sri lanka

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sri lanka

SRI L ANKA
2013 REVIEW AND OPPORTUNITIES IN 2014
Copyright © 2014 The Nielsen Company
1
SRI L ANKA
2013 REVIEW AND OPPORTUNITIES IN 2014
2013 was a period of consolidation in Sri Lanka, marked by ripples from
a series of corrective measures in 2012 aimed to chill an overheated
economy. The indicators are that the worst could be over. As 2013 came
to a close, inflation was heading south and the Sri Lankan rupee was
relatively stable, leaving consumers and businesses wondering if 2014
will be the year when confidence begins to ascend—leading to a bounceback in consumption.
As a country, Sri Lanka boasts an impressive per-capita GDP—one that’s
bigger than India’s and steadily approaching Indonesia’s. Given the
country’s economic footprint, marketers and brands certainly have an
opportunity to increase their engagement with consumers—engagement
that hinges on understanding their needs and spending habits.
2013 PER CAPITA GDP (US$)
INDIA
THAILAND
SRI LANKA
INDONESIA
1,414
5,878
3,127
3,498
Source: International Monetary Fund.
2
SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 2014
CONFIDENCE
RISING
On the heels of several landmark events over the past five years, including
President Mahinda Rajapaksa winning a second, six-year term in 2010,
sentiment about the future is improving among Sri Lankan consumers
and businesses. Both consumer and business confidence are up
significantly from their low points, even though there was some vacillation
toward the end of 2013. At year-end, consumer confidence was at 68 (up
from a recent low of 57 in August 2012) and business confidence was at
130 (up from a recent low of 90 in July 2012).
CONSUMER AND BUSINESS CONFIDENCE
NIELSEN CONSUMER CONFIDENCE INDEX AND
LMD-NIELSEN BUSINESS CONFIDENCE INDEX
BCI
CCI
173
160
162
153
158
158
154
149 151
135
135 134
139
140
147
140
131
121 122
77
73
77
85
138
130
119
90
77
72
65
60 58 59
57 59
59 60 62
67 68 64
59
60
63 65
62 59
59
67
68
'JU
LY
'A 11
U
G
1
'S 1
EP
'O 11
C
T
'N 11
O
V
1
D 1
EC
'1
JA 1
N
'12
FE
B'
1
M 2
A
R
'1
A 2
PR
'1
M 2
A
Y
JU '12
N
E'
JU 12
LY
'12
A
U
G
'12
SE
P'
1
O 2
C
T'1
2
N
O
V
'1
D 2
EC
'1
JA 2
N
'13
FE
B'
1
M 3
A
R
'1
A 3
PR
'1
M 3
A
Y'
1
JU 3
N
'13
JU
L'1
3
A
U
G
'13
SE
P'
1
O 3
C
T'
N 13
O
V
'1
D 3
EC
'13
77
85 87
129
125
111
108
105 107
130
BCI Base: 100 per month
CCI Base: Rolling Sample of 300 per month Respondents per Month
3
THE FUTURE LOOKS
BRIGHTER FOR
CONSUMERS
The improving consumer sentiment, business confidence and growing
tourism suggests better times ahead. For consumers, stable rupee
growth, lower inflation than in mid-2013 and mild interest rates for
loans should be a welcome change and could be a positive for spending
trends—amount and frequency—in 2014. The downside risk on the
economic front includes a possible trade balance downturn. A trade
balance slip could affect the value of the rupee and cause the economy
to overheat.
BETTER TIMES FOR CONSUMERS IN 2014?
QUARTERWISE GDP GROWTH (%)
SERVICES
MAY 2013
8.9%
DEC 2013
6.9%
MAY 2012
5.6%
EXCHANGE RATE (LKR:USD)
JUL-'2013
SEP-'2013
MAY-'2013
JAN-'2013
MAR-'2013
SEP-'2012
NOV-'2012
JUL -'2012
MAY-'2012
JAN '2012
MAR '2012
NOV '2011
JUL '2011
SEP '2011
Q3-2013
MAY '2011
Q2-2013
JAN '2011
Q1-2013
MAR '2011
Q4-2102
7.8
NOV '2010
Q3-2012
6.8
6.0
JUL '2010
Q2-2012
4.8
6.3
SEP '2010
Q1-2012
6.4
MAY '2010
7.9
JAN '2010
Q4-2011
INDUSTRIAL
MAR '2010
8.3
AGRICULTURE
NOV-'2013
GDP GROWTH
INFLATION % (12 MONTH AVERAGE)
COMMERCIAL BANKS AVERAGE INTEREST RATES (%)
AVGE WEIGHTED LENDING RATE
135
135
130
130
125
125
120
120
115
115
AVGE WEIGHTED DEPOSIT RATE
18
16
14
12
10
110
JAN/12
4
8
6
110
JUL/12
JAN/13
JUL/13
JAN/14
OCT
'11
DEC
'11
FEB APR ;
'12
12
JUN AUG OCT
'12
'12
'12
DEC
'12
FEB APR ;
'13
13
JUN AUG OCT
'13
'13
'13
DEC
'13
When we take a look at what’s driving the GDP growth, we
don’t see any surprises. The sources behind the uptick are
similar to those we saw in 2012 and last year. Agriculture is
still stifled, offering very little in terms of growth, mainly due
to poor weather. Consequently, agriculture contributed only
marginally to overall GDP growth in the last two years. The
positive, however, is that in aggregate, agriculture represents
a very small part of the larger GDP picture. The larger
contributors, the industrial and services sectors, is where the
picture is more optimistic.
