Consumer Boom in Pakistani Villages

Away from the violence and the troubles of the big cities, the economy of rural Pakistan is booming. Flush with cash from bumper crops at record commodity prices, the farmers are spending on tractors, cars, motorcycles, mobile phones, personal grooming items, packaged foods and beverages and other consumer products like never before.



Higher crop prices have increased farmers’ incomes in Pakistan by Rs. 342 billion in the 12 months through June, according to a government economic survey. That was higher than the gain of Rs. 329 billion in the preceding eight years, according to a report by Bloomberg News. Companies like Millat tractors, Honda Atlas Motorcycles, Pak Suzuki Motors, Engro Foods, Telnor, Nestle, Colgate-Palmolive, Proctor and Gamble and Unilever have been big beneficiaries of the current rural consumption boom.

Nestle Pakistan's chief Ian Donald has summed up the rising demand for his company's products as follows: “It’s a common perception that China and India are much bigger in terms of growth than Pakistan. But for Nestle, the per capita consumption of our products in Pakistan is twice as much as we have in China and India.” It should be noted that Nestle is the world's largest packaged food company, and Pakistanis' per capita consumption of milk and dairy products is about 2.5 times higher than in India. According to the FAO, the average dairy consumption of the developing countries is still very low (45 kg of all dairy products in liquid milk equivalent), compared with the average of 220 kg in the industrial countries. Few developing countries have per capita consumption exceeding 150 kg (Argentina, Uruguay and some pastoral countries in the Sudano-Sahelian zone of Africa). Among the most populous countries, only Pakistan, at 153 kg per capita, has such a level. In South Asia, where milk and dairy products are preferred foods, India has only 64 kg and Bangladesh 14 kg. East Asia has only 10 kg.

Here are a few key points excerpted from a recent Businessweek story on rise of the rural consumer in Pakistan:

1. Unilever and Colgate-Palmolive Co. are sending salespeople into rural areas of the world’s sixth most-populous nation, where demand for consumer goods such as Sunsilk shampoo, Pond’s moisturizers and Colgate toothpaste has boosted local units’ revenue at least 15 percent.

2. “The rural push is aimed at the boisterous youth in these areas, who have bountiful cash and resources to increase purchases,” Shazia Syed, vice president for customer development at Unilever Pakistan Ltd., said in an interview. “Rural growth is more than double that of national sales.”

3. Consumer-goods companies forecast growth in Pakistan even as an increase in ethnic violence in Karachi has made 2011 the deadliest in 16 years for the country’s biggest city and financial center.

4. Nestle Pakistan Ltd. is spending 300 million Swiss francs ($326 million) to double dairy output in four years, boosted sales 29 percent to 33 billion rupees ($378 million) in the six months through June. “We have been focusing on rural areas very strongly,” Ian Donald, managing director of Nestle’s Pakistan unit, said in an interview in Lahore. “Our observation is that Pakistan’s rural economy is doing better than urban areas.”

5. Haji Mirbar, who grows cotton on a 5-acre farm with his four brothers, said his family’s income grew fivefold in the year through June, allowing him to buy branded products. He uses Unilever’s Lifebuoy for his open-air baths under a hand pump, instead of the handmade soap he used before. “We had a great year because of cotton prices,” said Mirbar, 28, who lives in a village outside south Pakistan’s Matiari town. “As our income has risen, we want to buy nice things and live like kings.”

6. Sales for the Pakistan unit of Unilever rose 15 percent to 24.8 billion rupees in the first half. Colgate-Palmolive Pakistan Ltd.’s sales increased 29 percent in the six months through June to 7.6 billion rupees, according to data compiled by Bloomberg. “In a generally faltering economy, the double-digit growth in revenue for companies servicing the consumer sector has come almost entirely from the rural areas,” said Sakib Sherani, chief executive officer at Macroeconomic Insights Pvt. in Islamabad and a former economic adviser to Pakistan’s finance ministry.

