Compiled by Yamini Sequeira
HOW TO SURVIVE AND THRIVE
Shaminda Perera urges the local businesses to be cost-effective and agile
Q: What are the challenges facing the fast-moving consumer goods (FMCG) sector presently?
A: The FMCG sector has faced numerous challenges due to the depreciation of the rupee, the shortage of foreign currency and restrictions on raw material imports.
These factors have adversely affected the value chain cycle of FMCG goods. As a result, businesses are under pressure to deliver on key performance indicators (KPIs) – especially profitability.
Q: In the prevailing environment, do the same marketing rules apply or are businesses trying to innovate?
A: Innovation plays a key role when navigating difficult times. This is true for any industry or sector.
Responding to consumer needs innovatively will help create sustainable goals. Business innovations may come in different forms such as sizing, pricing, bundled packs, customer value offerings and so on.
Q: Has there been a substantial increase in online sales?
A: Since internet penetration covers 50 percent of the population and smartphone usage is at an all-time high, consumers are certainly shifting to online buying.
This has been an emerging trend for the past several years and pandemic related lockdowns acted as a catalyst in driving this shift. Coupled with the recent economic hardships, consumers are seeking more value for money products in the FMCG category.
The e-commerce sector is relying heavily on providing greater discounts than other channels and making it a timely solution for consumers. In turn, this creates opportunities for the FMCG sector. Therefore, it’s vital for all FMCG businesses to make e-commerce an integral part of their marketing strategy.
Q: Are there more obstacles ahead for the sector?
A: The aggregated decline in demand for nonessential products is a major challenge as some consumers are dropping out of certain categories altogether. In response, FMCG businesses need to penetrate new households and introduce fresh brands along with consistent supplies, access to quality products and affordability.
There is a pressing need to reduce overheads where possible by tracking KPIs closely and eliminating fruitless marketing endeavours. Businesses need to improve efficiency, cut costs and increase agility.
Most importantly, they need to be proactive rather than reactive to consumer needs.
Q: The sustainability of resources is becoming a key priority. In your view, which segments of the FMCG sector need to focus on sustainability?
A: A key priority for business sustainability is the creation of durable and long-lasting outcomes by understanding consumer needs better.
Some key initiatives are reusable packaging, environmentally-friendly initiatives and so on. Most FMCG businesses continue to carry out sustainable projects to give back to the community.
It may seem counterintuitive that spending more money on sustainable business practices can boost profitability but studies show that the most sustainable enterprises are also the most profitable.
The practice of embedding sustainability in business practices has increased since the COVID-19 pandemic. Studies show that one in five consumers have acquired more sustainable habits since the advent of the pandemic.
With this in mind, FMCG businesses are ramping up their sustainability efforts to keep pace with consumer demands and reap the benefits that follow.
Q: So how do you see the year unfolding for the sector?
A: The FMCG sector will see a stronger recovery this year.
Gradually reducing year on year inflation and its positive impact on the price of essential goods, and the appreciation of the Sri Lankan Rupee, are building positive momentum so that consumers can enjoy improved purchasing power.
However, a majority will continue to be on the lookout for value offerings such as discounts, smaller pack sizes and value buys in line with what is now a thrifty mindset.
With foreseen improvements in the import sector due to the recent relaxing of bans on selected items, supply chain limitations will ease and consumers will once again enjoy more choices.
But this will create a competitive market environment – especially for local players who enjoyed an advantage of sorts until recently – and businesses may have to reduce prices to remain competitive.
Essential products will enjoy an upsurge while the need for nonessentials will also grow once economic conditions stabilise to some degree. Although businesses may not see an exponential increase in volumes, most will likely be able to sustain their operations.
Brands will need to be extra-cautious about ‘shelf off-take’ in the coming months. They should focus on solidifying their digital footprint by staying socially networked and building a strong online retail presence. Connecting with buyers by using multiple touch points along the consumer journey is very important.
Building purpose driven brands, personalisation, sustainability and improved customer experiences are booming trends in the global arena.
Since the market dynamics are still volatile, being cautiously optimistic is the way to go. Agility, innovation and understanding consumer sentiment will determine whether brands survive or thrive.