Lankan consumer unplugged

If we look at the corporate sector performance of 2010/11, the results of the listed companies was outstanding, with revenue growing by 184% and profits growing by a 418%, whilst the cash in the bank is at Rs. 168 billion, which incidentally is higher than the FDI target set for Sri Lanka of 1.5 billion dollars.

This means that if this money can be attracted into Sri Lanka’s investment, it can be significant, which is why the new bill passed can have negative ramifications. However, going back to the outstanding corporate sector results, the big question that many ask is what impact it has had on the average Sri Lankan household.

Tourism: $ 1 billion?

If one examines the much-hyped tourism sector, way back in 1983 we had 337,000 tourists coming into Sri Lanka, whilst last year we had just doubled it with a revenue of just over half a billion rupees.

However, this year Sri Lanka’s tourism sector will register almost 800,000 visitors, with revenue generation touching US$ 1 billion. Once again the big question is, how much has this positive information impacted households outside Colombo?

Remittance: $ 5 billion?

If we examine the data for the first eight months, imports are recording a staggering $ 12.9 billion dollars at a growth of 51%, whilst exports are recording $ 6.9 billion at a growth of 29% and inward remittances are depicting a strong growth of 27.2% at 3.3 billion dollars, which means that in 2011 the number is sure to cross US$ 5 billion, which is very interesting.

The logic is that this income directly comes into a household in Sri Lanka. But once again the big question that one can ask is, what impact has this had on the average lifestyle of the typical Sri Lankan family?

Reality 2011

The latest market research data from Nielsen reveals that consumer spending has increased by 20% across households, but from the second quarter of 2011, the growth momentum has dropped.

As at now the highest growth is recorded by face wash products at 56% and light snacks by 40%, deodorants by 37% and shaving creams by 36% whilst yoghurts is at 32%, which is interesting given that most of them do not fall into the essentials category. In my mind, it reflects the changing lifestyle of the Sri Lankan consumer.

Another important trend seen is that almost 45% of the households now put money into savings, which was only 29% the quarter before, which means people are getting cautious. May be it’s worth understanding where these monies are being invested given the low interest rates that banks offer.

Reality 30 years

If we go back in time for 30 years, the 2009/10 Department of Census and Statistics report shares some very interesting highlights about the Sri Lankan household. The mean household incomes have increased by 4,137% during the last 30 years, whilst the average household expenditure has increased by 1,656%.

The important point to note is that expenditure on food and drink, which was 91% of the income in 1980/81, now registers 36%, which means that there is more money available for the consumption of non-food products, inferring the changing lifestyle of a Sri Lankan household. Maybe the increased number of consumer durable retail outlets like Singer and Abans that we see in the changing landscape of Sri Lanka is testimony to this data.

Poverty

On the poverty belt, we see that on the overall number standing at 8.9%, the best performing district strangely is Vavuniya at 2%, which needs further analysis, whilst Colombo as expected stands at 2.5% and Gampaha comes in third at 3%, which is reflective of the development agenda that we see in reality.

Kalutara comes in at 4.1%, Anuradhapura at 4.6% and Polonnaruwa at 4.5%, whilst it is only then that Hambantota is recorded at 5.4%, which is quite strange given the overall development that the latter has gone through in the recent past in relation to Anuradhapura and Polonnaruwa.    

Next steps

Validation of data of the performance of the Vavuniya District on the poverty index.

Update the data based on the latest census that will include the Northern Province.

Set a target for each indicator district wise.

Allocate resources (money from budgetary allocation) and investments based on the set targets as all districts cannot be developed at once.

Monitor the impact on consumer income and expenditure and evaluate how the development agenda is impacting the household at the grass root level.

Pick up the learnings and develop a longer-term development agenda (three to five years) so that the future landscape development agenda of Sri Lanka is clear.

This information is shared with the private sector so that an overlap will take place on one agenda.

The political and administrative hierarchy is allocated based on talent and challenge at hand at a district level.

This overall master plan is broken sector wise so that a sectoral development agenda comes to play.

This bottom-up exercise is married to the top-down approach so that it’s a balanced development plan.

(The author is actively involved in the development agenda in the country. The thoughts expressed are his own and do not reflect the offices he holds in Sri Lanka or internationally. He is an alumnus of the University of Harvard, Boston, and Fellow of the Chartered Institute of Marketing, UK.)