7. Unilever is pushing beauty products in the countryside through a program called “Guddi Baji,” an Urdu phrase that literally means “doll sister.” It employs “beauty specialists who understand rural women,” providing them with vans filled with samples and equipment, Syed said. Women in villages are also employed as sales representatives, because “rural is the growth engine” for Unilever in Pakistan, she said in an interview in Karachi. While the bulk of spending for rural families goes to food, about 20 percent “is spent on looking beautiful and buying expensive clothes,” Syed said.

8. Colgate-Palmolive, the world’s largest toothpaste maker, aims to address a “huge gap” in sales outside Pakistan’s cities by more than tripling the number of villages where its products, such as Palmolive soap, are sold, from the current 5,000, said Syed Wasif Ali, rural operations manager at the local unit.

9. Its detergents Bonus Tristar and Brite are packed in sachets of 20 grams or less and priced as low as five rupees (6 cents), to boost sales among low-income consumers hurt by the fastest pace of inflation in Asia after Vietnam. Unilever plans to increase the number of villages where its products are sold to almost half of the total 34,000 within three years. Its merchandise, including Dove shampoo, Surf detergent and Brooke Bond Supreme tea, is available in about 11,000 villages now.

10. Pakistan, Asia’s third-largest wheat grower, in 2008 increased wheat prices by more than 50 percent as Prime Minister Yousuf Raza Gilani sought to boost production of the staple.“The injection of purchasing power in the rural sector has been unprecedented,” said Sherani, who added that local prices for rice and sugarcane have also risen.

11. Telenor Pakistan Pvt. is also expanding in Pakistan’s rural areas, which already contribute 60 percent of sales, said Anjum Nida Rahman, corporate communications director for the local unit of the Nordic region’s largest phone company.

While the presence of multinational consumer product giants like Nestle and Unilever receive more coverage in the western media, the Euromonitor report finds that Pakistani FMGC companies like Engro Foods, Haleeb Foods, Shezan, Tapal, Shan and others dominate the packaged food business in Pakistan. Here's an excerpt from a recent Euromonitor report on Pakistan:

Although multinationals are paving the way for innovations and taking into account consumers’ demands by launching new products and advertising them heavily, it is usually the domestic companies which win the competitive battle in volume terms as they focus less on expensive and more conventional items which already have a consumer base. Nevertheless, multinationals carry strong brand names and target the higher class with premium products, thus taking their reasonable share in value terms.



Supermarkets/hypermarkets is the most steadily growing distribution channel with a new player Hyperstar. As urbanization is increasing, people tend to leave their families and live separately and therefore there is sometimes no housewife at home to be responsible for the purchase of fresh items close to home. Supermarkets/hypermarkets became more popular over the review period, being gradually considered more convenient as this channel can offer a wide selection of products in one place. Pakistanis are becoming more used to planning their meals for several days and supermarkets/hypermarkets work on offering as wide an assortment as possible. Nevertheless, traditional retail outlets such as independent and small grocery retailers continue to have a good name not just because of the lower unit prices offered but also because of their selection as most of them are specialized.


Pakistan continues to face major problems as it deals with the violent Taliban insurgency and multiple internal and external threats and crises of stagnant economy, scarcity of energy and the lack of sense of security. However, it is clear from the consumer spending data that Pakistanis are a resilient people, and they continue to defy the persistent prophecies of doom and gloom.

Pakistan is just too big to fail. I fully expect Pakistan to survive the current crises, and then begin to thrive again in the near future.

Related Links:

Haq's Musings

Pakistan's Sugar Crisis

Poll Finds Pakistanis Happier Than Neighbors

Pakistan's Rural Economy Booming

Pakistan Car Sales Up 61%

Resilient Pakistan Defies Doomsayers

Land For Landless Women in Pakistan

Comments

Riaz Haq said…
Pakistan central bank has cut key interest rate by 1.5% in its latest meeting, according to Businessweek:

Oct. 8 (Bloomberg) -- Pakistan’s central bank cut its benchmark interest rate by a more-than-estimated 1.5 percentage points to spur investment after terrorism and floods weakened economic growth.

