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Nielsen LankaFebruary 2017
2016 THE YEAR THAT WAS
2
What is happening in Sri Lanka in general?
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NEWS THAT MATTERED IN 2016Both positive and negative news came in over the last 12 months
Source: Lankabusinessonline.comJ
UL
AU
GS
EP
OC
TN
OV
DE
C
JA
NF
EB
MA
RA
PR
MA
YJ
UN
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SRI LANKA GROWTH SLOWED DOWN IN 2016Services are emerging as the major sector while Industries saw a fluctuation in growth, coming mainly from Construction. Agriculture sector continues to show a decline
Source: Department of Census and Statistics, Sri Lanka
7%
27%
58%
8%
8%
30%
57%
5%
Services
Industries
Agriculture
Taxes Less Subsidies
Inner Circle
Q1’15
Outer Circle
Q3’164.4
7.05.6
2.5
5.2
2.74.1
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16
GDP Growth (Base Year - 2010)
-0.5
1.9 2.70.7
7.75.0
-6.0
2.24.8
-1.9
6.84.7
Agriculture Industries Services
GROWTH RATE % BY GDP SECTOR
SECTOR CONTRIBUTION % TO SRI LANKA GDP SRI LANKA GDP GROWTH RATE (VS SAME QUARTER LAST YEAR)
Q4’15 Q1’16 Q2’16 Q3’16 Q4’15 Q1’16 Q2’16 Q3’16
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MAJOR INDICES MOVED TOWARDS A WORRYING TREND The Colombo Stock Exchange declined 15%, Sri Lankan Rupee depreciated ~4% while Inflation and Interest Rates moved up
Sources: lk.duinvest.com (Colombo Stock Exchange), Dept. of Census and Statistics (Inflation); BBC Financial Data (Exchange Rate); Central Bank (Interest Rates)
COLOMBO STOCK EXCHANGE ASPI (JAN 2015 TO DEC 2016 TREND) INFLATION % (12 MONTH [ANNUAL] AVERAGE)
COMMERCIAL BANKS AVERAGE INTEREST RATES IN %USD-LKR EXCHANGE RATE
52 Week High:150.153, 52 Week Low: 143.9
0
4
8
12
16
Average Weighted Lending Rate Average Weighted Deposit Rate
-4
-2
0
2
4
6
8
Jan
'15
Feb
'15
Mar
'15
Ap
r'15
May
'15
Jun
'15
Jul'1
5
Au
g'15
Sep
'15
Oct
'15
No
v'15
Dec
'15
Jan
'16
Feb
'16
Mar
'16
Ap
r'16
May
'16
Jun
'16
Jul'1
6
Au
g'16
Sep
'16
Oct
'16
No
v'16
Dec
'16
Total Food Non Food
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THESE EVENTS & TRENDS IMPACTED CONFIDENCE LEVELS The highs on confidence from election results did not sustain with changes in tax policies and budget proposals. Business leaders expected more
Source: Nielsen Lanka CCI and BCI Surveys*BCI is based on survey of 100 Managers/Senior Executives or above in the city of Colombo carried out by Nielsen and is compiled through series of questions on business conditions and expectations
*CCI is based on survey of 100 respondents every month. From 2011 onwards Nielsen tracks the consumer confidence index every month among 100 consumers in Western, Central and Southern
provinces. Index is developed based on consumers’ confidence in the job market, status of their personal finances and readiness to spend.
