Interview: Carl Cruz
How can Sri Lanka reverse the trend of sluggish consumption in the short to medium term?
CARL CRUZ: From our end, it is quite clear what needs to be done. The government needs to take steps to revitalise rural areas that have been hit hard in recent years. The past two to three years of inclement weather have had a significant impact on the economy, with the prolonged drought particularly noticeable in the north and east of the island. At one point, seven of the nine provinces were impacted by dry weather conditions. Meanwhile, other provinces were hit with flooding in 2016 and 2017, which fortunately did not occur in 2018. As a result, the economies in these areas have been deeply affected.
In order for the country to re-establish a good growth base, economic activity needs to be kickstarted. One way this can be achieved is with infrastructure investment to ensure future disruptions are less severe. I also believe in helping out in terms of output, mainly with regard to the agriculture sector, as the country’s rural economy is still very much spearheaded by farming.
Additionally, I think the government needs to stick with decisions it has made thus far in terms of its tough but fair fiscal and monetary policies. Consistency will give the public confidence.
What is your outlook for the evolution of market consciousness in terms of price versus quality?
CRUZ: As a result of technological advances, the market is developing in such a way that consumers are becoming much more informed. Being able to see what is outside of Sri Lanka is changing the landscape; therefore, awareness of portfolio gaps or opportunities is still very high.
On one hand, there is a certain level of price consciousness because of the economic difficulties consumers are currently facing. On the other hand, surprisingly, consumers are not willing to actually give up on quality. Based on a recent consumer survey of a number of households throughout the country, we found that they do not actually want to compromise their spending habits to meet basic requirements and necessities. They are instead coping with tighter budgets by purchasing smaller amounts, so the cash outlay is slightly lower. However, they are still purchasing high-quality products, which is a boon for everyone in the industry.
Based on the current macroeconomic situation, which new consumer segments offer the most potential for future growth?
CRUZ: We are looking at a number of fast-growing segments, and despite economic difficulties, there are still a lot of investment options available for those interested. Environmentally friendly and sustainable goods are becoming more popular as Sri Lankans become more globally minded consumers and learn more about the benefits of such products. This follows the global trend of reducing plastic usage, and opting for goods that are made with sustainable raw materials. We see many brands shifting direction and focusing on eco-friendly products.
Where do you see opportunities for the fast-moving consumer goods (FMCG) segment?
CRUZ: Opportunities in the FMCG segment are mainly found on the retail side. Modern trade activity comprises just 15% of retail here in Sri Lanka, but we are seeing major domestic retail players establish themselves throughout the country, even outside of Colombo and the Western Province. I think this will clearly help, because once you open up modern shopping outlets in towns, it signifies that the area is developing. This also goes to show that there is progress being made across Sri Lanka. However, additional opportunities to bring consumer products into the country are to be found across all segments.
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