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The Coconut Industry In Sri Lanka

Paper Type: Free Essay Subject: Marketing
Wordcount: 5324 words Published: 8th May 2017

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In Sri Lanka, about 25% of the total land is use for the coconut farming. Sri Lanka is the second largest land user for coconut. As a major beneficial harvest in the country, the coconut industry provides employment to some 1,35,000 people involved in the production, processing, and trading sectors of the coconut industry.

The period from 1970 to 1995 saw a steady failure in area under coconut, from 466,000 hectares in 1970 to 419,000 hectares in 1995. This steady failure in area under coconut which involved cutting of coconut palms was due to the increasing use of coconut land for industry, development and housing programed.

Coconut in Sri Lanka is mostly under private ownership with a huge majority classified as arable farm of less than 1.2 hectares. The percentage of palms over 60 years of age was predictable at about 15% of the total plantings.

Coconuts enjoy anextraordinary position in the Sri Lankan society and it is linked with the culture and ethnicities of its people. Each part of the coconut palm is strongly related with the day to day life of the public. Therefore it has been inaugurated as “Kapruka or Tree of Life” – a source of plenteous resources. It givessignificantly towards not only satisfying local requirements, but also earning foreign exchange as well.

The coconut farming covers 394,836 hectares, accounting for 19.26% of the total agricultural lands in Sri Lanka and 75 % of coconut farmers are small and medium measurefarmers. The coconut farming is the direct and indirect livelihood of around 835,000 of people. (Coconut Research Institute, 2011)

The annual necessity of coconut for national consumption, local and export oriented industries is around 3,650 million nuts. Yet, the current annual production is around 2,400- 3,000 million of nuts. Year 2010 saw an exceptional decline in coconut fabrication recording 2,317 million nuts resulting a drop in per capita coconut consumption from 116 to 95 nuts.

Thejudgment of the scientists/experts, there are several influential factors liable for the reduced production of coconut. One reason is the adversarial weather patterns which overcome in the previous years and more likely due to the effects of global climate change. Second is the sufficient fertilizerare got the smallholder farmers due to high cost. Pests and illnesses are also considered as aninfluential factor to the decline in production of coconut. Transforming coconut lands to other cash crops due to the absenteeism of an attractive market for coconut has also contributed to this disaster. Further, the fragmentation of coconut lands for manydevelopmentsprogramed including housing schemes and industries also had an opposing effect on coconut production.


In this background, special care of the Government towards coconut farming was most suitable. In this situation, the founding of a separate Cabinet Ministry for the portfolio of Coconut Development and Jonathan Estate Development amply establishes the Government’s strong attention in the development of the coconut industry. The new Ministry is tasked with the accountability of raising the coconut production satisfactorily to chance the local consumption; coconut based local industries and other industries aiming the foreign markets.


Asia Pacific Forestry Sector Outlook: Focus on Coconut Wood


1Adamjee Lukmanjee & Sons Ltd

Brief profile

“Adamjee” as are more popularly famous, has become popular in its core business as aninnovator manufacturer and export the Coconut Oil, Copra & Desiccated Coconut. They are proud of theircustom as a prominent Trading Company in Sri Lanka, and have steadily maintained them position as one of the largest exporters of combined Coconut Kernel products. Adamjee is also well-known in the export of Sri Lanka’s other product especially spices such as Black Pepper, Cloves, and Cinnamon etc.

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The Office, Processing Plant,Warehouse Complexare strategically located in the heart of srilanka is Colombo – the commercial hub of Sri Lanka, and within a 2km range to the main port. Taking benefit of Colombo fast becoming a major hub Port of Asia, Adamjee has grown to become an Entrepot Trader of Coconut Products and Flavors from all regions, to its international buyers.

Being in the business of food produces, they believe that the application of strict quality control processes is critical to any consumer. Adamjee has aunique reputation for being a trustworthytransporter with an importance on quality goods, and maintains a fully furnished, modern, in-house laboratory to guarantee 100% quality assurance. They are SLSI (Sri Lanka Standards Institute) and ISO 22000:2005 certified.

