How Climate Change Is Reshaping Sri Lanka’s Alcohol Industry

Sri Lanka’s famed arrack and beer industries now face growing climate threats. Arrack and beer together account for roughly 90% of the country’s alcohol sales, so any disruption to their raw materials or production hits hard. Sri Lanka is one of the world’s most climate-vulnerable nations: in 2023 it suffered both devastating floods and droughts, and in 2024 it endured repeated heavy rains. The island’s average temperatures are also rising rapidly—by about 1.8°C per decade recently—fueling more frequent heat waves. In agriculture, these trends translate to erratic seasons: “Rather than intermittent rains, farmers face long dry spells and prolonged periods of rain—both of which can devastate crop production.” This “weather whiplash” is already squeezing Sri Lanka’s drink producers at every turn. More details can be read here, here  and here

Stress on Raw Ingredients

Coconut (Arrack): Coconut palms underline Sri Lanka’s signature coconut arrack (distilled from fermented coconut sap). Yet coconut yields have plunged in recent years. Industry data show Sri Lanka’s harvest fell by over 700 million nuts from 2021 to 2024 . This shortfall has sent prices soaring. (In fact, despite falling output, 2023 coconut exports earned a record $708 million, and 2024 exports are on track to reach $850 million—evidence of tight supply.) Experts point to droughts, disease outbreaks, and reduced fertilizer use (linked to economic crisis) as causes, but climate factors loom large. A recent market report notes that “climate change and pests have affected yields in Sri Lanka,” cutting raw coconut supplies. In practice, farmers report hotter days, irregular monsoons, and water stress hurting coconut flowering and nut set. The result: domestic arrack makers are now left with less local sap to ferment, and consumers pay more. Coconut yields are falling. Sri Lanka’s farm output dropped sharply in 2023-24, creating shortages for arrack distillers.

In a conversation with CFC, Palinda Perera, sustainability manager of Rockland Distilleries, one of the famous alcohol beverage manufacturing companies of Sri Lanka, stated that with rainfall patterns and weather changes, the coconut yield of Sri Lanka has reduced, and it has been badly impacting the industry. He added that this is happening as a result of global climate change. The manager of Mestiya Distilleries, a middle-scale distillery in Sri Lanka, also told us a similar story in a conversation. He further elaborated that due to the shortage of natural coconut yield, some companies in the industry are using artificial methods, and it causes the taste of toddy and coconut arrack to be reduced. 

Sugarcane (Rum/Spirits): Sugarcane is another tropical staple used for sugar, ethanol, and some spirits. Here too climate change is a factor. Growers in Sri Lanka’s cane belt have seen erratic rainfall and rising temperatures begin to erode yields, and extended dry spells can sharply cut sugar content. In response, researchers have worked on drought-tolerant cane varieties. In July 2023 the Sugarcane Research Institute unveiled four new cultivars with higher sugar recovery (10–13% vs. 6–8% before) and improved performance under rainfed drought conditions. These varieties offer hope of stable supplies even as weather becomes more variable. They will take years to scale up. Meanwhile any drought can reduce harvests—pressing distilleries that depend on molasses for fermentation.

Barley, Grains, and Beer: Sri Lankan beer producers mostly import malted barley, but the country also grows some rice and coarse grains. Climate shocks abroad (e.g., heat waves in Australia or Europe) can push up global malt costs, while local rice farmers struggle with droughts. Domestically, rice and maize fields now also suffer from erratic monsoons, which can reduce general grain yields. Even if imported, beer production depends on stable water and grain availability, so rising global commodity volatility adds another layer of uncertainty to brewing costs and pricing.

Water Scarcity and Fermentation Challenges

Water is the lifeblood of brewing and distilling. Yet Sri Lanka’s water security is weakening under climate change. The country already uses about 91% of its renewable fresh water each year, making it “highly water stressed” . Its national climate report warns that “water shortages are drastically increasing” as prolonged droughts dry up watersheds. In effect, even a typically “water-rich” tropical nation now faces possible scarcity. This puts pressure on fermentation: yeast-based brewing and distilling require not just water for the mash but also large volumes for cooling, cleaning equipment, and recycling. If reservoir levels fall, factories may have to cut output or buy costly water.

