1.

0 Introduction

In agriulture, agribusiness is a generic term that refers to the various businesses involved
in food production; including farming, seed supply, agrihemicals, farm machinery,
wholesale and distribution, processing, marketing, and retail sales. The term agri business
has two distinctly different connotations depending on context
Within the agriulture industry, agribusiness is widely used simply as reffering to the range
of activities and disciplines encompassed by modern food production. On the other hand
the term has used in academic degrees, in departments of agribusiness, agribusiness trade
associations, agribusiness publications, and so forth, worldwide.

The Sri Lankan agriultural sector said to be changing gradually due to various reasons
and one factor is the changing consumer profile in the country. How ever this change is
not fast but very slowly happening given the poor economic and political system which
the country is having for decades.

Demographics

Sri Lankan population of almost 19.668* million residents grows at 1.0* annually.
• Immigration to Sri Lankan has traditionally been very low, and as a result the
population can be characterized as homogenous. Though there are different cultures
of multiethnic communities mainly the Muslims, Tamils, Sinhalese.
• Sri Lankan has the life expectancy 60-65 years years.
• The population is aging rapidly. The numbers of people over 55 were increased from
7.2%(Percentage of total population) in 1963, to 13.8 %%(Percentage of total
population) in 2003/2004.
• Over 40% of total residents are estimated to have middle class spending power.
• Over 7394039 million residents make up the Sri lankan labour force. Almost 66.7%
of male and 31.5%were female.
• Sri Lanka has a GDP growth rate is 7.7 % in2006
• Sri Lankan unemployment rate is fluctuating over the time 7.9% in 2001 and 7.7 %
in 2004.

Consumer Profile

Attitudes
• Sri lankan consumers are becoming educated about food and are increasingly aware
of food safety issues.
• Younger Consumers tend to "eat with their eyes," viewing food as art and are looking
for aesthetically pleasing products when shopping.
• "Harmony" and "Nature" are important concepts in regards to food consumption.
Food must be in "harmony" with "nature" as well as the consumer and surrounding
foods (side dishes).
• It is accepted that the key to a long life is good health care and healthy eating.

Eating Habits
• A typical Sri lankan breakfast includes bread/bun, rice, egg, hoppers/string hoppers
etc.
• The most common dinner foods are meats, fish, vegetables and rice.
• Lunch is typically prepared inside the home; however with the growing female
employment prepared foods purchased at restaurants or convenience stores are
becoming common.
• Snacking throughout the day is not yet common; although, western influences are
increasing snacking habits. Males are more likely to snack than women.
• Due to the proximity of retail outlets, rural consumers eat most meals at home and
make fewer trips to purchase groceries.
• Sri lankan soft drinks mostly consist of carbonated drinks and fruit based, with
growing popularity in sugar-free and ready made drink products.

Lifestyle Implications
• Despite busier lifestyles, Sri lankan consumers are focusing on consuming healthier
foods to help maintain a slimmer image.
• The average number of calories consumed in a day by Sri lankan consumers is xxx,
• Younger people seem to be adopting a westernized diet, while older adults, especially
in rural areas stick to the traditional Sri lankan diet.
• Increasing rates of diabetes, heart attacks, drives the health food industry, and the
desire for consumers to adopt a healthy lifestyle.

Spending Habits

General
• Food purchase is the largest expenditure category in a Sri lankan household.
• Consumers often purchase foods on a daily basis, searching for the highest quality
products (shopping at supermarkets) at several outlets are becoming common.
• General merchandise stores are growing in popularity, providing product selections
for one stop shopping.
• Teenagers (18-25 years) spend a significant portion of their money on social and
leisure activities, including dining out.
• Although Sri lankan consumers are generally price sensitive, they are willing to pay
for quality, convenience, and brand name products.

Trends
• Consumers with higher disposable incomes are willing to pay for new health products
including organic foods, which come at a price premium.
• Western influence coupled with a desire for convenience is increasing demand for fast
foods and prepared meals. Convenience is a driving force in restaurant sector growth.
• Packaged, frozen, preserved and processed food demand is increasing, and is
primarily purchased from supermarkets and convenience stores.
• Due to its high protein content and law price, Chicken consumption is increasing
faster than vegetable consumption.
• Bottled water is making gains in the Sri lankan market; however tap water is
preferred, most people are unwilling to pay for it.
• In cities like Colombo and Kandy there is a driving demand for home delivery meals
e.g pizza, KFC etc. This niche market will continue to grow as the majority of the
population ages in years to come.

Import Situation
• Importing a total of 1,980.00 U$ million of agri-food products,
• Popular imports include: rice, sugar, dhal, fruit, dairy products, etc

As a developing country Agri food business are not much developed but the potential of
developing a sustainable market for Agri products are remaining with around 90%
population of the island who are demanding for their essential food requirements. Sri
Lankan consumers are not still concern about processed agri products rather than
demanding for unprocessed agri products, because of the influences of value system of
the country.

