Entrepreneurial Spirits in Toddy Production in Sri Lanka: Is Kasippu Worth a Shot?

In recent years, Sri Lanka has seen a resurgence of interest in toddy tapping to produce its local alcoholic beverage, Arrack. Once seen as a poor man's drink, this centuries old spirit has become a favorite of the hipster generation and can be found in bars across UK, France and Germany. While toddy tapping itself is a legal and regulated endeavor, the fermentation process of the coconut tree sap to create Arrack or its illegal counterpart, Kasippu is where this once dying industry begins to blur the lines between productive and destructive entrepreneurship. Sri Lanka is one of the highest per capita alcohol consuming countries in the world despite the 20% increase of import duties on foreign alcohol and the high tax on local spirits. However, only 20% of the liquor consumed in Sri Lanka is legal. The country has been experiencing rising costs of raw materials and soaring inflation coupled with a low per capita income for households, which has contributed to the rise in prices of Arrack. Statistics show that revenue from legal alcohol (Arrack) has declined by 6% in 2020. This chapter explores the demand for cheap alcohol and the factors that are fueling the 80% illegal alcohol consumption in Sri Lanka. It will analyze under what conditions the production and sale of Arrack and Kasippu coexist. This chapter contributes a dual perspective on destructive entrepreneurship by highlighting the toddy tapping industry as an example of economically and socially harmful entrepreneurial activity that results in negative externalities and negative impact on society.