Industry’s exports to 55 countries at massive risk

by Sanath Nanayakkare

Christmas and New Year shoppers are likely to face disappointment as shops and supermarkets across the country won’t be able to stockpile bakery and confectionery products for the festive season due to a looming raw materials shortage in the supply-chain.

Although concerns about the Covid-19 pandemic have begun to recede, the mounting fallout on the supply chain has emerged as a new risk to the confectionery industry affecting not only manufacturers and consumers but thousands of employees making a living from the industry.

Wheat flour supply is already down by 25% on top of the scarcity of sugar, major fats and oils used in the industry as well as LP gas, The Island learnt.

“Confectioners face difficulty in sourcing the wheat flour, sugar and fats required to make their products. This has severely affected our manufacturing and distribution schedules. The ongoing shortage disruption is the biggest risk we see to the sustainability of our businesses both in the domestic market and our significant export market as we export our products to 55 countries including the European countries, the U.K., Canada, Australia, New Zealand, Ghana, Myanmar etc. Lanka Confectionery Manufacturers Association (LCMA) Chairman S.M.D. Suriyakumara told The Island yesterday.

“This predicament has been triggered by a lack of quality flour, sugar and fats caused by the impact of foreign currency shortage on relevant imports and global commodity price hikes. If this trend continues, consumers may not be able to find the products they like in supermarkets in the festive season as we won’t be able to work constructively with our retailers,” he warned,

“At a time the small and medium scale enterprises (SMEs) in the sector are striving to emerge from the pandemic more resiliently, major suppliers of the industry may raise their prices in the run up to the festive season due to rising inflation and foreign exchange shortage that negatively impact their imports. Like all industries, we are managing a number of challenges at the moment, but an impact on the availability of raw materials will be particularly hard to deal with, therefore, we urge the authorities to make effective intervention in order to mitigate the fallout,” Suriyakumar said.

“The confectionery industry consists of companies producing biscuits, cookies, cakes, wafers, toffees, chocolates, desserts, snacks, ice cream and even noodles. This industry was built on many decades of hard work and we produce over 85,000 tons of confectionery per year. Hence supply disruptions and increased costs will cause significant stress and impose additional burdens to both the manufactures and the consumers of these products,” he noted.

“The Sri Lankan confectionery industry has flourished over the years against foreign competition and has successfully retained 100% Sri Lankan ownership. It provides local consumers with products that equate with international brands or perhaps even better,” he said.

“Prima Ceylon (Pvt) Ltd and Serendib Flour Mills provide the industry with good quality wheat flour and they increase prices whenever they deem it necessary. Six months ago, they jacked up the price of wheat flour by 45%.”

“However, right now, we have to be more concerned about the supply and availability of raw materials than the cost because we have to retain our export market which is in constant, stiff competition with other competing global manufacturers in countries such as India and Malaysia among many others.”

” Another issue is the logistics obstacle related to our export business. Finding freight containers to dispatch our exports and then having to load them with enough products amid this raw materials shortage adds insult to injury. However, we have not given up hope. We are determined to keep on doing business even within lower profit margins and the challenging operating environment because we have to try and retain our export market share.”

“Here in Sri Lanka, it’s likely that this supply disruption and resultant shortage of confectionery products could add one more to the list of existing queues for milk powder, LP gas, Kerosene oil, cement etc.” he said.

“The industry employs over 50,000 people directly. As a result of the shortages, we have had to cut down production by about 25% which in turn has led to layoffs of employees. It’s needless to say how a layoff would affect employees and their families. Hence we urge the authorities to ensure that the confectionery industry won’t be in for long-running supply shortages,” Suriyakumara said.

Meanwhile. the representatives of the Lanka Confectionery Manufacturers Association (LCMA) and All Ceylon Bakery Owners’ Association (ACBOA) told the media last week that suppliers of wheat flour are unable to cater to the requirements of the industry as the lack of US dollars has made imports a challenge.

“Prima Ceylon and Serendib Flour Mills are only able to cater to 75 percent of the wheat flour requirement at present and it is feared the supply would further contract in the coming months. Even if we procure wheat flour at higher prices, the two suppliers are unable to meet our demand. The explanation we received was that they did not have enough US dollars to import the required quantities of wheat flour. This puts us in a very difficult situation,” they said.The LCMA cautioned that in addition to the likelihood of smaller manufacturers shutting down businesses which would result in job losses, the export market too would suffer a negative impact as production would have to be limited. It is becoming impossible to operate in the current context as there are shortages of rice, sugar and gas also.” they said.According to media reports, the ACBOA and LCMA have informed all relevant authorities about the issue. Anyhow a solution is yet to be found.

LCMA Chairman S.M.D. Suriyakumara concluded by saying that if the industry faced severe levels of shortages, it would affect not only confectioners and bakers but also employees, consumers and our export earnings.”