Ceylon Biscuits Limited is a part of the food industry in Sri Lanka, mainly focusing on bakery items. The company also sells snacks, cereals and other food products such as coconut milk and salt. The PESTLE analysis of Ceylon Biscuits Limited provided below examines the factors present in the macro-environment of Sri Lanka’s food industry that the company.
Political Factors
Sri Lanka has been dealing with political issues in the past, but the 2022 political crisis was a major event that has influenced the different sectors of the country. The ongoing protests, power breakdowns, rising inflation and the country being at the brink of complete collapse fueled the crisis further (Perera, 2023).
The availability of fuel was also adversely affected due to the political crisis, disrupting the manufacturing processes for different industries. The rising cost of energy was an additional challenge that the businesses had to face. The government was unable to control the uprising, or address the issues effectively by introducing some favorable policies.
Ceylon Biscuits responded to the political instability by indicating its support for the public that has been suffering due to government’s poor decisions. The existing policies devised by the government were not favorable in helping the business in moving towards expansion. These factors have negatively impacted the growth prospects of the company.
A positive factor for the company was its global presence which has supported the firm to maintain significant revenues during the fiscal year 2022. However, it has struggled during the political volatility which is reflected through the decline in net profit and earnings per share (Convenience Foods, 2022).
Economic Factors
The country nearing bankruptcy and intense economic decline has resulted in the imbalance of the economic condition of Sri Lanka. The lack of availability of US dollars made it more challenging for the company to manage the import of the raw materials that are required for manufacturing of its bakery items.
Inflation was at 54.6% in 2022 while people were struggling to access the necessities such as basic food items and medicines (Perera, 2022). The raw material and operational cost were higher due to the economic turbulence which has pressurized the biscuit manufacturers to raise the prices.
Currently, the food inflation is around 85% which indicates a serious area of concern for the food segment as growing food insecurity can disrupt the business. The disturbed supply chain linked with lower wheat supply due to Ukraine and Russia conflict and higher prices of sugar, oil and eggs has resulted in the revised price structure of the bakery and other food items (Market Monitor, 2022).
Social Factors
The increasing price of biscuits could potentially result in the closure of the confectionary segment of the industry as there is a decline in consumer purchase of bakery items (Samman, 2022). Consumers were having a great deal of difficulty in purchasing the basic necessities, declining the spending on biscuits.
Ceylon Biscuits has tried to capture the market segment seeking bakery items that are healthy and hold nutritional value for the children. Along with the younger market products, the company invested in the development of organic food range. This step was a reflection of the rising niche of consumers who were seeking organic products over the non-organic items.
The company has also identified the needs of the consumers during the phase of inflation hike by offering products that were in the super saver category. These products were specially targeting the customers who belonged to the low socio economic status and were struggling financially (Convenience Foods, 2022).
Technological Factors
Bakery items and food manufacturers require technology to manage the business operations and produce large batches. Ceylon Biscuits is managing market presence is more than 60 countries which requires the use of technology to maintain efficiency. Moreover, technological advancements help the company in making the product line more diversified.
The quality of the products is also dependent on the technology that is being used in the manufacturing. For example, Low Temperature Grinding Technology is being used by the company to maintain the freshness and taste of the spices. The inclusion of this technology has helped the company in gaining 5% market share in the spice segment (Convenience Foods, 2022).
Legal Factors
The company has to follow the health and safety guidelines for the employees and is also required to adhere to the employment laws. Besides these legal regulations, the company has acquired other firms and required to follow the regulations pertaining to the acquisition process. In addition, the company is bound to share relevant financial information with the stakeholders.
In case of food quality, Ceylon Biscuits has to ensure that the products it manufactures are according to the food safety standards. The company has incorporated quality assurance protocols to maintain adherence to these regulations. The trademark laws are also relevant for the company as similar packaging can lead to legal issues such as the case of Maliban vs. Munchee.
Ceylon Biscuits scrutinizes the level of ethical conduct of suppliers as a part of its ethical and legal compliance goal. The suppliers that are a part of the contract are selected on the basis of their adherence to food safety and quality. The firm has obtained ISO certificates that are relevant to its food categories, along with the Halal and SLS certifications for relevant items.
Environmental Factors
The environmental degradation by the waste from the packaged items is significant, warranting attention of the organizations in the food segment to take necessary actions. Ceylon Biscuits have set up PET bottle collection bins in an effort to gather the bottles and recycle them to reduce the impact on the environment (Convenience Foods, 2022).
Furthermore, the company has integrated the 3R framework as a part of the sustainable and green business operations. The management is also emphasizing on the use of technology that helps in minimization of emissions, along with the focus on green energy options. Adherence to environmental policies is another way through which environmental compliance is displayed.
Conclusion
Ceylon Biscuits has faced significant political and economic turmoil during the Sri Lankan crisis. The management was able to handle the impact of the negative business environment and use social trends and strategic decisions to maintain market position despite these major obstacles.
References
Convenience Foods. (2022). Annual Report. Retrieved from https://cdn.cse.lk/cmt/upload_report_file/488_1660707877212.pdf
Market Monitor (2022). Market Monitor Sri Lanka – August 2022. Retrieved from: https://docs.wfp.org/api/documents/WFP-0000143106/download/
Perera, A. (2022). Sri Lanka: Why is the country in an economic crisis? BBC. Retrieved from: https://www.bbc.com/news/world-61028138
Perera, J. (2023). Sri Lanka in 2022: A Country Wracked by Multiple Crises. South Asian Voices. Retrieved from: https://southasianvoices.org/sri-lanka-in-2022-a-country-wracked-by-multiple-crises/
Samman, T. (2022). LCMA says biscuit industry facing collapse. Ceylon Today. Retrieved from: https://ceylontoday.lk/2022/08/18/lcma-says-biscuit-industry-facing-collapse/