By Lanka Biz News Editorial Desk
The lush green hills of Sri Lanka, once echoing with the hum of tea processing and the rhythm of pluckers moving through rows of bushes, have fallen quiet in many regions. Over 225 small tea factories have closed down as of mid-2025, marking one of the darkest chapters for the country’s famed tea industry.
This isn’t just about economics. It’s about a way of life.
🚨 The Shutdown: What Happened to the Small Tea Factories?
These factory closures aren’t just statistics—they represent real livelihoods, disrupted. According to officials at the Tea Small Holdings Development Authority (TSHDA), it’s the highest number of closures in decades. Typically, a few dozen factories might close and reopen each year. But this wave has shown no signs of recovery.
“We haven’t seen it this bad in a long time,” said S. Pathirana, a factory manager from Ratnapura whose unit stopped operations in March. “There just isn’t enough green leaf coming in to keep us going.”
The culprit? A sharp decline in the supply of raw tea leaves, worsened by persistent structural flaws and policy inconsistencies. With fewer leaves to process and rising operational costs, many small factory owners were left with no choice but to shut their doors.
🌿 What’s Choking the Leaf Supply?
The root of the problem goes beyond the fields. A few years ago, Sri Lanka made international headlines with a sudden shift toward organic farming, including a ban on chemical fertilizers and pesticides. The idea was bold—but the rollout was chaotic.
Tea farmers, especially smallholders who account for over 50% of national output, were left struggling with lower yields and poor-quality crops. Though the government eventually walked back the fertilizer ban, the damage had already seeped deep.
Add to that:
Unpredictable weather linked to climate change
Rising input costs
Inadequate infrastructure in rural areas
Ongoing diesel shortages critical for running rural factories
The result? Even farmers with harvest-ready tea have no viable place to sell their leaves.
📉 A Misleading Rebound?
Interestingly, Sri Lanka’s tea output in Q1 of 2025 showed a modest uptick—up 3.61 million kilograms year-on-year. But beneath that growth lies a deeper instability.
Tea export volumes have improved slightly, but average auction prices are falling. The price per kilo dipped to Rs. 1,179.32 ($3.98), compared to Rs. 1,286.99 ($4.11) in the same quarter last year.
“Sri Lanka is still exporting mostly bulk tea to markets like Iraq and Russia,” said an industry analyst. “That limits earnings potential. We need more value-added exports if we want to truly recover.”
Meanwhile, India has overtaken Sri Lanka in tea exports, with 254 million kilograms shipped in 2024. That shift in global market share highlights how vulnerable Sri Lanka’s position has become.
🔍 Structural Flaws: Too Many Factories, Not Enough Strategy
One of the key problems is fragmentation. There are hundreds of small tea factories—over 700 by some estimates—many of which lack scale, technology, or access to stable markets. They’re highly sensitive to input price changes, labor issues, and climatic shifts.
Policy instability only makes it worse. Wage hikes are imposed without warning. Fuel subsidies are promised, then delayed. Investors looking at the tea sector aren’t seeing predictability—just risk.
In a conversation with a senior manager of a tea estate in Galle, she noted:
“We love this land and its tea. But unless government policy becomes consistent and supportive, we’ll continue to lose ground to our competitors.”
🌍 What’s the Global Market Saying?
Globally, tea consumption is diversifying. Health-conscious consumers are demanding organic teas, herbal infusions, and ready-to-drink formats. Sri Lanka, with its strong Ceylon Tea brand, has a golden opportunity—but it’s being missed.
The country still exports mostly raw or bulk tea. Very little investment has been made in branding, specialty blends, or tea tourism—areas where huge value lies untapped.
🔁 Where Do We Go From Here?
There’s still hope—but it requires coordinated action. Here’s what experts and stakeholders believe needs to happen:
- Support for Smallholders and Factory Owners
Immediate financial aid and infrastructure grants can help restart processing and stabilize smallholders.
- Investment in Value Addition
From premium organic blends to bottled iced tea, Ceylon Tea needs to modernize its offerings and target high-value segments.
- Sustainable Farming Incentives
Instead of sudden bans, offer gradual transitions to organic farming with training, subsidies, and verified certification support.
- Consistent Policy, Please
The government must consult stakeholders before announcing changes. Consistency will rebuild trust and attract investment.
- Upgrade Export Strategy
Push Ceylon Tea into niche global markets. Highlight health benefits. Partner with influencers and digital retailers abroad.
💬 Final Word: The Time to Act is Now
The closure of over 225 small tea factories is more than a supply chain issue. It’s a wake-up call for Sri Lanka. The tea industry is not just a sector—it’s a symbol of our heritage, our identity, and our connection to the global stage.
We must act decisively to protect the livelihoods tied to it and reimagine its future with sustainability, innovation, and dignity at its core.
As one hill-country farmer told us, standing by the shuttered gates of his old factory:
“This tea built our schools, paid for weddings, fed our families. We just need a chance to save it.”
