FACTORS EFFECTING ON CONSUMER BUYING BEHAVIOR OF FULL CREAM MILK POWDER INDUSTRY IN SRI LANKA

(With special reference to Nestle Lanka NESPRAY Full Cream Milk Powder)

Content

Topic

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1. Introduction 2. Significant of the study 3. Literature Review 4. Establishment of problem 5. Objectives of the report 6. Research design 7. Limitation of the study 8. Time frame 9. References

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Introduction
In Sri Lanka, full cream milk powder industry has a higher demand when compared to other industries since the most of Sri Lankans consume milk powder as a major meal of their life style. Therefore, it has a growing demand. As a result of this huge market share and growing demand, it has been established a fierce competition and the major competitive brands are Anchor, Raththi, Lakspray, Milgro, Nespray, and Maliban. Sri Lankas drink a few glasses of milk daily as a practice. Consumer buying behavior is the process of decisions and actions of people involved in buying and using products, the consumer behavior is always said to be multidisciplinary in nature. It includes study of Psychology, study of Sociology, study of Economy, study of Anthropology (Baker, 1991). Those acts of individuals are directly involved in obtaining and using economic goods and services including decision process that proceeded and determine these acts (Blackwell, 2005). Sri Lanka is highly dependent on the world market to meet its growing demand for milk and milk products and the local milk producers and processors supply only 20% of the demand at present. The rest is met by the imports, mainly milk powder (95% of the imports) followed by butter, cheese, yoghurt and other milk by-products. The domestic dairy processing sector is characterized by a government owned company (Milco) which is operating island wide, a multinational company such as, Fonterra, Nestle, operating nationally. The only form of trade restriction currently implemented in Sri Lanka is import tariffs and hence domestic price of full cream milk is largely determined by the world market prices (Bandara, J.S. 2007).

Milk is a translucent white liquid produced by the mammary glands of mammals. It provides the primary source of nutrition for young mammals before they are able to digest other types of food. It contains significant amount of fatterated fat, protein and calcium as well as vitamin C. Cows milk has a PH ranging from 6.4 to 6.8 making it slightly acidic. Full cream milk powder has vitamins A and D, fat 26% minimum 27% maximum, protein minimum 24.5% low ash and no anti-biotic (www.wikipedia.lk). The direction and magnitude of changes occur in dairy market in Sri Lanka are mainly determined by five key factors. First, they depend on the changes in the world market
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prices which in turn determined by the levels of reductions in export subsidies, domestic subsidies and import tariffs by the major producers and consumers of dairy products. Second, they depend on the way that consumers respond to changes in prices, i.e., what types of strategies they adopt to minimize high-price shocks. Third, they depend on the structure of full cream milk processing industry. If the milk processing industry is characterized by imperfectly competitive behavior, either due to concentration of firms or presence of state trading enterprises, the increase in high import prices will not efficiently transmit to the farm level. Fourth, they depend on the characteristics of production structure, resource endowment and resource use efficiency, which in turn are determined by various socio-economic, demographic and environmental factors, of the dairy farmers. Fifth, they depend on the domestic policy framework governing the dairy sector in the country (Bandara, J.S. 2007).

The Nestle brand has been familiar to Sri Lankans over a few decades. This survey is focused on Nestle Lanka company NESPRAY brand. Food and beverage products in Sri
Lanka are been manufactured and sold by Nestle Lanka PLC. Dairy products, including sweetened condensed milk, chocolate flavored malted food drink, and ready-to-drink beverages are primarily offered by it. Noodles, bouillon, and coconut milk powder products are produced and sold bythe company. Nestle Lanka PLC offers its products under the NESPRAY, NESTOMALT, CERELAC, MILO, and MAGGI brand names. The company is headquartered in Colombo, Sri Lanka. Nestle Lanka PLC is a subsidiary of Nestle U.S.A (NESTLE Annual Report, 2008).

