- Former Swadeshi, Delmege CEO Dr. Nuwan Wimalana says
By Uwin Lugoda
The Covid-19 pandemic has drastically changed the local fast-moving consumer goods (FMCG) industry prompted by changes in consumer behaviour. FMCG companies are now faced with the task of reskilling their staff and coming up with new strategies to capture the market.
To get a better idea on the current situation, The Sunday Morning Business sat down with industry veteran Dr. Nuwan Wimalana to discuss the current state of the industry and what companies must do in order to return to their pre-Covid sales numbers.
Dr. Wimalana is the former CEO of Swadeshi Industrial Works PLC and former Director/Group CEO of Delmege Forsyth and Co. Ltd. and has also held senior management positions at Nestle, including a two-year assignment with Nestle Malaysia, and Coca-Cola Beverages Sri Lanka Ltd., including being the Deputy Country Manager of Coca-Cola Nepal. He also held the position of Vice President of the Sri Lanka-Australia-New Zealand Business Council under the Ceylon Chamber of Commerce from 2015 to 2019.
Currently, he is rendering his services as the President of the Detergent Manufacturers Association of Sri Lanka and a member of the Academic Committee and the Education Reform Committee of the Sri Lanka Institute of Marketing (SLIM), and also works as a business consultant, independent director, and a visiting lecturer.
Below are excerpts of his interview with The Sunday Morning Business.
Have sales regained the momentum they lost during the Covid outbreak?
If you look at certain sectors of the industry, then definitely. The latest report by American information, data, and measurement firm Nielsen Holdings identified certain categories which have really grown even pass the pre-Covid environment. These include things like mosquito repellents and pre-dessert mixers. However, when you look at other sectors such as soft drinks and personal care products, these have not come back to the level they were before the outbreak. This is mainly because during the Covid period, people were at home and did not pay too much attention to things like personal care, so these are yet to recover.
If you look at the FMCG sector in general, I would say a majority of the local companies have been able to recover from the problems they had during Covid. However, what I find is that in many categories, these FMCG companies had problems in their pipelines. This is mainly due to companies being unable to manufacture and distribute these products, and the products already with the distributors and in the outlets were selling out. A lot of these companies are still finding it difficult to meet the demand because their pipelines are yet to be filled.
I think most of them were filled to a great extent by the end of July, but even now I find certain categories not being able to fill their pipelines to the level they were at before Covid.
How can companies go about fixing this issue?
Capacity is currently the biggest issue. This is because you cannot increase capacity immediately, and most of these companies are dependent on various raw materials which are imported and are not coming in as expected. So many of them are struggling to meet this demand.
One way around this issue is by increasing their production capacity by working extra days in the week, working in different shifts, as well as subcontracting certain products to the people who do not have strong brands or excess capacity. I see some companies doing this to an extent, but they need to do more to ensure the market pipelines are filled to the same extent it was before the outbreak.
How has consumer behaviour changed post Covid?
It is difficult to predict for certain categories, but we believe it has led to a fall in sales for certain categories. For example, if you take something like car care, their sales have really come down because people are now prioritising their needs, so only certain sub-categories from the FMCG sector are impacted from this change in consumer behaviour. I feel that consumers are still reluctant to spend money on what they think of as luxuries, because they want to ensure that if something like Covid happens again, like a second wave, they have enough stocks and cash in order to mitigate that.
How can luxury brands better adapt to this environment?
These luxury brands will still have their market because those are the brands aspired by the people and people still want to go buy them. But the main problem is faced by the international brands; they can’t come in any longer due to government policies. I think this is really good for the local industry, but the local companies need to understand that from each category, around 10-15% is occupied by luxury brands, so the local companies manufacturing similar products need to ensure they fill this vacuum. They need to close this gap in the market by keeping an appropriate price gap the consumers can fall to, because these consumers will not fall from luxury to the lowest – they will fall somewhere in the middle, so they need to be caught at the right level.
As for the local luxury brands facing problems in making sales and getting their revenue to what it was before, they need to look at various strategies on how to ensure that the consumers buy their products through the various marketing strategies.
What are your thoughts on the ‘buy local, support local’ concept the Government is prioratising?
I think it is an excellent concept; this is how most countries have grown their economies. However, I feel we should not go back to the era of 1970 to 1977 where they restricted certain brands without developing them in our country first. Therefore, all these controls on imports should happen while developing our local supply, because you cannot stop and let the local industry die, and let local companies collapse. It should be a process, with a clear timeline and strategies to ensure we develop those products locally up to the same quality of the imported products and competitive pricing.
Has Covid been a catalyst for the digitisation of the sector?
This has been a real catalyst because it helped make the change, which was a long overdue. But if you look at digital sales now, they have already started to come down from what it was during the outbreak. However, this has opened people’s eyes to the option of digital, so I think it will grow, but not at a really high pace. We see a lot of these digital companies coming down now because people went back to their normal behaviors of going to shops, touching and feeling the products before buying.
So Covid was a blessing in disguise for digital companies to ensure people at least know this option is there. Now they just need to market it and show consumers a benefit, applying strategies to ensure the consumer behaviour continues.
What kind of skills do sales professionals need in this environment?
Digital skills means they need to understand IT – you have to learn it – because now the market is becoming more educated and the consumers are more digital. So the sales people will not be able to perform in their market if they don’t have the knowledge in the digital sphere. Most companies have already gone digital. You do not see them carrying bill books and pens; they have laptops, tabs, and smartphones.
So the knowledge on using modern technology is something all sales people need to develop because in the time to come, if you do not know how to handle them (modern technologies), you will be discarded from the market.
Should companies take time to retrain their staff?
Most big companies have already taken this step, but from what I see, there are still certain employees in these organisations who have been there for a longer period and are not digitalised. The younger generations are used to it and join these companies with that knowledge of digital, but the older people – the companies are going to have to invest more and ensure these people become digital savvy to stay in the organisation. This is both a medium and long-term investment.
Did Covid level the playing field in favour of smaller companies?
In certain instances, yes, but the strong brands are still strong and have the additional advantage over the little-known brands in the market. However, if you look at the physical environment, smaller brands were able to make their products more visible to consumers.
How can the Government support the sector?
The FMCG sector in the country is our biggest sector, so the Government should ensure the tax structures are transparent and permanent for longer periods. The problem we all face is that there is a changing tax structure which changes very rapidly and we have to change our prices at the same frequency. It’s difficult to do that in this sector because consumers get to a certain price point and we cannot increase beyond it. Therefore, we want them (Government) to keep the tax structures for a longer period of time and not to change them with every year’s budget.
The second thing is that we need support from the banking sector. A lot of FMCG companies are dependent on a long cycle of manufacturing, so the cash flow cycle is long. Therefore, the Government must ensure these companies (banking sector) support these companies (FMCG companies) with buying machinery and when it comes to working capital, with a lenient interest rate.
Another problem we face is a lack of human resources. I do not see anywhere in Sri Lanka that develops the sales personnel as a profession. This is a problem all companies are facing; they do not have quality sales people, so there needs to be some arrangement to attract people to the profession, have them trained, and pass them to the private sector. So I think the Government needs to support it with the various youth programmes they are conducting.