Sri Lanka's Tea Export Industry: Value, Concentration and Risk

Sri Lanka’s tea industry achieved more export value in 2025 without a comparable rise in production. That is the central fact of the latest full-year evidence. It is more useful than a broad claim that the market is simply expanding, because production, export volume and export earnings describe different parts of the industry.

The revised data also change the outlook. Full-year 2025 earnings were stronger, but the first half of 2026 was weaker on production, conventional export volume and US-dollar export revenue. The sector therefore entered mid-2026 with evidence of value resilience and evidence of near-term pressure at the same time.

Data cut-off: 12 August 2026. All monetary values are nominal unless stated otherwise.

Scope and evidence boundaries

This report uses the Sri Lanka Tea Board’s revised production tables for agricultural output and the Central Bank of Sri Lanka’s 2025 statistical appendix for merchandise-export earnings. Product and conventional export volumes come from the Tea Exporters Association, and the first-half 2026 earnings comparison comes from the Sri Lanka Export Development Board.

Those series should not be combined casually. Tea produced in one year need not be exported in that year. Export volumes can include or exclude re-exports and different customs categories. Earnings are affected by volume, product mix, destination, currency and price. None of these measures, on its own, reveals company margins or returns on a proposed investment.

The evidence does not support the earlier US$2.2 billion forecast for 2034, a five per cent long-run growth assumption, or company-specific revenue and return estimates. They have been removed rather than presented as facts.

The 2025 baseline: limited output growth, stronger export value

The Tea Board’s final revised series records 264.62 million kilograms of tea production in 2025, compared with 262.69 million kilograms in 2024. The increase was 1.92 million kilograms, or 0.73%, calculated from the two official tables. Production was therefore broadly flat, not expanding at the rate implied by export earnings.

The composition remained heavily weighted towards black orthodox tea. The 2025 table records 237.50 million kilograms of orthodox tea including bio and reclaimed output, 24.75 million kilograms of CTC tea, and 2.37 million kilograms of green tea. Low-grown production accounted for 160.41 million kilograms, compared with 56.50 million high-grown and 47.71 million medium-grown. These categories describe production, not quality-adjusted export value.

CBSL reports a stronger result at the export-earnings level:

Measure	2024	2025	Change
Tea production	262.69m kg	264.62m kg	+0.73% calculated
Tea export earnings	US$1.436bn	US$1.507bn	+5.0% reported
Total merchandise exports	US$12.772bn	US$13.581bn	+6.3% reported
Tea share of merchandise exports	—	11.1%	CBSL share

CBSL’s 2025 figures are provisional. Its Annual Economic Review narrative attributes the improvement in tea earnings to both prices and volumes. The larger increase in earnings than production is consistent with a price, timing or product-mix effect, but the aggregate data do not isolate how much each factor contributed.

Product mix and value addition

The Tea Exporters Association’s product statistics record 106,801 metric tonnes of bulk tea, 116,245 tonnes of packets and 26,444 tonnes of tea bags in 2025. Packets exceeded bulk volume in that association series, showing that the export offer is not confined to undifferentiated bulk shipments.

That observation does not establish a margin advantage. Packeting, tea bags, blending, branding, compliance and distribution add costs as well as potential value. Public aggregate data do not reveal the net margin by channel, the cost of working capital, buyer rebates, contract terms or the return on a particular packaging line. A company considering further value addition should test those economics using its own orders and costs, not an industry-wide assumed percentage.

First-half 2026: several measures moved down together

The Tea Exporters Association’s market reports put production at 131.89 million kilograms in January–June 2026, 3.89 million kilograms below the same period of 2025. Conventional export volume was 123.10 million kilograms, down 3.71 million kilograms.

Its reported average free-on-board value increased in rupee terms to Rs1,810.28 per kilogram from Rs1,745.10, but declined in US-dollar terms to US$5.70 from US$5.86. Currency denomination therefore changes the apparent direction of the price movement.

The Export Development Board reported tea earnings of US$700.80 million for the first half of 2026, down 5.69% year on year. It also reported lower earnings from bulk and packeted tea. These are partial-year comparisons and should not be projected mechanically across the rest of 2026, but the direction is clear: the full-year 2025 increase did not continue through the first half of 2026.

Destination concentration and operating risk

The Association identifies Iraq as the largest destination for conventional tea exports in 2025, at 39.36 million kilograms, up 14.9% year on year. A large destination can provide scale, but it also concentrates demand, payment, shipping and geopolitical exposure.

Reuters reported in May 2026 that nearly half of Sri Lankan tea exports, worth about US$680 million annually, were directed to the Middle East. It also reported sharp falls in March shipments to Iraq and the United Arab Emirates amid regional conflict. These figures are secondary reporting and should be attributed as such, but they identify a credible transmission mechanism: disruption can affect shipping, insurance, payment channels, buyer demand and auction confidence before it changes annual production.

Weather and agronomic conditions create a different risk. A large low-grown share makes regional rainfall and temperature patterns material, while fertiliser, labour, energy and transport costs affect conversion from green leaf to export-ready tea. The published national series does not quantify each company’s exposure, so risk analysis belongs at estate, factory, exporter and destination level.

Origin protection and quality governance

The Lion Logo is a controlled origin mark, not a general promise of commercial success. The Tea Board states that it applies to 100% pure Ceylon Tea packed in Sri Lanka and requires approval. Its published terms identify a Rs5,000 fee plus applicable tax, a one-year certificate and an expected result within three working days. The earlier description of free, three-year certification was incorrect.

Origin control can help buyers and consumers distinguish qualifying products. It does not guarantee a price premium, shelf placement or repeat demand. Exporters still need product consistency, residue and food-safety compliance, reliable fulfilment, defensible sustainability claims and evidence that a target customer values the format offered.

Strategic reading

The strongest response to the current evidence is disciplined diversification rather than a single growth forecast. Destination exposure can be measured by buyer, country, currency and payment term. Product economics can be compared using contribution after packaging, compliance, freight, rebates and working capital. Traceability or digital quality systems can then be evaluated against defined problems such as rejected lots, inconsistent grading or buyer verification costs.

This approach leaves room for investment without assuming its return. A pilot should state its baseline, implementation cost, adoption measure, quality or waste outcome and decision rule before capital is committed. The same standard should apply to sustainable packaging: verify market requirements, performance and disposal conditions before treating consumer interest as realised margin.

Assessment

Sri Lanka’s tea sector produced 264.62 million kilograms and earned US$1.507 billion from exports in 2025. The modest production increase alongside stronger earnings supports a value-resilience interpretation. First-half 2026 evidence is less favourable: output, conventional export volume, US-dollar FOB value and export earnings were below their year-earlier comparisons.

The sector remains economically important and internationally distinctive, but the public evidence cannot justify a precise 2034 value, a guaranteed premium or a company-specific return. Decisions should be based on reconciled product, customer and cost data, with destination concentration and the difference between rupee and dollar performance made explicit.