Significant of the study

Studying consumer-buying behavior is a very important element for every organization. This research study is undertaken to indentify factors affecting to consumer buying behavior of full cream milk powder industry in Sri Lanka. This research is specially focused on Nestle Company NESPERY brand. Every firm needs be analyzed buying behavior for many reasons. The firms marketing strategy has a great impact on the buyer reaction to the firms success, the marketing concept stresses that a firm should create a marketing that satisfies customers. Therefore, it is important to understand what, where, when and how consumer purchases milk powder products and marketers can better predict how consumers will response to marketing strategies.
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This research is especially focused on Nestle Lanka Company. When considering the reports of Nestle Lanka, it is reported that sales of NESPREAY have decline figures in every year. Therefore, this study will give an immense support for the company to understand the factors affecting on consumer buying behavior of full cream milk poeder industry in Sri Lanka.

Literature Review
Ramasamy et al. (2005) indicated that the buying behavior is vastly influenced by awareness and attitude towards the product. Commercial advertisements over television was said to be the most important source of information, followed by displays in retail outlets. Consumers do build opinion about a brand on the basis of which various product features play an important role in decision making process. A large number of respondents laid emphasis on quality and felt that price is an important factor while the others attached importance to image of manufacturer.

Most parents acknowledge that their children do influence their buying decisions with 65% agreeing or strongly agreeing that they grave in to their childrens demand, however parents feel that they do not give in to pester power. Parents wear aware of heath issuesand state that they regularly purchase healthy foods for their children. However, many parents admit to buying un- healthy food products for their children as treats (Turner, J.J et al.2006).

Kumar et al. (1987) examined the factors influencing the buying decision making of 200 respondents for various food products. Country of origin and brand of the products were cross-tabulated against age, gender and income. Results revealed that the considered factors were independent of age, education and income. The brand image seemed to be more important than the origin of the product, since the consumers were attracted by the brands Belch and Belch (2007) explain that consumers are considering both an internal (memory) and an external sources of information include, personal sources, commercial sources, public sources, personal experience, the relevant internal psychological process consist of perception.
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Children in the younger age groups are affected more from the advertisements, broadcast on television and reflect more in their consuming behaviors. Children especially in the younger age groups are consuming food that has poor nutrients of vitamins, minerals & proteins and this could carry important development and health risk of the obesity during childhood (Arnas, Y. A. 2005). A base of loyal customers will be advantageous for an organization as it reduces the marketing cost of doing business. In addition, loyalty can be capitalized on through strategies such as brand extension and market penetration. Finally a large number of loyal customers is an asset for a brand, and has been identified as major determinant of brand equity (Dekimpe et al., 1997).

Rossiter and Percy( 1987), found that Brand awareness is widely misunderstood and often wrongly measured, even by experienced managers

Currim and Schneider, (1991),

indentified that variety of affecting on consumer buying behavior, Further, explained that customers may brand switch to seek variety. Blattberg and Neslin, (1989);East, (1997); Chandon, (1995), depicted that purchase patterns are altered by the sales promotions such as discount, Lack of availability of preferred brand can influence the purchaser to buy a brand they would not normally purchase (East, 1997; Chandon, 1995).

Establishment of the problem

When examining past studies regarding consumer buying behavior, most of researchers have undertaken their researches based on the data collected from U.S.A and European countries. Those identified factors may be irrelevant or mismatching to Sri Lankan context due to the culture, life style, consumption patterns of the Asian countries have differed with U.S.A and European countries. According to Sri Lankan culture, full cream milk powder plays a major role. The NESPRAY brand is coming under the Nestle Lanka is grabbed small market share for few decades, and major competitors such as Anchor and Maliban have played a vital role, while grabbing major market share in full cream milk powder industry. This research is undertaken to identifythe Factors effecting on consumer buying behavior of full cream milk industry in Sri Lanka Mainly NESPRAY.

Objectives of the Study

The aim of this research is to indentify the factors effecting purchase decision of full cream milk industry in Sri Lanka with the major focus of NESPRAY. Therefore, the objectives of this research can be enumerated as follows, To indentify the factors impact on consumer buying behavior of full cream milk industry. To indentify the relevant market share and position of NESPRAY when compared to other competitive brands.