The company manufacturing and markets them brand of Coconut Oil under the brand – N-Joy which is the only Natural Coconut Oil brand presently under ISO, SLSI and Halal certification in Sri Lanka. N-joy has also extended to include Coconut Milk Powder and Coconut Cream under its brand safety. Additionally, Double Palm Brand, the company’s long-lasting trademark for “Roasted” Coconut Oil enjoys a trustworthy niche market in South Asia.

Besides exportsthe domestic partition mainly imports and markets Animal Feed Materials such as Soya Bean Meal and Maize as well as several foodsproduces. Adamjee also imports and nationally distributes Cement under the brand “Saviya”.

The company with its long-lastingstatus has built very strong relations with its suppliers and customers and this has been a key success factor in all its activities.


Strive to maintain our position as a prominent exporter with an importance on quality and reliability through continuous exploration for development. To expand and seek new avenues of trade & markets whilewitnessing the highest standards of business principles and ethics set down by our forefathers. To permission a similar heritage for our future generations who will uphold the traditions and continue the name of Adamjee Lukmanjee & Sons Ltd.


To provide improved service levels to our customers whereasconfirming higher profitability and a better return on investment to our shareholders. To use the vessel of trade to promote and better understanding among nations and donate towards the economic growth of our people and country.

2Management body


Mr. Murtaza A Lukmanjee

Mr. Khuzaima T Gulamhussein


Established in 1865, Adamjee Lukmanjee & Sons Ltd. is one of the largest trading houses in Sri Lanka, specializing in the export of Coconut Products & Spices with affiliate manufacturing/export facilities in Bangladesh.

3Naratha Agro Industries (Pvt.) Ltd.

Brief profile

Naratha Agro Industries (pvt.) Ltd., is a member of N M K Group of Companies under Naratha Ventures (Pvt.) Ltd.

Naratha Agro Industries Private Limited was integrated in 2004. It is the onlybiggest edible oil manufacturer in Sri Lanka. As the innovator in innovative, health oriented edible oil manufacturing.They also have international standard process certifications such as ISO 22000, HACCP, GMP certifications to ensure that they deliver premium quality products to them consumers and industrial application sector.

With the growing economy, the company moved forward and is the pioneers of Palm Oil imports to Sri Lanka and is the exclusive supplier to most of the Multinational companies and National Manufacturers in Sri Lanka. The group is also one of the leading suppliers of Palm Oil to Nepal, Bangladesh, India, Russia and Sri Lanka. The vast range of Imports cover Edible Oils including Palm Oil, Fats, Margarine, Sugar, Wheat Flour, Grains & Pulses. In order to give greater benefits to our customers, we entered into a Joint Venture with Felda Group of Companies – Malaysia, the single largest Palm oil producer and manufacturer in the world and the highest contributor to the Edible Oil Industry, which has a large plantation with upstream and downstream functions.

Naratha Agro Industries is committed to serving customers around the world. We are dedicated to creating distinctive value for the customers we serve through our business units such as Edible Oils including Palm Oil, Oil Refining and Processing, Fats & Margarine.


We will be the #1 food business organization in the Sri Lankan market and a preferred supplier in international market. We will achieve this by being world class in everything we do. We will strive to continually add value – for our customers, employees, suppliers, shareholders and the community we serve.

To be the preferred choice in our range of value-added products and services with innovation to create profitability enhancement for all stakeholders with a focus of healthy products.


Implement systems and guidelines to ensure quality products with continuous quality improvements, customer satisfaction and to create distinctive value.

Dedicate professional staff committed towards quality consistent products with healthy, customer safe and excellent quality service to satisfy our stakeholders.

4Management body

N. M. Manjula Narayan (Group Managing Director)

Keith C. Paulus (General Manager (NMKINTL) – Foreign Trade / Business Development)





5Coconut is the largest farmsteadharvest in Sri Lanka and the second largest after rice. Out of 0.45 million hectares of coconut 58 per cent belongs to the smallholder with an average of 0.5 hectare per farmer. It is estimated that 700,000 farmer families depend on coconut for their income.

