Post conflict optimism dropping : Study

Sri Lanka's post conflict optimism has proved to be unsustainable, according to Shaheen Cader, Managing Director of Nielsen Sri Lanka, quoting from a Nielsen Consumer Confidence Index for the 3rd quarter of 2010, which shows levels dropping to those in mid 2009.

Justin Sargent

However, also indicated was that Sri Lankans aged between 20 to 35 years were much more confident than those who are 36 years and above. It was also further noted that business confidence was at an all time high as of October 2010, as indicated by the LM Nielsen Business Confidence Index.

Further, the Nielsen Consumer Confidence conducted in the first quarter of 2010 also indicated that the major concern for the public over next six months was the economy, children's education, health and debt. Worries about health and getting into debt had risen even more, especially with healthcare costs having risen three times more than the rate of inflation.

The main driver for Gross Domestic Product (GDP) growth was agriculture in 2009. This had also continued into the first quarter of 2010 where agriculture GDP growth was 9%. However, due to a fall in tea, growth had dropped to 5.1% in later part of 2010. However, increases in minor export crops, fisheries and paddy had also reached the double digits between the second quarter of 2009 and the same period in 2010.

As such, the rural sector, to which much of the 32% of the workforce involved in agriculture belong, had also been responsible for greater consumption in 2009. Also a result of the significant narrowing of the income gap between the rural and urban sectors, with monthly household incomes (MHI) of rural households increasing from an average of Rs. 26,286 in the 2006/2007 period to Rs. 35,495 in 2009/2010 while urban household income only rose by half that. This was due to continued government emphasis on the rural sector where fertiliser subsidies and concessions for paddy and fisheries spurred growth.

On the other hand, expenditure for food had also gone up from 38% in 2006/2007 to 40% in 2009/2007, which has resulted in, especially in urban households, other expenses being dropped. This could be largely spurred by an increase in food inflation to the tune of 6% as of October 2010, which has outpaced overall inflation numbers. Additionally noted was that 91% of monthly household income is spent on expenses in 2009/2010, an increase from 87% in 2006/2007, which suggests that there is less spare cash available to households today.

At the same time, he suggested that the urban sector, said to not have grown at all in 2009, was coming back in 2010. Further, 2010 was already said to be showing a 30% volume growth on a rolling annual basis, mainly due to pent up demand.

Shaheen Cader

Meanwhile, according to a Nielsen Internet Use Survey, carried out among 15 to 60 year olds, which was unveiled for the first time this week; 44% of those surveyed went online via their mobile phone with 34% using it at home, 26% at Internet cafes and 13% at work. Additionally, 1.2 million Internet users went online at least once a week and about half of this accessed the Internet daily. This is out of 2.2 million Internet users in Sri Lanka. Also suggested was 900,000 accessed social media websites such as Facebook, Twitter, etc.

Mr. Cader made these comments as a part of a presentation entitled "Global, Regional and Local Trends: The shape of things to come?" Joining him in making the presentation was Nielsen South Asia Managing Director Justin Sargent, who spoke about global and regional trends that were gaining interest such as modern trade or self service stores such as super markets which currently makes up 16% of the local market, from 5% in 2000. An area where substantial growth is likely in the near future as witnessed by China where this segment grew to equal 64% of channel distribution from 34% in 2000. An important future facet of this channel of this was suggested as being private label or generic products, often more cost effective; online retailing; mobile stores; and loyalty cards.

Mr. Sargent also noted that the rural sector was driving India's growth and that this had resulted in 12% growth across virtually every category. He also revealed that rural demand had turned to beauty, health and convenience products. Shampoo, face creas, lip gloss, deodorants, disposable diapers, sanitary napkins, instant noodles, fruit juices and even breakfast cereals. Also used were those products that offered a fusion between the new and old, adding traditional ingredients to convenient offerings.