The total food market is estimated as 58,756 million rupees, and the different cultures of
multiethnic communities mainly the Muslims, Tamils, and the majority of Sinhalese
demanded for different food products but it does not confused the basic demanded nature
for food items in the island. The unsolved problem in the agribusiness of the country is
the unstructured food supply chain which is concentrated for few geographic/ Agro
climatic regions of the island, there are few buying centers (Colombo, Dambulla)
operating in the island and the retail buyer is dispersed away from these operation which
they are demanding for.(ex, fish and dry zone crops). The new concept of supermarket
chain of the country answered this question clearly, demand of the consumers were
sufficiently filled by the supermarket food items. Most of the supermarket chains were
filled with imported agri products and it is a real challenge for the development of the
agribusiness sector in the island where Sri Lankan products have to compete for finding a
supermarket shelf against strong brands such as Kellogg, Heinz, etc..

The changing consumer profile and its Implication on agribusiness

The urban population of Sri Lanka is around 9,031,636 (2004) they all are not demanding
for more innovative agri food products. The awareness of those consumers about those
products were limited they were demanding for more traditional type of foods based on
rice, wheat flour and cereals. With the industrialization of the island development of
Export Processing Zones in different regions the phenomenon of labor migration is
happened in 1980’s, and this resulted a development of colonizes around these Export
Processing Zones and the urbanization of these areas creates a societal change in the
island and changed the consumer demand for more easy to consume food items which
added a ‘take away concept’ to the society. Still the consumers are not demanded for
more Organic food products because of the lack of awareness as well as the availability
of the such products in the food supply chain is limited.
The consumer base of Sri Lanka is consist with an aging population with a life
expectancy of around 60-65 years, the growth rate of the population is about 1% most of
the families bear one or two kids and the age below 5 years population is around 15%
which demanded for few amount of baby foods and more on healthier foods and
medicines for those aging population. The statistics shows the 14% of Sri Lankan
population is diagnosed as diabetic patients and around 12-14% are suffered from heart
diseases this condition creates an opportunity for healthier products that cares for more
health convenes attitudes. With the food poisoning in different urbanize areas and
frequently happened epidemic diseases of diarrhea opened the eyes of consumers for food
safety issues which are very primitive in Sri Lankan contexts. Apart from these the
tourism brings around 36,377 million rupees(2005) individuals to the island annually.
That creates a volatile niche market in the island for agri food products those which are
tourist were demanded for but the traditional food products are the main concern of those
consumers.
The per capita income of the island is around Rs 50,000.00 and around 10% of the
consumers have the higher purchasing power who are demanded for more sophisticated
food items available while others are demanding for those products seldom, so these
situation creates a slow development in agri business. According to the statistics the
engagement of women to the employments increases the weight of the consumer basket.
But it does not influence the development of agri food production of the island.
Consumers are demanded for more easy to consume meals that was provided by the take
away stores of the island. Sri Lankan consumes three main meals per day and in between
they consume snacks and tea. Most of the Sri Lankan consumers are eating rice, cereals
and wheat flour based products followed by root crops, expect those staple food items
consumers are demanded for fish, beef, chicken fruits and vegetables. Consumers prefer
to consume more convenience meals while lack of time and desire to prepare meals in
their homes. But this habit is not invading the rural areas of the island and consumers
basically depend on traditional agri food products which are mainly prepared on their
own. The staple foods and other agriultural products such as tea and other fruit based
products and palm based products were still not developed towards a sustainable market,
expect tea. Sri Lankan consumers are aware about health issues which were resulted
through the life style of the consumers.

2.1 Agri- Business system of Sri Lanka.

The consumer profile of the island is the main influence to the development of the Agri
food business in the island. Apart from the development of the industry the existing gap
created through the consumer expectations were filled with the imports of agri foods.
Agri products imported such as Dairy products (milk powder and cheese) rice, onions
potato and fruit based products (fruit juices, apples and oranges) imported mainly from
Denmark, NewZeland, Australia, Pakistan and India. These imports supply chain was
absorbed by the supermarket chain and the Co-operative channels of the country, ex.
Cargills food city, Keels super etc. total amount of agri food imports is worth 1,980.00
U$ rupees. With the inflationary situation of the country and the tariff duties reflect the
prices of the product much higher. So the consumers who had more spending power
consume those food items.