Coconut is a useful tree, which can be used to produce important products from many parts of the tree. Several periods ago the processing sector was mostly constrictedto limited traditional products such as copra, coconut oil, desiccated coconut and coir.

Today coconut sector in Sri Lanka has steadilydeveloped into a huge range of new products Such as Coconut Kernel Products: Desiccated Coconut, Coconut Oil, Copra, Poonac / Oil Cake, Coconut Milk,Coconut Milk Powder and Coconut Cream and Partially Defatted Granulated Coconut (PDGC). Coconut FiberProducts : Mattress Fibers, Bristle Fibers , Twisted Fiber. Coconut Shell Products : Coconut Shell Charcoal ,Coconut Shell and Shell Flour ,Coconut Shell Activated Carbon and Value Added Activated Carbon.Coconut Fiber Finished Products: Coir Twine , Coir Yarn,Coir Brooms ,Coir fiber Pith ,Rubberized Coir ,Rubberized Coir Pads , Coir Mats , Coir Matting , Coir-Geo Textiles ,Brush Mats Coir Basket Liners ,Coir fiber Logs ,Coco Poles, Moulded Coir Pots and Flower Pots ,Weed Killer Mats and also Ornamental / Handicraft Products .


1. Contribution of GDP and GNP of Apparel Industry in Sri-Lanka

In Sri Lanka the Coconut industry have great impact on the economic as well growth of the country as it contributes 2% to the Gross Domestic Product.

Production and GDP values of coconut have fluctuated between US$ 115 million in 1950; US$ 177 million in 1986, and US$ 139 million in 2002.

62. Contribution of GNP of Coconut industry in Sri Lanka


Contribution to GNP













Source: Report of Central Bank of Sri Lanka ( 2010 )

From the above table the contribution to GNP by coconut industry in 2005, 2006, 2007, 2008, 2009, and 2010 is 28000, 29000, 30000, 31000, 32000, and 49000 respectively.

73. Contribution in Budget Income of selected country:

In order to withstand the progress in the coconut sector which produce US$ 2,500 million export income and involve 250,000 families in a wide-ranging of employment.It is required to promote systematic improvements in the farming of all these harvests, each year.

The Government has already fixed a target of 3,650 million nuts to be produced by 2016. Kapruka inventiveness has contributed to increase quality seeds to farms and to distribute 10 million plants between small holders to sponsorfarming. The Srilanka Government has now decided to distribute coconut plants free of charge to all farmers more than 5 acres of land. In order to make popular organic fertilizer in coconut farming, government proposes to allocate Rs. 100 million from the Coconut Development Cess.

As a relief portion to recover from the special effects of the current drought, they propose that the Government will exchange all such affected trees, free of charge. They also suggestmaintaining high taxes on the import of vegetable oil to promote the coconut oil industry. Similar to coconut farming, Kitul cultivation will be particularly encouraged in the Sabaragamuwa Province and Palmira cultivation will be encouraged in the Northern Province, to protection increased availability of organic raw material required for a wide range of industrial products and food processing.



The extension activities of each unit are presented in detail in the annexure. Although extension units are established in different ministries, there is uniformity in the organizational structure of the units. Each structure is headed by a Director General. There are directors within the structure (technical and non-technical). Each director is supported by deputy directors and assistant directors handling different technical subject matter.

Based on the requirement of the profession some managerial level personnel are stationed in different geographical locations. They monitor the extension activities of each location and responsible for the mother organization. There exist one or more layers of officials at ground level under one command of guidance. In all the extension units ground level technical staff is directly linked with the farming communities in implementing extension activities.

They also bridge the farming community with the mother organization. Each mother organization maintains formal and informal linkages and networks with relevant stakeholders to strengthen their services to the targeted audience. It is an area to be further strengthened to expand sustainable partnerships locally and globally. Each structure has its own monitoring and evaluation mechanism in its unique way based on the expected output of the organization.

Monitoring and evaluation mechanisms are another area to be well defined and focused for each stratum. Establishment of a transparent, systematic, proportionate, rewarding system for each stratum of the organizational structure specially for those who work at grass root level was a vision of many as an annual evaluation mechanism. Method of recruitment of the staff and the educational qualifications required for recruitment are in line with the national policies.

