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Welcome, ladies and gentlemen, to today's presentation on the External Environment Analysis
of the Fast-Moving Consumer Goods (FMCG) industry in Sri Lanka post-COVID-19. In the next
few slides, we will delve into the shifts and transformations within this crucial sector. Our
agenda includes exploring the impact of the pandemic using strategic analysis tools such as
Porter's Five Forces and PEST+. To set the stage, let's begin with a brief overview of the FMCG
industry in Sri Lanka, considering its key players, market size, and its significance in the nation's
economy. Let's embark on this insightful journey together.
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Key Players and Market Size:

• Market Size: The Sri Lankan FMCG market is estimated to be valued at USD 7.5
billion in 2023, with an expected annual growth rate of 5.2% over the next five years.
• Dominant Players:
• Multinationals: Unilever Sri Lanka, Nestle Lanka, Cargill Foods Ceylon, Reckitt
Benckiser, Coca-Cola Beverages Sri Lanka.
• Local Champions: Sunshine Holdings PLC, Ceylon Biscuits LTD, Kelani Valley
Plantations PLC, Nawaloka Holdings PLC, Elephant House Private Limited.
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Importance in the Sri Lankan Economy:

• GDP Contribution: The FMCG sector contributes approximately 14% to Sri Lanka's
GDP.
• Employment Generation: Over 1.5 million people are directly employed in the
sector, representing 10% of the total workforce.
• Rural Development: The industry has a significant presence in rural areas, supporting
agricultural production and providing income opportunities.
• Export Potential: Sri Lanka exports a variety of FMCG products, particularly
tea, spices, coconut products, and processed food.
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Navigating the dynamic world of business requires understanding the forces shaping industry
competition. Enter Porter's Five Forces, a powerful framework developed by renowned business
strategist Michael Porter. It paints a clear picture of the key elements influencing an industry's
profitability and attractiveness.
Imagine a tug-of-war...
On one side, strong forces pull at a company's profitability, squeezing its margins. On the other,
strategic initiatives can counter these forces, creating a more advantageous position. Let's dive
into the five key players in this competitive tug-of-war:
• Threat of New Entrants: How easy is it for new companies to enter the market? Think:
high capital requirements, complex regulations, or established brand loyalty acting as formidable
barriers.
• Bargaining Power of Suppliers: Do suppliers hold the cards, dictating prices and terms?
Consider factors like supplier concentration, switching costs, and the availability of substitutes.
• Bargaining Power of Buyers: Who wields the purchasing power? Are buyers fragmented
and price-sensitive, or are they concentrated and demanding? Analyze buyer volume, switching
costs, and product differentiation to gauge their influence.
• Threat of Substitute Products: Can existing products be easily replaced by alternatives?
Think about technological advancements, changing consumer preferences, and the availability of
close substitutes.
• Intensity of Competitive Rivalry: How fierce is the battle for market share? Analyze
factors like competitor diversity, growth potential, and differentiation strategies to understand the
competitive landscape.
By understanding these five forces, companies can develop strategic maneuvers to gain a
competitive edge, navigate challenges, and ultimately secure success in their chosen industry.
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The Sri Lankan FMCG industry pre-COVID-19 exhibited a moderately attractive landscape with
moderate threats and manageable competitive forces. Strong brand loyalty, established players,
and entry barriers protected profitability. However, moderate supplier and buyer power, along
with the potential for technological disruptions and substitute products, highlighted the need for
continuous innovation and adaptation to maintain a competitive edge.
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Bargaining Power of Suppliers:

• Provide specific examples of supply chain disruptions due to COVID-19, like raw
material shortages or transportation delays.
• Quantify the increased cost of safety measures implemented by suppliers
(e.g., PPE, sanitation protocols).
Bargaining Power of Buyers:
• Highlight specific shifts in consumer behavior, like increased price sensitivity or
preference for specific product categories.
• Mention the growth of online grocery platforms and the impact on traditional distribution
channels.
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Threat of New Entrants:

• Elaborate on the economic uncertainties impacting new entrants (e.g., inflation, currency
fluctuations).
• Emphasize how existing players' rapid adaptation to changing consumer needs creates
additional barriers for new entrants.
Threat of Substitute Products:
• Provide concrete examples of the increased focus on health and hygiene products
(e.g., hand sanitizers, disinfectants).
• Mention any changes in consumer preferences towards organic or locally sourced
products.
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Understanding the Sri Lankan FMCG industry requires examining its external environment
beyond just competitors. The PEST+ framework offers a holistic approach, considering:
P - Political:
• Government policies: Supportive policies like tax breaks or subsidies for local
manufacturers.
• Political stability: A stable environment promoting investor confidence and economic
growth.
• Trade regulations: Import duties and tariffs impacting raw material costs and product
pricing.
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E - Economic:
• GDP growth: Stable economic growth translating to increased consumer spending power.
• Inflation: Fluctuations in inflation affecting raw material costs and consumer purchasing
decisions.
• Interest rates: Impacting investment in the industry and overall business costs.
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S - Social:
• Demographics: Ageing population impacting product preferences and demand for
specific categories.
• Urbanization: Growing urban population creating opportunities for modern retail
channels and convenience foods.
• Changing consumer values: Increased focus on health and wellness influencing product
choices and brand preferences.
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T - Technological:
• Digitalization: Growth of e-commerce and online marketing creating new distribution
channels.
• Automation: Adoption of automation in manufacturing and logistics potentially
impacting employment.
• Packaging innovations: Sustainable and eco-friendly packaging solutions gaining
popularity.
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Impact on the Industry:

