08 January 2012

Unprecedented Growth in Sri Lanka Supermarket Trade in Coming Years – Research Report

03rd January 2012, www.news360.lk

Sri Lanka’s supermarket trade is expected to see an unprecedented growth within the next few years, backed by increasing per capita income, an increase in the work force and the changing consumption patterns, says a newly released equity research report.

According to the report, the spread of supermarket trade in the country as of now stands at just 15%.

The report compiled by Bartleet Religare Securities says, with the end of the war, the three leading supermarket chains in the country, namely Cargills, Keells and Arpico have started expanding aggressively while investing heavily in to this segment.

The report also observes the demand for supermarkets is also backed by convenience and late shopping hours it offers to the customers.

“Some individuals are also attracted to processed food items found in supermarkets which are much easier to prepare”, the report reveals.

The study has found that Supermarkets are also at an advantage, as they have a higher bargaining power over suppliers and are in a better position to offer products at competitive prices due to economies of scale.

However, despite the growth potential, the report says that most supermarkets operate on thin margins thus banking on higher volumes to cover operational costs while at the same time focusing on cost effective strategies.

“ Owing to the high competition in the industry; various promotions, loyalty schemes and advertising has to be carried out on a regular basis to retain the respective clientele as switching cost to customers are minimal”, added the BRS report.

According to BRS, there are 516 supermarkets being operated in the country which can be categorized as supermarkets, hypermarkets and convenience stores.

Cargills operates 177 supermarkets and the state owned Sathosa which offers products at a subsidized rate operates a convenience store network of 250 stores.

Keells has 48 supermarkets being converted to a hyper market while Arpico operates 13 hyper markets.

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