Direct recruitment for managerial level positions command a recognized university degree and the middle level technical officers require a two year diploma in the identified fields by the mother organization. Applicants who fulfill the basic educational qualifications are to sit for a written examination conducted by an independent body, the department of examination of Sri Lanka. The successful candidates are to face an interview. Within each mother organization promotion schemes are been regularized with timely adjustments approved by the government of Sri Lanka.

1. Unorganized or organized

Organized Structure Type

Coconut Industry



For coconut industry the organized structure type is unorganized as well as organized having proper management structure.

2. Type of Organization Structure:

In Coconut industry types of organized structure as under:

Type of Structure

Coconut Industry



Type of Organization Structure can be Centralized as well as Decentralized, for Coconut Industry it is decentralized where all the level of employees can participate in decision making in the organization.

3. Hierarchy & Departments in selected company







Finance Manager

Marketing Manager

Production Manager

HR Manager





Hierarchy in coconut industry is chairman and C.E.O at top level, four managers, four department managers for production, marketing, finance and human resource and bottom level management having employees.


1. Forms of Business (Sole proprietorship, partnership Etc.):

Forms of Business

Sri Lakan Coconut Industry

Sole Proprietorship

Partner ship



The forms of business for coconut industry there is Sole Proprietorship where business is run by single individual, partnership where there is more than two individuals running the firm.

82. Business Customs & Practices:

Rathkerewwa Desiccated Coconut Industry has applied RECP practices during last few years mainly to improve raw material consumption, water consumption and energy consumption. Reducing the water usage has been immensely helpful for the factory to enhance their environmental performance. After applying the RECP practices, they have reduced raw material use by 390 tons per year and reduced water use by 5,400 kl per year.

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The company has also implemented a range of energy efficiency measures and replaced the fossil fuel by waste coconut shells pieces leading to significant reductions in greenhouse gas emissions. Major issues faced by the company were related with raw material and water consumption. A considerable amount of nuts were rejected daily due to mishandling when loading to trucks at the collection points and when unloading at the mill premises.

The damage due to unloading was reduced by re-laying rubber carpets on cemented floor. This measure saved the mill USD 11,750.To reduce the wastage at paring stage (removing the brown outer peel of kernel) the wastage was quantified first and the peelers were made aware of the value involved. This measure gave the highest financial benefit with savings in the range of USD 94,500.

Water was used heavily in the factory for the cleaning purposes. Water was purchased from outside in tankers. Taking steps to control water use in operations and cleaning in the mill resulted in the reduction of water usage by almost 70% corresponding to savings in the range of 5,400 kl per year. The reduction of wash water drastically reduced the pollution load of the treatment system (by 42%) and saved USD 6,600.

The recovery of oil from the coconut water accumulated in the waste water pits brought an additional income of USD 49,500 to the company. The fuel switching in the boiler from furnace oil to coconut shell saved USD 165,000 and reduced CO2 emissions by almost 900 tons. Material use was decreased by 390 tons and waste was decreased by almost 400 tons.

The company saved at least USD 50,000 during the initial phases of the RECP programmed and, after the implementation of all the options; the savings were in excess of USD 200,000 for an investment of less than USD 5,000. Today, Sri Lanka NCPC uses Rathkerewwa DC Industry as a model to show the other DC millers in the region how to successfully integrate CP into the desiccated coconut making process

3. Transportation & Communication System needed for specific Industry:

Railroads: Government owned; about 1,944 kilometers of track; network extends radially from Colombo to northern, eastern, and southern coastal cities; service to northern and eastern areas erratic because of domestic unrest.

Roads: Total approximately 75,000 kilometers; paved (bituminous) about 25,500 kilometers; 478,000 registered vehicles in mid-1980s.

Waterways: About 430 kilometers of rivers and canals navigable by shallow draft vessels.

Ports: Deep water ports at Colombo, Trincomalee, and Galle, latter two underutilized; government Shipping Corporation possessed eight freighters and two tankers in late 1980s.