The pre-COVID-19 PEST+ analysis reveals a generally supportive environment for the Sri
Lankan FMCG industry. Government policies, stable economic growth, and changing consumer
preferences presented positive opportunities. However, challenges persisted such as fluctuations
in inflation, rising raw material costs, and the need for technological adaptation.
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Political:
• Provide specific examples of government policies: Loan schemes, tax breaks, or
temporary regulatory easements implemented to support businesses during the pandemic.
• Analyze the impact of trade restrictions: Mention disruptions in imports/exports of raw
materials or finished products.
Economic:
• Quantify the economic downturn: Include data or statistics on GDP
decline, unemployment rate, or inflation rise specific to Sri Lanka.
• Elaborate on the effectiveness of stimulus packages: Discuss how government spending
or financial aid programs impacted the FMCG industry's recovery.
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Social:
• Describe specific changes in consumer behavior: Increased focus on hygiene, home
cooking, or value-driven purchases.
• Mention emerging trends: Growth of online grocery shopping, preference for local
brands, or increased demand for health-conscious products.
Technological:
• Provide concrete examples of accelerated digital transformation: Highlight increased
adoption of e-commerce platforms, contactless payment systems, or digital marketing strategies.
• Specify the adoption of contactless technologies: Mention the use of online
ordering, cashless payments, or delivery drones.
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Porter's Five Forces:

• Increased bargaining power of suppliers: Supply chain disruptions and safety measures
raise costs.
• Shifting buyer power: Increased price sensitivity, but online platforms offer growth
opportunities.
• Deterred new entrants: Economic uncertainties create higher barriers to entry.
• Heightened threat of substitutes: Focus on health and hygiene products impacts
preferences.
• Intensified competitive rivalry: Market consolidates, driving innovation and adaptation.
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PEST+ Factors:
• Supportive government policies: Aid packages and regulatory adjustments mitigate the
economic downturn.
• Economic challenges: Consumer spending remains cautious due to inflation and
unemployment.
• Social shifts: Increased focus on health, hygiene, and value-driven purchases.
• Technological acceleration: E-commerce, digital marketing, and contactless solutions
gain traction.
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The post-COVID-19 environment presents both challenges and opportunities for Sri Lankan
FMCG companies. To stay ahead of the curve, consider these strategic priorities:
Embrace Agility and Adaptability:
• Respond swiftly to changing consumer needs and preferences. Prioritize product
innovation and diversification to cater to health-conscious, cost-sensitive, and tech-savvy
consumers.
• Build flexible supply chains. Mitigate disruptions by diversifying suppliers, adopting
digital inventory management, and exploring local sourcing opportunities.
• Embrace rapid experimentation and iterate quickly. Implement data-driven decision-
making and pilot new marketing campaigns to optimize strategies.
Fuel Innovation and Differentiation:
• Invest in research and development to create innovative products. Focus on health-
oriented offerings, sustainable packaging solutions, and convenient formats.
• Leverage digital technologies to enhance customer experience. Implement e-commerce
platforms, personalized marketing campaigns, and contactless payment options.
• Build strong brand loyalty through differentiated communication strategies. Emphasize
brand values, local heritage, and commitment to social responsibility.
Prioritize Customer Centricity:
• Deeply understand evolving consumer preferences through market research and data
analytics. Segment customers effectively and tailor products and marketing messages to their
specific needs.
• Provide exceptional customer service across all touchpoints. Invest in customer
relationship management systems and ensure seamless online and offline experiences.
• Build trust and transparency with consumers. Practice ethical sourcing and sustainable
production, communicate product information clearly, and address customer concerns promptly.
Remember:
• Agility, innovation, and customer centricity are key to navigating the ever-changing post-
COVID-19 landscape.
• Embrace digital transformation and leverage technology to enhance operations,
marketing, and customer experiences.
• Focus on building strong brand loyalty and trust with consumers through differentiated
offerings and ethical practices.
By adhering to these strategic imperatives, Sri Lankan FMCG companies can not only weather
the challenges but also capitalize on the opportunities presented by the new environment.
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The Sri Lankan FMCG industry has emerged from the challenges of COVID-19 with a
transformed landscape. While uncertainties remain, a potent mix of resilience, adaptation, and
strategic priorities paves the way for a future brimming with possibilities. Companies that
embrace agility, prioritize innovation, and cultivate deep customer-centricity hold the key to
unlocking success in this new era. By leveraging technology, building vibrant brands, and
remaining attuned to evolving consumer needs, Sri Lankan FMCG players can not only navigate
the present but also thrive in the exciting chapters yet to be written. Remember, the future is
not predefined, it is shaped by the choices we make today. Choose agility, choose innovation,
choose customer focus, and choose to embrace the dynamic narrative of the Sri Lankan FMCG
industry.
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