SRI LANKA - Nielsen 2019-05-29آ  SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 2014 C 2014 T N Company

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  • 1SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 2014 Copyright © 2014 The Nielsen Company

    SRI L ANKA 2013 REVIEW AND OPPORTUNITIES IN 2014

  • 2 SRI LANKA: 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 bounce-

    back 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$)

    Source: International Monetary Fund.

    1,414

    3,127

    5,878

    3,498

    SRI LANKA

    INDIA

    INDONESIA

    THAILAND

    SRI L ANKA 2013 REVIEW AND OPPORTUNITIES IN 2014

  • 3SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 2014 Copyright © 2014 The Nielsen Company

    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

    'JU LY

    11

    'AU G

    11

    'SE P 1

    1

    'O CT

    11

    'N OV

    11

    DE C'1

    1

    JA N'

    12

    FE B'1

    2

    MA R'1

    2

    AP R'1

    2

    MA Y'1

    2

    JU NE

    '12

    JU LY

    '12

    AU G'

    12

    SE P'1

    2

    OC T'1

    2

    NO V'1

    2

    DE C'1

    2

    JA N'

    13

    FE B'1

    3

    MA R'1

    3

    AP R'1

    3

    MA Y'1

    3

    JU N'

    13 JU

    L'1 3

    AU G'

    13

    SE P'1

    3

    OC T'1

    3

    NO V'1

    3

    DE C'1

    3

    77 77 73 77 85 87 85

    77 72

    65 60 58 59 57 59 59 60

    62 67 68 64

    59 60 63 65 62 59 59

    67 68

    160

    173

    162 153

    158 149 151

    154

    135

    105 107

    90

    108

    121 122

    135 134 139

    158

    140 147

    140 131

    125

    111

    129 119

    130 138

    130

    CCI BCI

    BCI Base: 100 per month CCI Base: Rolling Sample of 300 per month Respondents per Month

    NIELSEN CONSUMER CONFIDENCE INDEX AND LMD-NIELSEN BUSINESS CONFIDENCE INDEX

  • 4 SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 20144

    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 (%) INFLATION % (12 MONTH AVERAGE)

    8.3 7.9 6.4

    4.8 6.3 6.0 6.8

    7.8

    Q4-2011 Q1-2012 Q2-2012 Q3-2012 Q4-2102 Q1-2013 Q2-2013 Q3-2013

    GDP GROWTH AGRICULTURE INDUSTRIAL SERVICES

    JA N

    '2 01

    0

    M AR

    '2 01

    0

    M AY

    '2 01

    0

    JU L

    '20 10

    SE P

    '20 10

    N O

    V '20

    10

    JA N

    '2 01

    1

    M AR

    '2 01

    1

    M AY

    '2 01

    1

    JU L

    '20 11

    SE P

    '20 11

    N O

    V '20

    11

    JA N

    '2 01

    2

    M AR

    '2 01

    2

    M AY

    -'2 01

    2

    JU L

    -'2 01

    2

    SE P-

    '20 12

    N O

    V- '20

    12

    JA N

    -'2 01

    3

    M AR

    -'2 01

    3

    M AY

    -'2 01

    3

    JU L-

    '20 13

    SE P-

    '20 13

    N O

    V- '20

    13

    DEC 2013 6.9%

    MAY 2013 8.9%

    MAY 2012 5.6%

    EXCHANGE RATE (LKR:USD)

    135

    130

    125

    120

    115

    110

    135

    130

    125

    120

    115

    110

    JAN/12 JUL/12 JAN/13 JUL/13 JAN/14

    COMMERCIAL BANKS AVERAGE INTEREST RATES (%)

    AVGE WEIGHTED LENDING RATE AVGE WEIGHTED DEPOSIT RATE

    DEC '13

    OCT '13

    AUG '13

    JUN '13

    APR ; 13

    FEB '13

    DEC '12

    OCT '12

    AUG '12

    JUN '12

    APR ; 12

    FEB '12

    DEC '11

    OCT '11

    6

    8

    10

    12

    14

    16

    18

  • 5SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 2014 Copyright © 2014 The Nielsen Company

    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.

    SOURCES OF GDP GROWTH SIMILAR IN ‘12 & ‘13

    HOW ECONOMIC TRENDS COULD AFFECT CONSUMER BEHAVIOR 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.

    6.3% 6.9% 2012: Q1-Q3

    AGRICULTURE

    INDUSTRY

    SERVICES

    2013: Q1-Q3

    0.8%

    2.7%

    2.9%

    0.3%

    2.9%

    3.7%

    FOOD EXPENDITURES

    THAILAND25%

    INDIA35%

    AUSTRALIA11%

  • 6 SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 2014

    RURAL & ESTATE CONSUMERS > HIGH FOOD COSTS

    Sources: Sri Lanka; DC&S, Housing Income & Expenditure Survey 2013

    Other Countries: Economic Research Service, US Department of Agriculture / Euromonitor (2010)

    2010: GLOBAL COMPARISONS ON % OF EXPENDITURE ON FOOD

    % OF HOUSEHOLD SPEND ON FOOD

    TOTAL SRI LANKA

    URBAN

    RURAL

    ESTATE

    2013 37

    31

    39

    50

    2010 40

    34

    41

    50

    7%

    25%

    9%

    45%

    46%

    40%

    25%

    43%

    37%

    14%

    35%

    34%

    11%

  • 7SRI LANKA: 2013 REVIEW AND OPPORTUNITIES IN 2014 Copyright © 2014 The Nielsen Company

    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 v