Airfields: Fourteen, of which twelve usable in late 1980s, eleven having permanent surface runways, one (Bandaranaike International Airport at Katunayaka) with runway more than 2,500 meters.

Telecommunications: International service provided by satellite earth station and submarine cable; international telephone, telex, and direct dialing in operation; about 106,500 telephones nationwide; about 29 radio stations, 24 of which are AM, at least 5 are FM) in operation, with more than 2 million registered receivers in use; 2 television networks broadcast over 4 channels; 350,000 television sets nationwide.

Modes of Transportation

Modes of Transportation

Sri Lanka Coconut Industry




The modes of transportation for raw material as well as for finished products for coconut industry are all railway, roadway and waterway.

Modes of Communication

Modes of Communication

Srilanka Coconut Industry




The modes of communication for coconut industry are all Telephonic, E-mail and Post.

4. Labor Force (Size, Potential Etc.):

For Coconut Industry unskilled labors are required so the unemployment rate of Sri Lanka that is 3.9%, from this rate labors can be employed to give them employment. Around 8, 35,000 individuals are engaged in this industry.

95. Development in science & technology, Current technology Available:

The level of technology employed by the industry is not sophisticated through maintaining hygienic conditions are of supreme importance, as product is a food item. Dc factories could be divided into three categories, as traditional, modernized and ultra-modernized

There are about 16 traditional mills employing desiccators the drying equipment that is considered the heart of the production process. They operate at around 42% efficiencies & are generally fuelled by fire wood through air heaters. Modernized mills employ a fluidized bed type of dryers & are fuelled by furnace oil through the generation of steam using boilers.

Fluidized bed type modern dryers have high efficiencies ranging from 52% to 60, however there are variations of performance ever among fluidized bed dryers according to their capacities, design, & construction etc. Modernized mills are considered to be superior in terms of product, quality & hygienic conditions of the factory environment. The share of the annual DC production in traditional & modern mills is 30 % & 70 % respectively. There is one ultra-modern factory with the installed capacity of 2, 50,000 per day. This has a much greater degree of mechanization and capacity.

There are a series of operation in the DC manufacturing process,, wiz hatch ting, paring, pairing, sterilizing, cutting. Drying, grading and packing. The drying process which is the most cannery intensive reduces the moisture content from around 52 – 55 % to 3 %.

E¬ƒcient dryers

The dryer is the most critical and highest energy consuming unit in a DC factory and is responsible for the consumption of around 90% of the total thermal energy. Therefore, any improvement in the dryer will have a signi¬cant impact on the cost of production. About 50-60% energy saving is possible by changing from the traditional tray type desiccators continuous band dryers. If the remaining 16 traditional factories switch over to more e¬ƒcient Fluidized Bed Dryers, approximately 45 GW h of thermal energy could be saved annually, which is equivalent to SLRs 14 million (US$0.16 million) at current fuel prices. This would also result in the reduction of CO2 emission by 43,500 tons per year and of CO emission by 5100 tons per year. Though energy e¬ƒcient boilers and dryers are available, implementation in DC mills is restrained due to its high capital cost. A continuous dryer having a capacity to process 300,000 nuts/day would cost about Rs 4-4.5 million [approximately 1US$ ¼ 96 Sri Lankan Rupees (Rs)], which is about 50% higher than locally made semi-automatic dryers of the same capacity. However, non-availability of adequate capital and ¬‚uctuation in the global DC market impede installation of energy e¬ƒcient equipment in the DC mills in Sri Lanka, especially in traditional mills.

Waste heat recovery from ¬‚ash steam

Audits indicate that there are several de¬ciencies in boilers and steam distribution systems, especially in terms of energy e¬ƒciency. Flash steam recovery is one of the energy saving measures that has been tried recently in the Sri Lankan DC industry. Most dryers in the DC industry are in the capacity range of 550-750 kg/h, and the steam pressure at the main radiators is maintained at around 9-10 bars to get the required temperature in the dryer. In one of the DC factories, to recover the waste heat of ¬‚ash steam, an additional radiator was introduced, which operates at atmospheric pressure. This was connected to the condensate line and is used for preheating air to the main radiator. The monthly fuel saved was about 1400 l, amounting to SLR 24,000. For an investment of SLR 200,000, the payback period obtained was about 9 months, and CO2 emissions were mitigated by 53 tons per year.