The State Bank of Pakistan lowered the discount rate to 12 percent from 13.5 percent, Syed Wasimuddin, a central bank spokesman, said in Karachi today. Three of five economists surveyed by Bloomberg News predicted a 1 percentage point cut, and the remainder forecast a 0.5 percent reduction.

Acting Governor Yaseen Anwar had room to act and join emerging markets from Russia to Brazil in lowering borrowing costs after Pakistan’s inflation rate dropped 2 percentage points in the past three months. A rate cut might support an economy that’s seen growing less than half the pace of fellow South Asian nations India, Bangladesh and Sri Lanka this year.

“It’s a bold decision and would help prop up growth,” said Suleman Akhtar, head of research at Foundation Securities Ltd. in Karachi. “Further rate moves would depend on the extent to which the weakening rupee boosts import costs and stokes inflationary pressure.”

The Pakistan rupee has declined 1.9 percent this year and dropped to a record low on Sept. 16, prompting the central bank last month to conduct what it called a “calibrated intervention” to stabilize the currency.

Stocks, Bonds

The Karachi Stock Exchange 100 Index has fallen 1.4 percent since the start of this year, while Pakistan’s 10-year government bond yields are trading at 12.6 percent, the highest level after Greece and Venezuela, according to data compiled by Bloomberg.

Consumer prices rose 10.46 percent in September from a year earlier, after climbing 12.43 percent in July, according to the Federal Bureau of Statistics.

The central bank decided to slash its policy rate for a second straight meeting because of a “high probability” of meeting the FY12 inflation goal and to stimulate investment, according to today’s statement. The State Bank is targeting an average inflation of 12 percent in the year ending June 30, 2012.


http://www.businessweek.com/news/2011-10-08/pakistan-cuts-key-rate-more-than-analysts-forecast-on-growth.html
Riaz Haq said…
Stock and credit markets respond positively to rate cut by Pak central bank, according to The Express Tribune:

KARACHI: The bond and equity markets have reacted strongly to central bank’s surprise decision of slashing the interest rate to bring it on a par with pre-2008 crisis levels.

Karachi inter-bank offered rate (Kibor), the benchmark six-month lending rate, plummeted 95 basis points in a single day to a 26-month low of 11.96%, according to a Topline Securities research note.

Furthermore, yields of the actively traded one-year treasury bills and the benchmark 10-year Pakistan Investment Bonds fell by 75 basis points and 60 basis points to trade around 11.90-93% and 12.00-05%, respectively.

The State Bank of Pakistan (SBP) on Saturday cut its benchmark discount rate from 13.5% to 12%.

The rate cut has also benefitted well the stock market on account of better earnings for leveraged companies and reduction in risk-free rate, adds the note.

The Karachi Stock Exchange’s benchmark 100-share index opened with a gap of approximately 350 points to skip over 12,000 points for the first time in two months on Monday.

Profits of leveraged companies to jump 2-8%

Heavily leveraged companies from the cement, textile and fertiliser sectors – whose loans are floating and linked with Kibor – will have to bear lower interest charges from January 2012 following quarterly loan re-pricing in December, says the note.

These companies will be the major beneficiaries of the cut in discount rate, the fee commercial banks pay to borrow money from the SBP. DG Khan Cement, Engro and Pakistan State Oil will be some of the major gainers as their annualised earnings will increase by 7.8%, 6.5% and 2.1%, respectively, adds the research note.

Overall, the rate cut will augment earnings growth by 0.5% in 2012.


http://tribune.com.pk/story/271244/chain-reaction-surprise-rate-cut-takes-kibor-to-26-month-low/
Riaz Haq said…
Here's a Dawn report on Pakistan auto sales July-Sept 2011:

KARACHI: While sale of cars, two and three wheelers and light commercial vehicles remained brisk from July-September 2011, production by a leading tractor assembler remained suspended between second week of July 2011 and September 2011.
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Buying spree was witnessed for locally assembled cars thanks to huge arrival of home remittances, surging farm income, slight increase in car sales through bank financing, etc.

