Low consumer spending due to the economic crisis was not the only issue that snacks players faced in 2023 as the falling exchange value of the Sri Lankan rupee, limited access to foreign currency, supply chain issues and interruptions to the power supply all posed huge challenges to industry players. On the consumer side, smaller packs became more popular as consumers looked to reduce their spending on snacks, while premium brands benefited from robust demand among more affluent segments.
While 2023 finally saw an end to the disruption caused by the COVID-19 pandemic, the economic crisis that first struck Sri Lanka during 2022 continued to have a significant impact on the operating environment across all categories of snacks throughout the year. The substantial devaluation of the Sri Lankan rupee led to significant increases in imported raw material prices and high inflation at local level, putting huge pressure on discretionary spending.
Supply chain disruptions continued to plague all fmcg industries in Sri Lanka throughout 2023, with sharp increases in raw material prices exacerbating pre-existing challenges relating to the procurement of essential raw materials for the production of all types of snacks. This came at a particularly inopportune time for industry players as demand patterns that that had begun developing during 2022 intensified, specifically the shift towards lower-priced brands and products in smaller pack sizes.
The impact of Sri Lanka’s deep and seemingly intractable economic crisis notwithstanding, 2023 saw key brand owners across virtually all categories of snacks continue to offer different products and brands that target consumers, usually but not always on the basis of income level. For example, in bulk ice cream, Ceylon Cold Stores (CCS) targets mass consumers market with the mainstream umbrella brand Elephant House.
Among the major impacts of the socioeconomic crisis on Sri Lanka during 2023 were major inflationary pressures and significant fuel price hikes and this led to substantial increases in the cost of transportation and logistics. As a result, the country’s entire snacks industry spent the entire year under considerable strain as margins were stretched to the limit.
Sri Lanka’s snacks industry is expected to continue facing major challenges in the short-to-medium term due to the current macroeconomic challenges that the country is likely to continue facing during the first half the forecast period, at least. The sharp increases that have already been seen in inflation and interest rates, combined with impending fiscal consolidation measures, are likely to result in a far more moderate and circumspect approach to discretionary spending among the majority of consumers and this can be expected to suppress growth in demand for non-essential items such as snacks in the short term.
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Understand the latest market trends and future growth opportunities for the Snacks industry in Sri Lanka with research from Euromonitor International's team of in-country analysts – experts by industry and geographic specialisation.
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