Coconut shells as a source of energy

It is estimated that around 213,000 tons of coconut shell per year are made available as a byproduct of the DC industry. Over 90% of this is burned in open pits to produce charcoal for the activated carbon industry. This process emits a lot of harmful gases, creating severe environmental problems. If e¬ƒcient carbonization of coconut shells were adopted, the waste heat of the process could be used for generating steam, and the environmental hazard could be eliminated. This is an ideal option for the traditional 16 mills that need to be modernized, and the cost of the coconut shell carbonization system is estimated at SLRs 3 million (US$33,000).

Some trials done in this regard have shown that this will reduce the fuel consumption of the boilers by 20% and, at the same time, produce 750 kg of charcoal out of 3 tons of coconut shells (the traditional shell burning produces about 800 kg of charcoal from 3 tons of shells). Though a few factories have installed prototype systems, there is room for further development and improvements. The improvements could be done in all three stages, which consist of shell burning, waste heat recovery and using the heat in dryers and boilers. However, for the modernized factories, this may not be economically attractive, as it requires the replacement of existing boilers.

Wastewater treatment

A pilot wastewater treatment plant has been built in one of the DC factories using an anaerobic digestion system. This had been earlier developed and tested in the laboratory by the National Engineering Research and Development Centre (NERD). It is expected that the BOD and COD levels of the wastewater after treatment will be reduced to acceptable limits, and the biogas generated (1 m3 of biogas per 2 m3 of wastewater) will ¬nd useful applications (to supplement boiler fuel, lighting, water boiling in the canteen and in the laboratory etc.) within the factory.

However, in order to reduce the initial investment of the treatment plants (estimated to be around SLRs 1,200,000 or US$13,340), the wastewater generated needs to be reduced by separating the coconut sap from the wash water. Positive results of this plant will bene¬t not only the DC mills in overcoming their pollution problems but also the people living in the vicinity of DC mills who have been su¬€ering from the environmental degradation.

New applications for sap

No organized attempts have been made to identify new applications for coconut sap so that its value can be upgraded instead of trying to treat it as a waste product. Therefore, it is suggested to explore the possibility of converting the liquid e¬„uent to ”consumable” products. The sap contains 1.5% fat and very valuable minerals, such as iron, sodium, potassium, magnesium, calcium and small quantities of phosphorous. There is a considerable market for coconut water based products, for example, in Taiwan, and the technology is available in the Philippines, Thailand and China. Promotion of technology transfer through joint ventures and local research and development works could, thus, reduce waste and increase pro¬ts.

6. Value chain Model:

Support Activity


Sales and







Administration and Infrastructure

Human resource Management

Product/ Technology/ Development




Research and development


Administrative and management functions

Customer service

Sales and marketing

Research and development

Improving technological capabilities will have ramifications for producers and manufacturers. Combining resources for a research and development organization that focuses on applied research, product development, and prototyping will reduce costs for individuals and speed development of high-value products.


Plantation revival, forestry integration, and extension of coconut to nontraditional areas will guarantee future supplies of raw coconut in strategic and competitive quantities. Joint procurement initiatives and other supply chain management recommendations will have a significant impact on cost competitiveness.


Superior specialty grades of coconut and products targeted at more sophisticated niche markets will necessitate better production processes and planning. Efficient prototyping facilities and custom compounding centers will satisfy the need to develop innovative products.


The strategic initiatives will force Sri Lankan producers to develop their own brands and to undertake their own distribution. Greater ownership of the distribution channels will improve margins and reduce the threat of having Sri Lankan coconut products downgraded to commodity status.

Sales and marketing

Gathering market intelligence will benefit many medium and small-scale producers who do not have access to real-time knowledge of the marketplace. Developing a long-term marketing plan will be an important step in allocating res


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