As the brewing industry itself notes, beer production is “an energy and water-intensive industry” vulnerable to climate and resource stresses . For example, a mid-sized brewery might use dozens of liters of water to produce one liter of beer, and distilleries likewise use many times the final volume for still cooling. If drought hits, distilleries must conserve or recycle water. Some Sri Lankan distilleries are already acting. Rockland Distilleries, maker of Ceylon arrack, built a water-recycling system: condensate and process water are cooled in a pond and reused. This saves about 30,000 liters per day (roughly 2.7 million liters per quarter). Rockland also captures biogas from waste to fire its boilers, cutting fuel use by ~15%. (Rockland notes there is currently no acute water shortage in Sri Lanka, but its conservation measures hedge against future scarcity.) On a larger scale, industry experts recommend breweries aim for a 1:1 water-to-beer output ratio and use heat-recovery tech; new designs can slash brewing energy or water use by up to ~90%. Taken together, these pressures—less clean water, higher cooling needs under heat stress, and intense competition for irrigation—make fermentation more challenging. Yeasts operate best at moderate temperatures, so hotter equipment and air require extra cooling (raising energy bills). In some years, distillers may find themselves literally running out of water at peak demand.

Supply Chain Vulnerabilities

Erratic weather also disrupts alcohol distribution. Heavy rains and floods can cut off roads, damage factories, and stall exports. Sri Lanka’s recent history offers stark examples. In May 2016, an extraordinary Kelani River flood sent over 6 ft of water into the Lion Brewery (maker of Lion Beer) in Biyagama. The flood destroyed machinery worth Rs. 2.9 billion and knocked production offline. Beer output plunged; Lion had barely 15 days’ inventory left. To avoid a beer shortage, its parent company, Carlsberg, had to brew Sri Lankan beer at four other Asian breweries and ship it in. By the time Lion resumed full operations later that year, its sales were down 57% for the period, and profits plunged. This event shows how a single extreme storm can halve a brewery’s output overnight. More details can be read here 

Palinda Perera of Rockland Distilleries also stated that due to instant flood situations in the Kelaniya Valley, they are also facing similar situations, as their distillery is also located nearby to the Kelani River.

Similar risks loom now. The 2023 southwest monsoon and subsequent floods inundated lowland roads and rail lines; relief reports describe bridges under water and landslides blocking highways. Any disruption to transport delays delivery of barley, sugar, or finished beer. For farmers, a flash flood can literally wash away an entire cane or grain harvest before it reaches the mill. In short, Sri Lanka’s alcohol supply chains are only as robust as its infrastructure—which is buckling under climate stress.

The list of adaptive strategies is growing:

Drought-tolerant crops: Breeding and adopting new varieties (e.g., drought-hardy sugarcane) and farming methods to keep yields stable under heat and dry spells.

Water conservation: Recycling cooling water in distilleries (e.g., Rockland’s system saves ~2.7M L per quarter) and designing breweries with ultra-efficient water systems (aiming for 1:1 water-to-beer ratios).

Renewables and efficiency: Capturing biogas from waste to fire boilers (Rockland reports ~15% fuel savings), installing solar panels, and using advanced heat recovery in brewhouses to cut energy use by up to ~90%.

Knowledge tools: Mobile apps and climate advisories that guide farmers on irrigation, pest control, and timing of harvests (Sri Lanka’s sugarcane app is one example).

Policy support: Subsidies and infrastructure (irrigation, pump schemes) to help growers cope—for example, the coconut sector has urged using industry levies to fund drought-mitigation grants. Every measure that builds resilience—from drip irrigation in a coconut grove to chiller recycling in a brewery—helps buffer the industry against the next drought or flood.

As with many other industries of the country, Sri Lanka’s alcohol industry is heavily suffering from global climate change; however, the companies in the industry have been adapting to the situation, and some of their climate resilience efforts are successful.

Reference: 

https://www.economicsforhealth.org/research/price-elasticity-of-arrack-and-beer-use-in-sri-lanka

https://pulitzercenter.org/stories/sri-lankas-climate-exodus

Sweltering heat wave hits Sri Lanka; climate change will likely bring more

Unprecedented coconut shortage threatening Sri Lanka

https://www.freshplaza.com/north-america/article/9729998/global-coconut-prices-surge-on-supply-shortages

Amid socioeconomic slump, new sugar cane varieties offer hope in Sri Lanka

https://www.adaptation-undp.org/integrated-water-resources-development-way-forward-sri-lanka-tackle-climate-crisis

https://unfccc.int/sites/default/files/resource/Third%20National%20Communication%20of%20Sri%20Lanka.pdf

https://www.gea.com/en/stories/fermenting-change-keys-to-bright-future-for-brewers

https://www.rockland.lk/eco-distillery

https://archive.roar.media/english/life/reports/one-year-after-the-floods-lion-roars-back 

Banner Image: Photo by Rayyu Maldives on Unsplash

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Rashmitha Diwyanjalee
Rashmitha Diwyanjalee
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