0
50
100
150
200
250
Presidential Election 2015
Budget 2015
General Election 2015
Budget 2016
VAT Increase, Drought
Budget 2017, VAT Increase
BUSINESS CONFIDENCE INDEX TREND, CONSUMER CONFIDENCE INDEX TREND IN SRI LANKA
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CONCERNS DOMINATED MINDSPACE FOR CONSUMERS & BUSINESSESTaxes, policies, investments, job prospects were top of mind
Source: Word Cloud based on Nielsen Lanka Business Confidence Index and Consumer Confidence Index Survey
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WHAT ARE BUSINESSES SAYING ABOUT THE GENERAL ECONOMY?About 1 in 3 feel economy will improve in the next 12 months, while investment sentiments moved from ‘Fair’ to ‘Poor’
Source: Business Confidence Index Survey, Nielsen Lanka
32%
51%
49%
40%
Percentage of respondents who
see current investment climate
in the country as Fair or
Poor/Very Poor
Percentage of respondents who
expect Sri Lankan economy in
general to improve in the
coming 12 months
59% 59%
23%
40%
67%
24%
Economy Politics Corruption
Percentage of respondents
highlighting the three most
pressing National issues in
the current environment
Dec-1
5
Dec-1
6
Dec-1
5
Dec-1
6
Dec-1
5
Dec-1
6
ECONOMY PERFORMANCE INVESTMENT CLIMATE TOP NATIONAL ISSUES
Outer ring – Dec’16
Inner ring – Dec’15
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WHAT ARE LEADERS SAYING ON BUSINESS PROSPECTS?Lesser percentage of leaders are optimistic on business performance in 2017 and therefore wish to stall any workforce expansion. Taxes remain as biggest concerns
Source: Business Confidence Index Survey, Nielsen Lanka
39%
61%
27%
59%
14%
33%
Percentage of respondents
saying company planning to
Increase / Maintain / or
Decrease its workforce in the
coming 6 months
Percentage of respondents who
expect their business to get
better in the coming 12 months
86%
42%35%
83%
37% 29%
Taxes Inflation Interest Rates
Percentage of respondents
highlighting the three most
pressing issues for their
business in Sri Lanka
Dec-1
5
Dec-1
6
Dec-1
5
Dec-1
6
Dec-1
5
Dec-1
6
BUSINESS PERFORMANCE WORKFORCE EXPANSION TOP BUSINESS ISSUES
Outer ring – Dec’16
Inner ring – Dec’15
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WHAT ARE CONSUMERS SAYING?Consumers are concerned with the inflation and say they will delay plans of purchasing durables and reduce spends on utilities and telecommunication
Source: Consumer Confidence Index Survey, Nielsen Lanka
3%12%
32%
7%19%
40%
Political Stability Increasing Utility Bills2 Children's Education /Welfare
Percentage of respondents highlighting consumer concerns
Dec-1
5
Dec-1
6
Dec-1
5
Dec-1
6
Dec-1
5
Dec-1
6
CONSUMER CONCERNS SHOWING BIGGEST JUMPS OVER A YEAR
12%
26%
40%31%
0%
42%
17%26%
Food Items Household Durables Utilities Telecommunication
Percentage of respondents for change in consumption patterns
due to increase in VAT and Other Taxes
CONSUMER REACTION ON CONSUMPTION DUE TO INCREASE IN
VAT AND OTHER TAXES
Will spend LESS than before
Will spend SIGNIFICANTLY LESS than before
11
What are the trends in the Fast Moving Consumer Goods industry?
