Cinnamon Value Chain Dynamics and Enhancement

Abstract

Ceylon cinnamon (Cinnamomum zeylanicum Blume), among the first traded spices of the ancient world, led for many centuries with the power of Arab monopoly in the industry, was known for its medicinal, chemical and aromatic properties. Cinnamon has been one of the oldest, most popular and expensive baking spices in many cultures for centuries. Pharmaceutical, bakery and confectionary products and cosmetics and perfumes were the main global market segments. Knowledge in cinnamon plantation management and processing was passed from generation to generation ensuring the survival of the industry. Job insecurity, seasonality of income, poor working conditions and lack of appeal to youth have created a critical human resources issue in cinnamon value chain. Predominately male actors participated in the growing, processing and trading activities; however, there were signs of inclination of females to participate. Income distribution of the growers, processors and intermediaries varied significantly, and the biggest share of the income was received by exporters, while processors too had a significantly large share of the income generated. Cinnamon has been the only plantation industry in Sri Lanka in which a substantial share, varying between a third and a half of the income generated, was shared with the processors. Price premiums were marginal for the upstream section of the value chain, while the downstream section enjoyed attractive returns. Exporters had control over the price of each grade, and growers could not benefit from the economies of scale. The export basket comprised quills, cut cinnamon, powder, oleoresin, cinnamon tea, nutraceuticals and pharmaceuticals. Oleoresin was the top gainer followed by bark oil and fractionates irrespective of whether branded or non-branded. Innovation and value addition are prevalent at the introductory stage of the product lifecycle. Relatively large-scale exporters have succeeded in introducing value-added products to the international market. Upstream actors of the cinnamon value chain have a weaker compliance level on quality standards and certification than downstream actors. Lack of traceability and improper pricing mechanisms hinder the compliance levels of the upstream, while price premiums, competition and brand loyalty attract downstream actors. Exporters and value-adding producers use standards and certification as strong marketing tools to enter the high-end markets and their labelling architecture give prominence to standards and certification logos.