Significant volume growth ‘likely’ in local FMCG in 2015 – Nielsen
View(s):Significant growth in terms of sales volumes is “likely” in Sri Lanka’s Fast Moving Consumer Goods (FMCG) sector over the next few months of 2015, according to market researcher Nielsen. The company also added that this was a result of the current low inflation environment as well as significant recent allowances government sector employees who make up one in seven of all employed Sri Lankans.
Making these observation in the “Nielsen Sri Lanka 2014 Review: Opportunities and Challenges” report, which was released in February 2015, the company also opined that, while price cuts in the 2015 interim budget would lead to lower inflation at present, inflation could rise in the medium since, a consequence of the devaluation pressure faced by the Sri Lankan Rupee (LKR) since it was appreciating against the Euro (EUR) to the tune of 17 per cent as of end-January 2015.
The report also noted that, as of February 2015, Nielsen’s Consumer Confidence Index (CCI) was at an all-time high, reaching the same post-war peak in December 2011, while the LMD-Nielsen Business Confidence Index was also at an all-time high as of January 2015. But it further elaborated that this was prior to the reading of the 2015 Interim budget, because the business community had “massive” expectations.
At the same time, the report also revealed that the mean household income of the top 20 per cent of households was Rs. 121,368, with this group possessing 52.9 per cent of all income, while the 20 per cent immediately below this group had a mean household income of just Rs. 45,596. It also concluded that consumers are shifting to more lifestyle oriented products instead of just the basics, especially in terms of food, transport and housing/home products such as durables. One further interesting note in the report, 10 per cent of Sri Lankan households now owned a car, resulting in roughly 600,000 cars owned (and 3 million motorcycles).On the other hand, the report also commented that, while Sri Lanka’s ongoing trend of lowering interest rates was boosting borrowing, in addition to also increasing housing and consumer durables expenditure as mentioned previously; these interest rates cuts would “most likely” cause older consumers depending on fixed deposit/savings interest to, in turn, reduce their spending since they will earn less from these instruments. (JH)