F G226 Bn LKR 259Thousand 7%
FMCG Value Sales in
General Trade for Sri Lanka,
Year 2016
FMCG General Trade
Universe in Sri Lanka, Year
2016
FMCG Value
Sales Growth in
Sri Lanka, Year
2016 over Year
2015
Source: Nielsen Sri Lanka, RMS Data, for All FMCG (33 Categories including Soft Drinks), from General Trade, Year 2016, New Universe Data
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INFLATION DROVE GROWTH IN 2016 AS CONSUMPTION SLOWED DOWNAfter a low inflation period in 2015, growth in 2016 is again driven by price increases. Consumption growth slowed down post a healthy first quarter of 2016
FMCG GROWTH TREND IN SRI LANKA, GENERAL TRADE
Source: Nielsen Sri Lanka, RMS Data, for All FMCG + Soft Drinks, from General Trade, excluding NP, Year 2016, New Universe Data
0.5%-1.1%
-1.0%-0.4% 1.1% 2.1% 2.5% 3.0%
7.8%
6.6%4.8%
5.9%
9.5%
3.9% 4.7%4.4%
8.3%
5.6%3.8%
5.6%
10.6%
5.9%7.2% 7.4%
Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16
Price change component Volume change component Overall growth
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INFLATION WAS LARGELY SEEN IN PERSONAL CARE AND OTCPrices of OTC products went up despite price control on some categories. Household Care Products see a decline in average price as low priced brands gain market share
Source: Nielsen Sri Lanka, RMS Data, for 25 Categories + Soft Drinks, from General Trade, Year 2016, New Universe Data
-2
+3
-1
+3Household Care Products
Personal Care Products
Food & Beverages
Over The Counter Products
AVERAGE PRICE OF CATEGORY IN 2016 INDEXED TO 2015
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CONSUMERS SEEK VALUE FOR MONEY IN LARGE PACKSWhile price benefits of Large Packs was sought by consumers, they also upgraded to higher price tiers across categories
Source: PACK SIZE ANALYSIS: Nielsen Sri Lanka, RMS Data, for FMCG excluding OTC (30 Categories), from General Trade, Year 2016, Old Universe Data
Source: PRICE POINT ANALYSIS: Nielsen Sri Lanka, RMS Data, for All FMCG (36 Categories including Soft drinks), from General Trade, Year 2016, Old Universe Data
42%
47%
11%
43%
47%
10%
SHARE OF PACK SIZES TO VALUE SALESInner ring 2015, outer ring 2016
% Change in Average
Price over Year Ago2.8% 2.2% -6.4%
SMALL MEDIUM LARGE
7%
76%
17%
10%
73%
17%
SHARE OF PRICE SEGMENTS TO VALUE SALESInner ring 2015, outer ring 2016
% Growth over Year
Ago-25% 12% 11%
LOW MID PREMIUMLow price Segment: Brand average price is equal or less than 80% of the category average pricePremium Segment: Brand average price is equal or more than 120% of the category average price
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COMMODITY TO BRANDING AIDED FOOD PRODUCTS, ESPECIALLY IN RURALRural growth picked up to a level higher than Urban after a few quarters, across categories
Value growth
over year ago
FMCG GENERAL TRADE IN SRI LANKA, SEGMENT WISE VALUE CONTRIBUTION AND GROWTH
Source: Nielsen Sri Lanka, RMS Data, for All FMCG + Soft Drinks, from General Trade, Year 2016, New Universe Data
68%
30%2%
FOOD NON-FOOD OTC
8.1% 5.9% 2.6%
36 36 36 38
64 64 64 62
FMCG FOOD NON-FOOD OTC
URBAN RURAL
(8.2%)
(8.0%)
(10.8%)
(3.3%)
(7.7%)
(-0.3%)
(8.9%)
(6.4%)
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Some Beverages grew on distribution while most categories growth was aided by higher per store off-takes
