before the pandemic, Ceylon Cinnamon exports were experiencing continuous growth in the global market. In 2018, the exported value reached USD 190 million, and Sri Lanka accounted for 62% of the global export share. In both of those years, traditional importing countries like Mexico, which used to be Sri Lanka's leading destination for Ceylon cinnamon, decreased their imports by up to 70%.
The increase over the first four months of this year is expected to drive exporters to continue to increase cinnamon trade to support the national economic recovery, after the recession that the COVID-19 pandemic left. The fact that spice exports from January to April generated USD 136.76 million and represented a significant increase of 115.4% is a solid indication that Sri Lanka´s Ceylon cinnamon is back in the market.