• Persistent stagnation in coconut production since the 1960s
• Labour force is declining and modernisation policies are absent
• SL challenged by countries like India, Indonesia, the Philippines
• Initiatives to create second coconut triangle in NE show promise
• Untapped potential for growth in growing media solutions
• Adopting technology is essential to address a range of issues
• Growth will have to come from value addition, diversification

Crop/yield, environmental threats, and limited application of technology are the three major challenges that plague Sri Lanka’s coconut industry, stated Hayleys Group Eco Solutions Managing Director Rajeeve Goonetileke in an interview with The Sunday Morning, pointing out that there had been a persistent stagnation in coconut production since the 1960s, worsened by the decline in the labour force and absence of modernisation policies. 

He added that Sri Lanka was also challenged by countries like India, Indonesia, and the Philippines not just in economies of scale but also in yield-per-tree, amidst volatile global markets and changing consumer needs, while climate change had resulted in more frequent extreme weather conditions, disrupting harvesting and leading to increasing pest invasions. 

However, Goonetileke asserted that these challenges could be overcome with foresight and planning, noting that initiatives to create a second coconut triangle in the North and East Provinces showed promise.

While the appetite for embracing automation and technological advancements has been limited, he emphasised that adopting technology was not just essential for global relevance but was a remedy for the declining workforce, improving product quality, consistency, and enhancing productivity. 

Sri Lanka’s agricultural produce currently accounts for some 22% of national exports and Goonetileke is confident that there is potential to expand with value addition and product and market diversification. Walking the talk, Eco Solutions has diversified out of bulk coconut fibre that the business started with 145 years ago in response to global shifts and has ventured into new industries to meet the rapidly-evolving needs of its customers across the globe.

With eco-conscious customers and increasing stringency of environmental regulations boosting demand for its eco-fibre products, the company has capitalised on the opportunity and launched biodegradable solutions that offer cost-effective and environmentally friendly answers to a variety of challenges including erosion control and climate-related issues.

Goonetileke asserted that Sri Lanka must strategically position itself to compete on the global stage and outlined the untapped potential for growth in growing media solutions. “The untapped potential for growth in this sector far exceeds our current market share as a country. We have an opportunity to take the lead on a global stage in tackling challenges associated with climate change and environmental degradation,” he added.

Hayleys Eco Solutions also ventured into the Northern and Eastern Provinces recently, to ensure raw material supply consistency, with the expansion not only increasing the extent of land cultivated for coconut, but also providing the opportunity to uplift local communities. 

In terms of expectations from Budget 2024, he said that offering incentives for renewable and green energy initiatives could help businesses reduce their carbon footprint and lower production costs, making local products more competitive in the global market.

Following are excerpts of the interview:

What are the key issues facing Sri Lanka’s agriculture industry in general and the coconut sector in particular? 

Three major challenges plague Sri Lanka’s coconut industry: crop/yield, environmental threats, and limited application of technology.

There has been a persistent stagnation in coconut production since the 1960s, which compounds as labour force declines and modernisation policies remain absent. We’re challenged by countries like India, Indonesia, and the Philippines, not just in economies of scale but also in yield-per-tree, amidst volatile global markets and changing consumer needs.

With climate change we are seeing more frequent extreme weather conditions that disrupt harvesting, and are linked to increasing pest invasions. 

Yet, with foresight and planning, these challenges can be overcome. Initiatives to create a second coconut triangle in the North and East Provinces show promise, addressing both climate challenges and creating new opportunities for these communities.

In the coconut-related industries, the appetite for embracing automation and technological advancements has been limited, primarily relying on traditional methods. Adopting technology is not just essential for global relevance but is a remedy for the declining workforce, improving product quality, consistency, and enhancing productivity. The costs associated with automation and mechanisation have also decreased. 

Despite these challenges, we’ve invested in R&D, tech innovation, and employee training. This not only equips us for global competition but also retains top talent. As an example, we invested Rs. 7.42 million in training and development as well as safety systems over the past year. 

As pioneers in coconut exports, we’re also leveraging technology to optimise our manufacturing. Embracing automation and mechanisation is key to managing operational costs, and we’re deploying with in-house talent to develop unique, home-grown solutions tailored to local conditions.

You head Eco Solutions for Hayleys, which pioneered the export of coconut fibre. Where does Sri Lanka stand in terms of market share, what are the key export products, and how much export revenue does the sector bring in?

The Hayleys Group’s 145-year history began with the export of coir fibre and other coconut-based products. Many of the group’s most sophisticated innovations come from this incredibly versatile plant, and Hayleys Eco Solutions represents the longest unbroken link back to these roots.

In its current format, Sri Lanka’s agricultural produce accounts for nearly 22% of national exports. We see potential to expand, but the majority of that growth will have to come from value addition as well as product and market diversification. 

In response to global market shifts, we’ve diversified out of bulk coconut fibre that the business started with 145 years ago. Today, we have ventured into new industries armed with market-first, pioneering value-added products that fulfil the rapidly-evolving needs of our retail and DIY customers across the globe.

Eco-conscious customers and increasing stringency of environmental regulations boosted demand for our eco-fibre products. Making use of this opportunity, we launched biodegradable solutions that offer cost-effective and environmentally friendly answers to a variety of challenges including erosion control and climate-related issues.

The growing demand for growing media products, driven by population growth and a focus on healthy diets, coupled with limited available land, is creating opportunities for volume growth. Acknowledging these trends, we launched innovative coir-based products under the Haygreen brand, which have been met with an enthusiastic response. 

Our transition from traditional coir products to a complex portfolio that offers consumers transformative eco-solutions to manage environmental challenges, embodies the Hayleys Group’s ethos of innovation and sustainability. These efforts have earned our Sector multiple awards at the 30th National Chamber of Exports Annual Awards and have generated foreign revenue in the range of $ 40-45 million for FY 2022/’23. 