Source: Nielsen Sri Lanka, RMS Data, for All FMCG + Soft Drinks, from General Trade, Distribution growth is for Dec 2016 Vs. Dec 2015, and Value growth is for 2016 Vs. 2015 , New Universe Data
F&B
IMPULSE PRODUCTS
HOUSEHOLD CARE
PERSONAL CARE
OTC
DISTRIBUTION GROWTH WAS RESTRICTED TO SMALLER CATEGORIES
HOME INSECTICIDES
HAIR DYE
YOGHURT
DEODORANTLIGHT SNACKS
HOUSEHOLD CLEANERS
SHAMPOOS/CONDITIONERSSANITARY NAPKINS
RUBS & BALMSNOODLES
MILK CHOCOLATES
MOSQUITO REPELLENTS
PERFUMES/COLOGNESCREAMS & LOTIONS
FACE WASHMILK POWDERSOYA MEAT
BATTERIES
WASHING POWDERTOILET SOAP
TEA
SHAVING EQUIPMENT
BISCUITS
HAIR STYLING
TOOTH BRUSHES
WASHING SOAPSQUASHES & CORDIALS
CSD
MILK FOOD DRINKS
ANALGESIC / COLD PR
INFANT MILK FOOD
COOKING AIDS
MILK RTD
FRUIT JUICES
ENERGY DRINK
-10
-5
0
5
10
15
20
25
-15 -10 -5 0 5 10 15
TOOTHPASTE
DISTRIBUTION GROWTH%
VA
LU
E G
RO
WT
H%
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SOFT DRINKS WAS AMONGST THE FASTEST GROWING CATEGORIESIncrease in average summer temperature and higher per store off-takes helped Soft Drinks tide over the floods related issues and lower distribution
Source: Nielsen Sri Lanka, RMS Data, for CSD, General Trade, Year 2015 and 2016, New Universe Data
32 32 32 32
33 34
32 31
MAR15 APR15 MAY15 JUN15 MAR16 APR16 MAY16 JUN16
TEMPERATURE IN CELCIUS IN 2015 & 2016
# Summer temperature in 2016 was higher than in 2015
# The month of May saw floods all across the island
impacting distribution and stock levels
DISTRIBUTION IN THOUSAND STORES FOR SOFT
DRINKS 2015 & 2016
# Summer month distribution levels in 2016 were lower than
2015
# The floods in May and June 2016 also impacted stock
availability
PER DEALER OFFTAKES IN LITERS FOR SOFT DRINKS
2015 & 2016
# However, the per-store off-take went up in 2016 to cater
to higher temperature and stock issues in summer months
140145 144
140 139 142136 135
MAR15 APR15 MAY15 JUN15 MAR16 APR16 MAY16 JUN16
101118 110 104
129145
126100
MAR15 APR15 MAY15 JUN15 MAR16 APR16 MAY16 JUN16
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CHEMISTS AND COSMETIC STORES EMERGED AS GROWTH CHANNELSTraditional Grocers remain the main channel. Chemists and Cosmetic Stores emerge as options for the upmarket consumer offering a better, premium range of brands. Modern Trade is around 15% of the market
12-15%
Contribution of
Modern Trade to All
Island FMCG Sales
estimated through
secondary sources
Value Growth of
channels types, 2016 vs.
2015
FMCG GENERAL TRADE IN SRI LANKA, CHANNEL WISE CONTRIBUTION AND GROWTH
Source: Nielsen Sri Lanka, RMS Data, for All FMCG (33 Categories excluding Soft drinks), from General Trade, Year 2016, New Universe Data
60%
79%
1%
7%
11%
5%26%
7%
Contribution toFMCG Store
Universe
Contribution toFMCG Sales
5%
13%
-3%
2%
30%
GROCERS
CHEMISTS
RESTAURANTS
OTHERS
COSMETIC STORES
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GENERAL TRADE CAME BACK AS MAJOR CHANNEL FOR FMCG PURCHASESemi Wholesalers, offering a significant discount over market price, are the main channel for about a fourth of the population
Source: Nielsen Sri Lanka Survey, 2014, 2015, 2016
21% 23%19%
54%49%
56%
21%24% 23%
2014 2015 2016 2014 2015 2016 2014 2015 2016
SUPER MARKET / CHAINS GENERAL TRADE STORES SEMI WHOLESALE STORES
PERCENTAGE RESPONDENTS USING DIFFERENT CHANNELS AS MAIN CHANNEL FOR REGULAR FMCG PURCHASE
