Lankan consumers are shifting from commodities to branded products

With the dawn of peace after the cessation of the three-decade conflict in the country, the economy of Sri Lanka witnessed a considerable expansion in all three sectors.

Year 2010 recorded a significant enhancement in the Gross Domestic Product (GDP) by 8% and the first half of 2011 recorded an even higher increase in the GDP by 8.2%.

The benefits of economic development is evident in all regions of the economy specially in post-conflict North and East Provinces, in which GDP has expanded more rapidly by 23 % and 19 % respectively.

Along with the prospects in economic development, the doubling of per capita income of the general public in recent years has also contributed in improving the economic activity in the country. Reaping maximum benefits from peace dividends, major industry players in the country initiated business expansion activities by investing in new business ventures as well as expanding their existing capacity.

Massive infrastructure development projects currently being undertaken by the government in highways, roads, ports and airports, expansion in access to financial services specially in regional areas by way of opening up bank branches, persistently low interest rate and significant increase in credit to the private sector all indicates towards prospects available in the economy for further enhancing the growth in the country.

The above mentioned positive macro economic developments in the country have resulted in improving the consumer confidence in the economy to new heights. As indicated in the LMD-Neilson Business Confidence Index for 2010/2011, the index is on a continuous upward trend since the end of the conflict and the confidence is highest among income earners in the age group 20-35 years.



Trend dynamics in buying behaviour

With the increase in purchasing power, a dynamic shift in the buying behaviour of rural and semi-urban consumers has taken place in recent years. Increasingly, these consumer categories are shifting towards branded products from generic products. Especially income earners in the age group 20-35 years are becoming more brand conscious and paying more attention to the buying behaviour process.

This is a very favourable development in the market and proportionate to the affordability levels of these consumers, they demand for smaller pack sizes of their preferred brands. This trend in consumer buying behaviour is evident in essential commodities such as tea, sugar and rice where rural and semi- urban consumers preferring to purchase branded packs in different sizes at different price points. As an example, a basic commodity like tea is preferred to be purchased in small quantity branded packs rather than in loose form.

Some of the major factors influencing this trend towards branded products from semi-urban and rural consumer categories are expansion in modern trade, increased competition among branded competitors to capture market share, increased influence from social media, high penetration in telecommunication, internet and mobile services and change in consumer expectation levels.  The modern trade category has emerged as a fast growing area in recent years. The competitive price, convenience and consumer friendly pleasant shopping environment coupled with attractive product presentation and displays have resulted in shifting consumers, especially in semi-urban areas, towards this rapidly-expanding supermarket category and a more brand-oriented approach. Particularly in the Fast Moving Consumer Goods (FMCG), these developments could be observed.

Supermarkets to the fore

Consumers tend to upgrade their living standards and change their lifestyle in accordance with the ongoing trends. By offering various loyalty schemes, discount offers, credit card facilities, etc., these supermarket chains makes an effort to aggressively attract new customers as well as maintain their existing customer base with them. Nevertheless, despite the growth in supermarket category, general/traditional trade is dominating the market having 75-80% penetration levels. There are number of social/consumer habits and social economic factors still driving this segment, especially in rural markets. Credit facilities offered by the retailers to their individual customers assist them to retain consumers.

Competition among brands

Competition among brands has reached new heights due to changes in consumer buying behaviour. Various consumer promotions, communication campaigns by leading brands to increase their value and volume share in the market also resulted in shifting to these brands in the short to medium term.  Influence from social media network, expansion in IT, telecommunication and mobile facility to rural areas and popularisation in social media network in rural areas has a direct impact on the buying behaviour and decision making process of rural consumers. Social media communication and advertising has triggered increased sales in branded products in rural markets, especially for personal care products such as shampoo, cream, soap and perfume products. Thus, expansion in social media, IT and telecommunication services will provide further opportunities for marketers to penetrate the rural and semi-urban market categories and facilitate consumers in these categories to make informed buying decisions.  In today’s evolving society, children and teenagers have become a significant influencing factor in the buying behaviour process and this is valid in the case of rural and semi-urban consumers as well. Various types of consumer promotions and product positioning targeting children and teenagers has triggered a major driving force in the consumer buying behaviour process and increased growth and penetration in branded products.

Conclusion

In modern society, consumers spend a significant proportion of their income on food, beverages and personal care products. Increasingly consumers are shifting towards branded products considering the improved quality, convenience and affordability. This trend in consumer buying behaviour will continue to grow in the years to come due to life style changes and social value changes.

Furthermore, increasing desire for shopping convenience, clean and hygienic store environment, pleasant customer service and care will further enhance the shift towards purchasing more branded products than generic products.

(The writer currently functions as the Chief Operating Officer of C.W. Mackie PLC/ Scan Products, having a first degree in marketing and postgraduate qualification in business and finance administration. He has represented several national level projects in marketing and counts more than 15 years of experience in both local and foreign markets.)