HOW ECONOMIC
TRENDS COULD
AFFECT CONSUMER
BEHAVIOR
SOURCES OF GDP GROWTH
SIMILAR IN ‘12 & ‘13
2012: Q1-Q3
6.3%
2013: Q1-Q3
6.9%
0.3%
0.8%
2.9%
2.7%
3.7%
2.9%
AGRICULTURE
INDUSTRY
SERVICES
At a granular level, construction delivered more than half of the GDP
growth in the last two years, fueled by surges in domestic trade and
transport—a trend that should continue. On the flipside, import trade has
contributed very little to the equation.
For consumers, lower borrowing costs could lead to higher spending on
housing and consumer durables. Older consumers who are reliant on
fixed incomes, however, will likely trim back on spending as interest rates
on their savings and deposits come down. Inflation had dipped below 7
percent at the end of 2013, another level of breathing room for consumers,
but fuel hikes and related increases in electricity and transport costs did
cause a rise in non-food costs last year.
Non-food costs aren’t the top concern for Sri Lankans, however.
On average, consumers in the region spent about 40 percent of their
household expenditure on food, well above the average of less than 15
percent for developed countries. Comparatively, food expenditures are 25
percent in Thailand, 35 percent in India, and 11 percent in Australia.
FOOD EXPENDITURES
25%
THAILAND
35% INDIA
11% AUSTRALIA
5
RURAL & ESTATE CONSUMERS > HIGH
FOOD COSTS
% OF HOUSEHOLD
SPEND ON FOOD
2013
2010
TOTAL SRI LANKA
37
40
URBAN
31
34
RURAL
39
41
ESTATE
50
50
2010: GLOBAL COMPARISONS
ON % OF EXPENDITURE ON FOOD
9%
7%
46%
25%
45%
14%
34%
35%
25%
37%
40%
43%
11%
Sources: Sri Lanka; DC&S, Housing Income & Expenditure Survey 2013
Other Countries: Economic Research Service, US Department of Agriculture / Euromonitor (2010)
6
WHEELS, RICE
COOKERS AND
TECHNOLOGY
Against a backdrop of relative optimism, there are a few areas where
consumers in Sri Lanka could direct their disposable income as futures
brighten. The first is transportation. Sri Lanka is home to 5 million
households that have 4 million vehicles—and climbing. While sales of
car, three-wheeler and dual-purpose vehicles (vans) have tapered off in
recent years, motorcycles are becoming the transportation of choice. At
year-end 2013, there were 2.7 million motorbikes in the region—steadily
making them the family vehicle of choice.
OVER 4 MILLION VEHICLES FOR 5 MILLION HOUSEHOLDS
45,00,000
40,00,000
TOTAL NO. OF
REGISTERED VEHICLES
35,00,000
30,00,000
25,00,000
20,00,000
15,00,000
10,00,000
5,00,000
UNITS
2003
2004
2005
2006
MOTOR CARS
2007
2008
3 WHEELERS
2009
2010
MOTORBIKES
2011
2012
JUL-13
DUAL PURPOSE
Source: Registration of Motor Vehicles
7
Consumers are also spending more on durables and technology.
Sri Lankans are no longer content with outdated items, as many are
opting to replace their old televisions and refrigerators with new,
efficient models.
Technology is also playing a bigger role for consumers these days.
In 2013, Sri Lankan households purchased 250,000 new computers and
550,000 new rice cookers.