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SRI LANKS ROSE ON THE ATTRACTIVENESS INDEX FOR MODERN RETAILINGSmall format stores in are expected to drive Modern Retailing growth in Sri Lanka in line with retail trends in APAC
Source: Global Retail Development Index, AT Kearney analysis 2016
18
14
12
2015
2016
2014
Sri Lanka
Ranking
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THE FMCG INDEX ON COLOMBO STOCK EXCHAGE DECLINED ~ 5% However, the FMCG market grew about 9% in value as large local companies saw healthy growth in sales
Source: Nielsen Sri Lanka, RMS Data, for All FMCG (38 Categories), from General Trade, Year 2016, New Universe Data
BEVERAGE, FOOD AND TOBACCO INDEX: CSE 2016 VALUE GROWTH FROM TOP 10 FMCG COMPANIES(Ranking 1-10 from left to right), NIELSEN RETAIL Audit Data (GT)
Blue bars indicate the company is listed on CSE
4% 6%11%
1% 1%5%
23%
7% 5%
35%
MN
C
Lo
ca
l
MN
C
MN
C
Lo
cal
MN
C
Lo
ca
l
Lo
ca
l
Lo
ca
l
MN
C
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LOCAL COMPANIES GAVE 2/3RD OF THE INCREMENTAL FMCG SALESWhile they account for about 55% of the sales share, local companies accounted for 67% of incremental sales over two years – driven by both distribution expansion and per store sales growth
Source: Nielsen Sri Lanka, RMS Data, for All FMCG (38 Categories), from General Trade, excluding NP, Year 2016, Old Universe Data
45%33%
55%67%
Share of FMCG Sales 2016 Share of Incremental FMCGSales, 2016 vs 2014
MNCs LOCAL
0%
2%
5%
9%
MNC Local
Distribution PDO
MNC VS LOCAL COMPANY PERFORMANCE IN FMCG DISTRIBUTION PERFORMANCE CAGR, 2016 VS 2014
24
News from other sectors!
M i
Source: Nielsen Sri Lanka Survey 2016, amongst age group 16-60, All Island, All SECs
92%Mobile penetration in
Sri Lanka, Year 2016
28 %Smartphone penetration
in Sri Lanka, Year 2016
32%Internet penetration in
Sri Lanka, Year 2016
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32%
68%
21%
79%
ABOUT A THIRD OF SRI LANKA NOW HAS ACCESS TO INTERNETInternet penetration grew significantly in last two years and penetration of smartphones has helped this growth
Source: Nielsen Sri Lanka Survey 2016, amongst age group 16-60, All Island, All SECs
INTERNET PENETRATION, SRI LANKA 2016
Inner circle 2014, Outer circle 2016
13%
DONGLE
86%
MOBILE
6%
ADSL
MEDIUM OF ACCESS FOR INTERNET, SRI LANKA 2016
Some use multiple means
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DATA WILL REMAIN FOCUS FOR GROWTH IN TELECOMLike Global Trends, data consumption is increasing in Telecom and service providers will do well to come up with attractive options to ride this trend
Source: Colombo Stock Exchange, *Nielsen Sri Lanka Survey 2016, amongst age group 16-60, All Island, All SECs
TELECOMMUNICATION INDEX: CSE
11%
23%
9%
18%
5%
16%
20
14
20
16
20
14
20
16
20
14
20
16
Social Media Browsing You Tube
USAGE OF MOBILE DATA FOR DIFFERENT PURPOSE*
cF a~85% 12% 5%
Bank account penetration in
Sri Lanka, (amongst adults, Year 2015-
16)
Credit Card
penetration in Sri
Lanka, Year 2016
Online banking
penetration in Sri
Lanka, Year 2016(amongst those using any banking
service)
Source: Nielsen Sri Lanka Survey, 2016, amongst age group 20-60 years, SEC A, B, C & D
esliVe-57%
New Registrations in ‘000 of
Motor Vehicles in Sri Lanka
Growth of new Motor Cars
registration, 2016 vs. 2015
Source: Motor Vehicles Department, Sri Lanka
Growth of new Motor
Tricycles registration,
2016 vs. 2015
-56%327
430
669
493
2013 2014 2015 2016
30
Who is advertising and where in Sri Lanka?