Could you do a SWOT analysis of the coconut fibre market, including in terms of value-added products and what we need to do to improve?

Coconut fibre is both renewable and versatile, and provides environmentally-friendly solutions to diverse sectors – from agriculture and horticulture to infrastructure development and construction. Global competitors are emerging, but this drives us to keep innovating. Together with continuing impacts of climate change and land fragmentation, we see challenges in maintaining adequate supply of raw materials. 

Market fluctuations and natural disasters also pose significant threats and demand vigilant management and robust contingency plans. However, our biggest opportunity also arises out of a rising eco-consciousness from global consumers. Our portfolio – with products like Haygreen and our wide range of coco-peat solutions – offers solutions to environmental challenges that are drawn and inspired by nature itself. 

Coco peat currently captures a mere 2% of the global growing media market, while use of conventional alternatives pose ecological risks due to their non-eco-friendly nature or the environmental damage caused by their extraction processes.

Sri Lanka must strategically position itself to compete on the global stage and this is precisely where our growing media solutions play a crucial role. Our 100% biodegradable alternative, crafted from coconut husks, coir pith, chopped fibre, and husk chips, offers a cost-effective solution for both indoor and outdoor farming methods. These growing media blends facilitate plant growth by providing essential water, air, and nutrients, thus creating a conducive environment for water absorption and retention.

The untapped potential for growth in this sector far exceeds our current market share as a country. We have an opportunity to take the lead on a global stage in tackling challenges associated with climate change and environmental degradation.

Accordingly, our strategic blueprint revolves around product innovation, market expansion, and sustainability. We are also working with key local stakeholders – including local universities and the Coconut Cultivation Board in order to help broad-base modernisation, and tap into the true potential of this industry. 

How important are sustainability and social impact in your operations?

Our adherence to the overarching principles, standards, and targets set out in the Hayleys Lifecode underscores this commitment, serving as a roadmap for our ESG aspirations, and a guiding set of principles for our internal ESG goals. These in turn are carefully overseen by our Lifecode Champion, who operates with the delegated authority of the Hayleys Group ESG Team.

Beyond business operations, we actively embed ourselves in community development, offering employment and spurring economic empowerment. Even though our operations do not pose any threats or negative impacts to the communities that live around our production facility, we take pride in maintaining a collaborative and positive relationship with the community.

Similarly, we also continue to invest heavily in our human capital through 5,957 hours of skills training sessions and 845 hours of safety training over the last financial year. Looking ahead, we are also aiming for ISO 45001: Occupational Health and Safety Standard Certification, as well as establishing learning centres at each plant to support continuous development for our teams.

We are also devoted to preserving natural habitats, leaning on key partnerships to elevate our green innovations. Through projects like ‘Micro Habitat Development’ and a significant pivot to 60% renewable energy, we underscore our dedication to environmentally responsible production. 

Hayleys Fibre recently expanded its supply chain network beyond the coconut cultivation triangle and entered the Northern and Eastern Provinces. What drove this decision, and how has it been received? 

Venturing into the Northern and Eastern Provinces was a deliberate step to ensure raw material supply consistency. The expansion while increasing the extent of land cultivated for coconut, also provided us with the opportunity to uplift local communities. 

By diversifying our supply chain, we reduce our risk and address challenges posed by climate change and land fragmentation, which can impact our industry. We also build partnerships with local farmers and suppliers and this helps to ensure that the raw materials we source meet stringent quality and consistency standards.

Sustainability for us is about the planet and its people. Through training and resources, we’ve helped local communities elevate their farming techniques and, in turn, their livelihoods.

Given the ongoing economic crisis and rising labour shortage, how have operations been impacted and how are you adapting?

Our response to the ongoing economic crisis and labour shortage has been multifaceted. 

Despite prevailing conditions, our sector maintains a long-term perspective on value creation. In the last financial year we invested Rs. 500 million in expanding our manufacturing capacity for spring mattresses, grow bags, and related items. Additionally, we upgraded all backup generators during the year due to interruptions in the power supply. Innovation remains a top priority, with achievements including the launch of 40 new floor mat designs and product redesigns in coir twine, providing increased customer value and access to new markets.

Given the economic challenges, predictability in sourcing raw materials has become a concern. Our response has been a holistic rethinking of our sourcing strategies. Beyond this, we’ve fortified our partners with both financial and technological resources, giving them access to global best practices.

Another challenge we’ve encountered lies in the realm of transportation and logistics, where delays have become more prevalent. Escalating costs, particularly for energy and fuel, are what pushed us to accelerate our investments into renewable energy – ensuring cost efficiency while bolstering our sustainability agenda.

To further strengthen our resilience against these challenges, we’ve expanded our operations beyond the traditional bounds, now tapping into the Northern and Eastern Provinces. With an emphasis on creating value-added products, we are driving both profitability and advancing our sustainability vision.

Of all challenges, the direct impact on our employees was paramount. Anticipating food security issues, we embarked on an internal cultivation initiative, granting land and resources for our employees to grow vegetables. The initiative’s success, marked by shared harvests among teams, highlights our unwavering commitment to our people.

What are your industry-related expectations from Budget 2024?

In light of the ongoing economic challenges and the labour shortage we’ve encountered, we believe that Budget 2024 presents an opportunity for supportive measures that can alleviate the pressure on exporters. 

The rising costs of essential inputs like energy and fuel have adversely affected profitability. Offering incentives for renewable and green energy initiatives can help businesses reduce our carbon footprint and lower production costs, making our products more competitive in the global market.

We look forward to consistent policies that foster growth, innovation, and sustainability in the agriculture sector.