TV & REFRIGERATORS > UPGRADING TO NEW MODELS COMPUTERS,
RICE COOKERS > INCREASING PENETRATION
PERCENT OF HOUSEHOLDS OWNING SPECIFIED DURABLES
TV
96%
97%
RADIO
89%
88%
% OF HHS OWNING
REFRIGERATOR
57%
57%
COMPUTER
27%
32%
RICE COOKER
48%
59%
WASHING MACHINE
13%
14%
2012
2013
Source: Nielsen Consumer Surveys, 2012, 2013 in 9 Provinces, 23 (out of 24 districts)
8
The other area where technology is affecting consumer spending is in
the digital space. While fixed and mobile voice connectivity is declining
or flat, mobile broadband connectivity is growing. As of September 2013,
there were 1.2 million mobile broadband connections in Sri Lanka, and
the number of accounts is steadily increasing.
And where there’s digital growth, there’s increasing Internet penetration.
In Sri Lanka, the availability of technology is having a huge impact
on Internet use. Between 2012 and 2013, the country’s population of
Internet users, aged 15 to 60 years, grew from 2.5 million to 2.8 million,
and 2.4 million of them are connecting either daily or weekly.
2.8 M INTERNET USERS (2.4 M DAILY/WEEKLY USERS)
FREQUENCY OF INTERNET USAGE (AMONG ALL 15-60 YEAR OLDS)
2012
2.5M
2013
2.5M
2.8M
2.8M
INTERNET USERS
(22% of 15-60 yr olds)
17% Daily / Weekly users;
5% occasional users
INTERNET USERS
(24% of 15-60 yr olds)
21% Daily / Weekly users;
3% occasional users
2012 2013
FREQUENCY OF INTERNET USAGE 2013 (% BY AGE GROUP)
AGE
DAILY/WEEKLY/LESS OFTEN
HOW INTERNET
USUALLY ACCESSED
SOME USE MULTIPLE
MEANS OF ACCESS
ALL 15-25 26-35 36-4546-60
2447 18 15 7
52%
DONGLE
57%
MOBILE
15%
ADSL
Source: Nielsen Consumer Surveys, 2012, 2013 in 9 Provinces, 23 (out of 24 districts)
9
CONSUMPTION
OUTLOOK—A
REVERSAL OF
RECENT TRENDS
Given the various factors affecting businesses and consumers in Sri
Lanka over the past couple of years, it’s not surprising that fast-moving
consumer goods (FMCG) volume was down in 2012. That was a year
ago, however, and that downtrend reversed its course in the last two
quarters of 2013.
So where are the biggest areas of opportunity? The personal care and
emerging lifestyle sectors.
Despite negative growth in the household care (cleaning products and
detergents) area, double-digit growth in personal care item sales has
been an offsetting positive.
10
MONTHLY AVERAGE GROWTH
FMCG MARKET VALUE (RS. MN.) - MONTHLY TRENDS IN TRADITIONAL TRADE
15,000
HOUSEHOLD CARE
PERSONAL CARE
F&B
10,000
5,000
0
D-10
M-11
J-11
S-11
D-11
M-12
'J-12
S-12
D-12
M-13
J-13
S-13
D-13
QUARTERLY FMCG VALUE GROWTH & SOURCE OF GROWTH
(COMPARED TO SAME QUARTER A YEAR AGO)
14
NOMINAL GROWTH (%)
VOLUME GROWTH (%)
UNIT VALUE GROWTH (%)
14
4
% GROWTH
3
11
10
10
1
14
15
16
14
2
-1
-9
Q4 11
Q1 12
Q2 12
-12
Q3 12
8
-5
-16
Q4 12
-6
6
4
8
7
-2
-3
Q3 13
Q4 13
-21
Q1 13
Q2 13
Source: Nielsen Retail Audit (excl. N&E)
11
From a retail perspective, package size is once again a primary
consideration. When times were tougher, retailers and companies began
offering products in medium-sized packs to provide a price-conscious
option when consumers didn’t have the economic bandwidth to spend
for larger, higher-cost packages. Over the past year, however, consumers
are noticing these options less. From a trend perspective, more and more
consumers are gradually shifting to either larger or smaller sizes—even
when prices for smaller packs are going up.
The fastest-growing categories, even in general trade, are those in the
emerging lifestyle and personal care arena, albeit from a very small base.
The products and services that have seen the highest growth are those that
appeal to younger consumers.
And when it comes to pricing, consumers are very value conscious: the
magic numbers in these categories fall between Rs30 (food and beverage)
and Rs45 (personal care).