Even rising prices of locally produced cars and high cost of fuel (petroleum products and CNG) did not make any adverse impact on vehicle sales.

Pak-Suzuki Motor Company Limited (PSMCL) raised the prices by Rs14,000-30,000 followed by two to four per cent by Indus Motor Company (IMC).

Honda City also became costlier by Rs25,000 while Civic price was raised by Rs38,000.

Pakistan Automotive Manufacturers Association (PAMA) claimed rise in overall car sales to 38,065 units in July-September 2011 as compared to 30,030 units in the same month of last year.

Overall sale of costly cars (1,300cc and above) rose to 16,936 units as compared to 14,949 units.

Sale of Honda Civic, Honda City and Toyota Corolla stood higher at 1,710, 2,562 and 10,682 units as compared to 1,558, 2,274 and 10,371 units respectively. Suzuki Swift sales also surged to 1,826 units from 673 units.

In 1,000cc segment, overall car sales jumped to 7,343 in July-September 2011 from 5,679 units in the same period of last year in which sales of Suzuki Cultus and Suzuki Alto swelled to 3,710 and 3,633 units from 2,860 and 2,819 units respectively.

Increase in Suzuki Mehran sales to 8,415 units from 5,356 units made a positive impact on overall sales of 800cc and below 1,000cc cars which rose to 13,786 units from 9,402 units.

Sale of Daihatsu Cuore and Suzuki Mehran went up to 1,282 and 4,089 units as compared to 1,136 and 2,910 units.

A leading car assembler said he checked with many banks who intend to cut interest rates from Nov 1 after Central Bank`s decision to lower interest rates.

He said car financing by banks now enjoys 20 per cent share in overall car sales and this share may go up slightly after cut in interest rates.

From July onwards, the buyers especially on cash basis had resumed purchases and it was evident from sales trend in the first quarter of the current fiscal year.

Rising farm income also encouraged farmers and growers to purchase more new bikes, thus pushing up Honda bikes sales to 152,605 units in July-September 2011 from 126,701 units in the corresponding period of 2010.

Sale of Suzuki bikes also increased to 5,506 from 4,588 units while sale of Ravi and Habib bikes (Chinese two-wheelers) improved to 6,680 and 7,707 units from 5,971 and 4,053 units.

Qingqi and Sazgar three-wheeler sales reached 5,193 and 3,901 units from 2,787 and 2,976 units.

In pick-ups, a total of 4,586 units of Suzuki Ravi and 856 units of Toyota Hilux were sold in July-September 2011 as compared to 3,129 of Ravi and 285 units of Hilux in the same months during 2010.

In heavy vehicles, sales of only Master trucks rose to 110 units from 82 units while sales of Hino, Nissan and Isuzu trucks plunged to 231, 33 and 36 units from 422, 102 and 119 units.

In buses, Hino bus sales dropped to 56 units from 110 units and Isuzu bus sales also came down to 12 units from 23 units........


http://www.dawn.com/2011/10/11/tractor-heavy-vehicles-sale-dip.html
Riaz Haq said…
Nishat Group entering packaged milk market in Pakistan, according to Bloomberg:

Nishat Group, owner of Pakistan’s largest lender by market value, plans to enter the consumer goods business by starting milk production this year, Chief Financial Officer Inayat Ullah Niazi said.

“We have bought land outside Lahore and after beginning milk production, we will add other products to the line,” Niazi said by telephone from Lahore today. He didn’t provide more details.

Niazi said the group, which owns MCB Bank Ltd. and Nishat Mills Ltd., the nation’s largest textiles exporter, sees growth potential in Pakistan for consumer goods, particularly food products. The government plans to spend 3.5 billion rupees ($40 million) to improve the dairy industry, including expanding infrastructure, in the fiscal year ending June 30, and boost economic growth in the period to 4.2 percent from 2.4 percent.