Research design
This is a descriptive research undertaken to indentify the factors affecting on consumer buying behavior of full cream milk industry in Sri Lanka. The research can be indentified as a combination of both quantitative and qualitative data. Data would be collected from selected samples both from final consumers and retailers in then relevant research site. The sample is selected randomly and the sample size would be 200. The primary data will be gathered through administrated questionnaires and formal interviews while secondary data will be collected by using company report / annual reports. The questionnaires are administered in Galle, Matara, Hambanthota, Colombo and Gampaha Districts. The collected data would be analyzed with appropriate statistical techniques such as Mean and Standard Deviation.

Limitation of the study

There will be a couple of limitations related to this research. The main loop hole is, it is difficult to undertaken this research by covering entire island and respondents are randomly elected from Galle, Matara, Hambanthota, Colombo and Gampaha Districts. In addition to that limited time horizon is an issue in this research.

Time frame
Activity Week Sep Oct Nov Dec

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Literature search Make research proposal Questionnaire Design & Preparation Data Collection Data preparation & Analysis Conclusions & Recommendations Completing & Handover

* * * * * * * * * * * * * * * * * * *

References
1) Bandara, J.S. (2007), The Effects of Agricultural Trade Liberalization under Doha Development Agenda with Special Reference to the Asia Pacific Region: A Brief Survey, ARTNET Working paper, No. 31.

2) Baldinger, A.L. and Rubinson, J. (1996), Brand loyalty: the link between attitude and behavior, Journal of Advertising Research, November/December. pp. 22-34.

3) Baker,(1991), Understanding consumer buying behavior, Article of Consumer Research, pp 41.

4) Birdwell, A.E. (2005), A study of the influence of image congruence on consumer choice, Journal of Business, 41, 76-88.

5) Central Bank of Sri Lanka 2008, Annual Report, Colombo Sri Lanka.

6) Chernatrony L. de, From Brand Vision to Brand Evaluation, Butterworth Heinemann ,ISBN- 0-7506 -4614-4 . 7) Grant, J.H., T.W. Hertel and T.F. Rutherford (2006), Extending General Equilibrium to the Tariff Line: US Dairy in the Doha Development Agenda, Ninth Annual Conference on Global Economic Conference, Ethiopia, June 15-17, 2006.

8) Jacoby, J. and Kyner, D.B. (1973), Brand loyalty vs. repeat purchasing behavior, Journal of Marketing Research, Vol. 10, February, pp. 1-9.

9) Hoyer. W.D. (1984), An examination of consumer decision-making for a common repeat purchase product, Journal of Consumer Research, Vol. II No. 3, pp. 822-9.

10) Mahipala, M.B.P. (2002). Comparison of Milk-Based and Vegetable-Based Cattle Farming Systems in Up-Country Wet-Zone., M.Sc. (EE) Project Report 12, Postgraduate Institute of Agriculture, University of Peradeniya, Sri Lanka.
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11) Moll, H.A.J., S.J. Staal and M.N.M. Ibrahim (2007), Smallholder Dairy Production And Markets: A Comparison of production Systems in Zambia, Kenya and Sri Lanka Agricultural Systems, 94: 593-603.

12) Ranaweera N.F.C.(2007), Improved market access and small holder dairy farmer participation for sustainable dairy development: Lessons learned Sri Lanka. www.aphca.org/reference/dairy/ FAO_milk_report_final_to_RAPA_forweb.pdf (Accessed on 23 January 2008)

13) Sproles, G.B. and Kendall, E.L. (1986), A methodology for profiling consumer's decision making style, The Journal of Consumer Affairs, Vol. 20 No. 2, pp. 267-79.

14) Turner J. J., Kelly J. and Mckenna K., (2006), Food For Thought; Parents perspective of Child Influence, British Food Journal, 108(3).

15) Sri Lanka Institute of Marketing Recommended text book

16) Internet References: www.wikipedia.lk ( Accessed on 2011.09.08) www.nestle.lk (Accessed on 2011.09.10)

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