SALES VALUE CONTRIBUTION % - NOV ‘13
ALL F&B
0
-9
10
F&B EXCL. MILK POWDER
4
9
9
9
9
9
9
9
9
4
4
99 499 599 999
99 345
99 224
49 274
49 174
00
-19 - 24
-2
- 9 - 12
-3 5-3
-8
-4 5-4 0-5 0-6 0-7
-2
-1
-1
-3
10
-2
=
5
5
5
0
6
5
25
7
0
3
0
0
0
0
0
5
4
20
6
90 100
30
80
7
40
7
>
1
12
15
2
22
25
34
20
50
60
30
40
PERSONAL CARE
0
12
-9
10
HOUSEHOLD CARE
5
9
9
9
9
9
9
9
9
4
4
4
9
9
9
9
4
9
9
9
9
4
4
0
-19 - 24
19
14 - 17
27
22
29
34 - 39 - 49 - 59 - 99
24
-2
- 9 - 12
-3 5-3
-8
-4 5-4 0-5 0-6 0-7
00
=1
5- 05 - 0 - 25 - 50 5 - 50
6
25
7
3
0
0
0
5
4
20
6
90 100
30
80
7
40
7
>
4
1
12
0
0
0
1
2
2
2
3
2
5
6
30
40
THE MILLENNIAL
OPPORTUNIT Y
When we look at demographics across Sri Lanka, as well as other
regions of the world, consumers born in the 1980s and 1990s are
becoming a steadily important group to engage with. These young
adults, born in the reality TV show era, are 3.5 million strong and
represent a portion of the consumer base that will become increasingly
more influential as they grow older.
In addition to being a group with growing spending power, Millennials
tend to be more optimistic than the average consumer. In fact,
consumer confidence in Sri Lanka is highest in this group. They’re also
more likely to spend on themselves when it comes to discretionary
purchases.
GEN Y MORE OPTIMISTIC AND MORE LIKELY TO SPEND ON THEMSELVES
CONSUMER CONFIDENCE INDEX, BY AGE GROUP
25-30
80.5 77.5
75.5
2011
74
31-35
71
36-45
46+
75.5
65.5 63.5
60.5
2012
67.5 65
59
2013
13
SO WHERE ARE THEY SPENDING?
% RESPONSE JAN 2013 – DEC 2013
25-30
31-35
36-45
46+
PUT IT INTO S AVINGS
60
53
42
34
BUY NEW CLOTHES/SHOES
13
7
2
1
RESTAURANTS AND DINING OUT
10
2
1
1
PAYING OFF DEBTS/CREDIT CARDS/LOANS
6
6
4
3
LATEST TECHNOLOGY PRODUCTS
4
2
0
0
GROOMING
1
2
1
0
HAVE NO SPARE CASH
18
39
35
26
Engaging with Millennials requires different tactics than other
demographics. They are fun-loving, adventurous and usually want to be
want step ahead of their peers. So in that regard they’re always on the
lookout for the brands that are considered the most modern and trendy.
They also love to tell their peers, friends and families about their latest
purchases—whether they be clothing or the latest tech gadgets.
For Millennials, it’s all about lifestyle and convenience, so engaging with
them needs to keep these two prime motivators at the forefront.
14
A BRIGHTER
HORIZON AHEAD?
2013 was a year of consolidation. The impact of the corrective measures
taken by the government in 2012 to calm the economic environment
weighed on consumer spending and prevented any meaningful forward
momentum. Now, however, consumers and businesses are cautiously
optimistic, particularly as inflation declines and interest rates for loans
recede. If these trends persist, barring any significant deterioration of
the Sri Lankan rupee, 2014 could open the door to a notable bounceback in consumption.
Mobility is a fast-evolving trend for consumers—both on wheels and
in the digital space. Motorbike ownership is on the rise, enhancing
consumer experiences in leisure and shopping, while mobile broadband
expansion is broadening the way consumers interact on the go.
And the robust growth of the branded FMCG market toward the latter
half of 2013 stands to continue improving against a backdrop of
consumer and business optimism. And much of the growth in FMCG
has come from Millennials, a sizable portion of the population that
holds the key to future growth across a number of key sectors that
will need to pace themselves in order to keep up with and engage this
vibrant, young audience.
15
ABOUT NIELSEN
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and
measurement company with leading market positions in marketing
and consumer information, television and other media measurement,
online intelligence and mobile measurement. Nielsen has a presence in
approximately 100 countries, with headquarters in New York, USA and
Diemen, the Netherlands.
For more information, visit www.nielsen.com.
Copyright © 2014 The Nielsen Company. All rights reserved. Nielsen and
the Nielsen logo are trademarks or registered trademarks of CZT/ACN
Trademarks, L.L.C. Other product and service names are trademarks or
registered trademarks of their respective companies. 14/7483
17

sri lanka

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