“Dairy is one of the fastest growing businesses in Pakistan,” said Abdul Aziz Anis, who oversees $35 million in assets including shares of MCB and Nishat Mills, as chief executive officer of Karachi-based Alfalah GHP Investment Management Ltd. “There is huge growth potential in the consumer business, but the only question is the buying power of the population with still-high inflation.”

Nishat Group joins Nestle SA in expanding in dairy in Pakistan. The Vevey, Switzerland-based company said in August that it plans to double dairy output in Pakistan by spending 300 million Swiss francs ($334 million) in the next three to four years. Companies including Unilever and Colgate-Palmolive Co. are also expanding sales of consumer goods in the South Asian nation as demand for products such as Sunsilk shampoo and Colgate toothpaste bolster local units’ revenue.

Inflation in Pakistan rose 11.56 percent in August from a year earlier, the fastest pace in the Asia-Pacific region after Vietnam, according to data compiled by Bloomberg. The State Bank of Pakistan cut the discount rate to 12 percent from 13.5 percent this month to help spur investment in the nation, which has been hit by flooding and terrorism.


http://www.businessweek.com/news/2011-10-19/pakistan-s-nishat-group-to-start-milk-production-this-year.html
Riaz Haq said…
Here are some excerpts from a Bloomberg report on increasing auto sales and profits at Indus Motors in Pakistan:

Car sales in Pakistan increased 26 percent to 38,065 units in the quarter ended Sept. 30 from a year earlier, the Pakistan Automotive Manufacturers Association said Oct. 10. Indus sold 12,820 cars in the period, rising from 11,792 a year earlier, according to the association.
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Oct. 25 (Bloomberg) -- Indus Motor Co., Toyota Motor Corp.’s affiliate in Pakistan, posted a 62 percent gain in first-quarter profit as rising incomes boosted sales.

Net income climbed to 937.5 million rupees ($11 million), or 11.93 rupees a share, in the three months ended Sept. 30, from 577 million rupees, or 7.35 rupees, a year earlier, the Karachi-based company said in a filing today. Sales gained 20 percent to 17.1 billion rupees.

Sales of the Cuore, Corolla, and Hilux models assembled by Indus increased more than 9 percent during the three months, according to Shahbaz Ashraf, an analyst at Arif Habib Ltd. Remittances to Pakistan gained 25 percent to $3.3 billion in the period, the nation’s central bank said Oct. 10.

“Rising remittances and farm incomes helped pushed sales for the company,” Ashraf, who has a “buy” recommendation on the stock, said by telephone from Karachi before the company’s announcement.

Indus, Pakistan’s second-largest carmaker, didn’t provide reasons for the profit increase in its filing.

Shares of Indus climbed 2.5 percent to 199 rupees as of 1:24 p.m. on the Karachi Stock Exchange, paring the stock’s decline this year to 21 percent.

Higher crop prices boosted farmers’ incomes in Pakistan by 342 billion rupees in the 12 months through June 30, more than the annual gain of 329 billion rupees in the preceding eight years, according to an economic survey published by the Ministry of Finance.


http://www.businessweek.com/news/2011-10-25/pakistan-s-indus-posts-62-profit-gain-as-sales-rise.html
Riaz Haq said…
Occasional and isolated but nonetheless tragic suicide cases like Raja Khan's in Pakistan get a lot of media coverage as they should. Meanwhile, over 200,000 farmer suicides in India have passed with little media attention in India.

Here's a Washington Post report on rising suicides in India:

NEW DELHI — Ram Babu’s last days were typical in India’s growing rash of suicides.

The poor farmer’s crop failed and he defaulted on the $6,000 loan he had taken to buy a tractor. The bank’s collectors hounded him, even hiring drummers to go round the village drawing attention to his shame.

“My father found it unbearable. He was an honorable man and he couldn’t take the humiliation. The next day he hanged himself from a tree on his farm,” his son Ram Gulam said Friday.

Babu’s suicide went unreported in local newspapers, just another statistic in a country where more than 15 people kill themselves every hour, according to a new government report.

The report released late Thursday said nearly 135,000 people killed themselves in the country of 1.2 billion last year, a 5.9 percent jump in the number of suicides over the past year.

