Consumer demand may remain tepid next two years: FMCG executive
10 Dec 2015 - {{hitsCtrl.values.hits}}
By Chandeepa Wettasinghe
The consumer demand in Sri Lanka is likely to be disappointing in 2016 and 2017, with the sources which boosted spending drying up, a consumer industry executive said.
“It’s hard to be positive about the next couple of years, but it would be wrong to say that they will be a complete disaster. They feel a bit flattish. I don’t think there will be any growth in the local market. The current levels will continue,” Hemas Holdings PLC CEO Steven Enderby told Mirror Business.
Enderby said that it is hard to see from where the country will get the same level of demand growth it has seen in the past few years.
Hemas, with business interests in healthcare, tourism and logistics, is a leading FMCG player in the local market and an emerging one in Bangladesh.
“Of course, in the Budget earlier this year, there were some populist measures to increase the spending power of the people, and there was a bit of an increase in this Budget too. But this is offset by the increase in the Nation Building Tax and other increased costs,” Enderby said.
He noted that while the fall in the global commodity prices is a plus, it too is countered by the falling rupee.
The depreciating rupee has already contributed to a jump in inflation this November, compared to a deflationary situation in earlier months.
“The increase in interest rates also means that there will be less money in people’s pockets as they save up instead of consuming,” Enderby remarked.
Therefore, he noted that competition will intensify, possibly leading to better deals for customers.
“Our competitors will duck and dive, and give us a hard time. So we will also do the same. But with regard to pricing, I think it will be more strategic and practical.”
Enderby said that with the local slowdown, the companies providing consumer goods would have to seek different areas of growth.
“Achieving growth is challenging in this environment. We need to look at markets outside Sri Lanka. There are many interesting opportunities for Sri Lankan businesses that start to think of moving away from traditional export markets in the West to regional markets.”
He noted that Sri Lankan companies can provide products of better quality than available in markets such as Bangladesh, which could be capitalized on heavily.
Enderby also added that companies should look inwards to strengthen their employees to world-class standards, so that they could come up with strong global strategies for the companies to expand in the coming years.
However, he said that in Hemas’ case, while the consumer demand may be flat, the company will grow through the booming leisure and travel sectors.
In the consumer durables, while high taxes might depress vehicle growth, housing could boom with the Budget reducing the taxes on the imported ceramics and steel, coupled with the subsidised cement costs implemented earlier this year.
The government is also facilitating housing for the middle and lower income segments of society within Colombo.