2.2 Animal based products,

2.2.1 Dairy products
The available types of dairy products in the island are processed milk and the raw milk.
Among the processed milk, milk powder, cheese, yoghurts and the sweeten milk are
available in the market. Among the consumers most of the rural consumers consumes the
raw milk while the consumers in the urban areas consumes processed milk. That is
mainly due to the unstructured income distribution of the country and the lack of the
development of distribution channel of the processed milk products to the rural areas of
the island. As far as this ill supply chain the processed milk business is not saturated in
Sri Lanka. Because of the production capacity of the milk is not developed to suite the
capacity demanded. The unstructured supply chain of the island confuses the customer in
the urban areas because of the number of brands available in the super market shelves.
The main Sri Lankan produced powdered milk brands are Highland , Nestle and
Kotmaley dairywhile all the other brands were imported. To fill that gap in the dairy
products the amount demanded on raw milk as well as the capacity of the processing
plants are not enough. The next processed dairy products such as cheese and yoghurt, the
main players in this industry are Newdale, Highland and lucky yoghurt manufactures and
few small farm associations. Most of the time these processed milk products can mapped
in between normal and luxury food items in some of the customers of the island and most
of the time due to the lack of availability of raw milk it is considered as a normal food
item. This is happened due to the income distribution pattern of the island. When
considering the elasticity of demand income of individuals, price of milk powder packet,
price of substitutes affect to the milk powder demand of consumers. So the elasticity of
demand for those products lies in between ‘0-1’, incase of the middle class income
earners and it is ‘0’ elasticity for most of the upper level income earners and it is negative
for the lower level income earners of the island. The milk products are imported from
Newzeland, Denmark and Australia worth of 13,401 million rupees annually.

2.2.2 Meat and Fish based products.

As an island Sri Lanka has a wide range of potential fish harvesting area around the sea
and in some of the inland reserves, the main reason is the under developed supply chain
in the island that lead not to meet the demand expectations. The main fish markets are
limited to the few harvesting harbors of the island such as Negombo, Chilaw, Manner,
Bentora, etc.. Due to that ill supply chain the technology is also not developed to harvest
the fish around the island. So to full fill that demand expectation canned fish was
imported to the island mainly from Chilie worth of 76,000 ton(whereas local production
is about 300,000 tons) annually the imported canned fish dried fish and Maldives fish are
totally absorbed to the super market and Co-operative channels of the island. This canned
fish is a good alternative for the changing busy lifestyle of the consumers because of it’s
ready to cook mode. But except few income categories as well as few fish varieties this is
known as a normal good. Elasticity of demand lies between ‘0-1’.
The elasticity of demand on fish and the unavailability of this category the chicken
industry become as a threatening factor, chicken processors used this as an opportunity
and established more chicken processing plants in different regions of the island which
supported with a good distribution facilities of the industry. As well as the main
processors and the small scale manufactures brings the chicken processing industry more
saturated within short time period, and they used a lowering the price as a tool to
penetrate in to other players market share while the product is remain without
differentiations. Chicken products become a complimentary product and the demand for
other animal products such as Beef, Mutton, limited to a niche market in the island well
supported by the religious beliefs. So these products are fallen to a category beyond the
normal food items, the price of these products increased with the limited number of
consumes.
With the growing concern on the chicken processing industry more quality concerns on
that product was developed such as HACCP and SLS standards. This becomes more
demanded by the consumers when purchasing decision is made. Different packaging
types such as vacuum packaging and Cryopack packaging concepts were introduced to
increase the quality of the products.

2.2.3 Fruits and vegetables,

The fruits and vegetable market shows a perfect competitive market, Sri Lanka has a year
round production in vegetable and seasonal production of fruits. As a habit Sri Lankan
consumers consume vegetable as a compulsory item in their meal. Those two items
shows ‘zero’ elasticity in the aspect of the price and income, as far it doesn’t have
substitutes the effect on elasticity based on substitute is negligible. The two items can be
considered as normal goods. The only problem exists is the supply chain of those two
products. These two agri products were produced mainly in up country and dry zone as
shifted agriulture. The two main buying centers were Dambulla and Colombo so the
vegetable supply chain is not a sophisticated one and so many post harvest losses were
emerged due to this reason and long distance compared to the shelf life of the vegetables
so there should be buying centers developed around the production area to facilitate
access to consumers and minimize the losses which will increase the development of agri
business.

Apart from that few fruits are imported to the country which shows the sensitivity to the
price of the product and the income of the consumer so those are kept away from the
normal good concept.

Summery and conclusions

Marketers within agribusiness have embrace the primacy of the "customer focus".
The ageing population and smaller family size reflect changes in the family life cycle,
which is a key determinant of consumption patterns. Marketers need to define their target
markets in terms of specific life cycle groups and develop appropriate products and
marketing plans.

Continuing the pattern observed over the last couple of years, private expenditure on
imported goods and non-factor services, rose at a higher rate than expenditure on
domestically produced goods.

The emergence of the private sector as the leading agent of economic and social change.
Importantly, unlike in the public sector where salary and wage differentials are contained
within reasonable limits based upon equity considerations, senior private sector
executives (male and female) receive salaries and a package of fringe benefits. Further
the effect of rising female employment and their income demanding more of quality,
health, convenience in what their food stuff.
Herein lies the pivotal marketing implication to recognize the changing definitions of
social status and hence New product development, packaging, consumer shopping
behaviour and marketing communications are areas of particular concern and interest for
marketers in this regard.
The economic condition of the Sri Lankan consumer highlighted income disparities and
poverty, particularly in the rural areas of the country, the impact of which on the rural
youth is significant and far reaching. Youth unemployment is predominantly a rural
phenomenon.