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TV CONTINUED TO RETAIN LION SHARE AS DIGITAL EXPANDS GLOBALLYDigital commands almost a 1/3rd share of Ad spends globally. In Sri Lanka, Radio has a significant share
Source: Global Ad Spends – ZenithOptimedia, Sri Lanka Ad Spends Nielsen Lanka Ad Tracking Solution, Internet includes wired and mobile
Total spends
2016 LKR
90bn
5%Growth year
on year
TV share
70%Radio share
22%Print share
8%
37%
32%
18%
6%
7%1%
39%
24%
22%
7%7%
Television
Internet
Radio
OOH
Print Cinema
SHARE OF GLOBAL AD SPENDS BY MEDIUMInner ring 2014, outer ring 2017
SRI LANKA AD SPENDS LANDSCAPE*Excludes OOH, Internet, Cinema
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RADIO AND PRINT CONTINUED HEALTHY GROWTH IN SRI LANKAAs newer sectors (BFSI, Luxury Brands) grow, Print media enjoyed high growth. Radio helps drive tactical promotions and messaging
Source: Sri Lanka Ad Spends Nielsen Lanka Ad Tracking Solution
Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16
TV Radio Print2%
14%
11%
SRI LANKA AD SPENDS TREND BY MEDIUM SRI LANKA AD SPENDS GROWTH 2016 VS. 2015
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TOP 3 SPENDERS REMAINED FMCG, FINANCIAL SERVICES AND TELCOFMCG spends accounted for almost half of TV spends while Financial Services spent on Radio and Print too
Source: Sri Lanka Ad Spends Nielsen Lanka Ad Tracking Solution
14%
36%
10%
11% 12%9%
FinancialServices
FMCG Telco
10%
45%
10%
24%
17%
13%
17%
9%
5%
SRI LANKA AD SPENDS 2016, SHARE OF SECTORS BY MEDIUM
TOTAL TV RADIO PRINT
GROWTH IN AD SPENDS BY SECTORS, 2016 VS 2015
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• GDP growth slowed down in 2016
• Policy uncertainty impacted Business Confidence
• Consumers are cutting down consumption on
account of inflation
• FMCG growth in high single digits, inflation
picks up again
• Consumers look for ‘Value for Money’ but adopt
premium products at the same time
• Chemists emerge as a growth channel
• Local companies drive growth
• Internet penetration and Smart phone usage
continues to grow
• Online banking still low on penetration
• New Motor Vehicles registration dropped in 2016
• Television continues to be the major advertising
medium but Radio and Print grow faster
• Financial Services and Telecom Service providers
are major Non-TV advertisers
2016 S RI LANKA
UMMARY
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• Fiscal consolidation will continue for Sri Lanka
• There will be short term pain but Businesses and
Consumers would do good to be patient for the
benefits to come in
• Specialist Channels will continue to grow in Sri
Lanka
• Local, regional players will emerge as
competition and growth drivers
• Data penetration and consumption will continue to
grow, also enabling Online banking and shopping
• Taxes, duties and registration policy will define
growth for vehicles
• Digital media will become more and more important
• DTH channels will see higher penetration and share
of TV spends
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Research helps uncover and manage uncommon shifts!!
CONSUMERIZATION:How to organize around
consumers by building a
proprietary understanding
about the brand’s most
profitable consumers and
then activating across the
entire business system
against these segments
SALES
EFFECTIVENESS: How to activate
plans through
superior sales
execution, effective
assortment and
integrated price and
promotion decisions
INNOVATION: How to improve the
brand’s innovation
success rate: identify
white spaces and
unmet needs, develop
better products faster,
and increase launch
performance
MARKETING
EFFECTIVENESS:How to engage
consumers through
effective and
efficient marketing
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