The suicide rate increased to 11.4 per 100,000 people in 2010 from 10.9 the year before, according to the statistics from the National Crime Records Bureau.

Financial difficulties and debts led to most of the male suicides while women were driven to take their lives because of domestic pressures, including physical and mental abuse and demands for dowry.

A 2008 World Health Organization report ranked India 41st for its suicide rate, but because of its huge population it accounted for 20 percent of global suicides.

The largest numbers of suicides were reported from the southern Indian states of Kerala, Tamil Nadu, Andhra Pradesh and Karnataka, where tens of thousands of impoverished farmers have killed themselves after suffering under insurmountable debts.

The loans — from banks and loan sharks — were often used to buy seeds and farm equipment, or to pay large dowries to get their daughters married. But a bad harvest could plunge the farmer over the edge.

Sociologists say the rapid rise in incomes in India’s booming economy has resulted in a surge in aspirations as well among the lower and middle classes, and the failure to attain material success can trigger young people to suicide.

“The support that traditionally large Indian families and village communities offered no longer exists in urban situations. Young men and women move to the cities and find they have no one to turn to for succor in times of distress,” said Abhilasha Kumari, a sociology professor in New Delhi.


http://www.washingtonpost.com/world/asia-pacific/government-report-says-15-people-commit-suicide-every-hour-in-india/2011/10/28/gIQAVFGWOM_story.html
Riaz Haq said…
Here's an excerpt from a Unilever report on ice cream consumption in Pakistan:

0.5 kg consumption per capita but growing at double digit rate

http://www.igisecurities.com.pk/pdf/Unilever_Pakistan_Limited_Initiating_Coverage.pdf
Riaz Haq said…
Here's a NY Times story about soil renewal for agriculture in Pakistan:

LAHORE, PAKISTAN — In the Pakistani village of Sharbaga, about 130 kilometers from Lahore, a 70-year-old farmer named Mohammed Ali and his wife plant rice seedlings in a wide field. They stand ankle-deep in muddy water holding thin green leaves that they deftly press into the ground. It is hard work under a blazing sun, but this seemingly mundane task is a significant development that can help rural Pakistanis improve their lives.

Just a few years ago, this rice paddy and most of the surrounding fields in this village of 5,000 were barren. For decades the land has lain fallow because it is saline from poor groundwater.

In 2006, the government of the state of Punjab, traditionally Pakistan’s breadbasket, and the United Nations Development Program started an agriculture project to rehabilitate saline farmland by treating it with gypsum. The Punjab government pays for two-thirds of the project’s six-year, $17 million budget, while the U.N. program pays for the rest.

Nearly six million hectares, or about 15 million acres, across Pakistan, including 2.3 million hectares in Punjab, are barren because of salinity and water logging. Gypsum’s calcium composition can neutralize saline soil. Within a season of applying the white powder, farmers like Mr. Ali had transformed a long-degraded land into a field that yielded bountiful crops of rice and wheat.

Forty-three percent of Pakistan’s population of 170 million depends on agriculture for their livelihood and two-thirds of the country’s citizens live in rural areas. Projects that help improve the lives of people on the ground are critical to creating stability in Pakistan, and yet these are often overlooked.

Sustainable agricultural growth is a “necessary condition for rural growth, employment generation, poverty reduction and social stability,” said a 2009 report on Pakistan’s agricultural potential by Weidemann Associates, an economic development consulting firm near Washington. The report was prepared for the U.S. Agency for International Development in Pakistan.

The biosaline project in Punjab has already helped lift 50,000 households out of poverty by raising incomes. From 2007 to 2010, the increase of rice and wheat production on rehabilitated land totaled 417,016 tons, worth $122 million.

Dozens of enthusiastic farmers who gathered to meet a visitor to Sharbaga this past summer were unequivocal about how the agriculture project had improved their lives. Before the project, there were few ways to make money in the village aside from sporadic manual labor. Farmers owned small parcels of largely infertile land, and most of the men migrated to cities for work in factories or as temporary laborers.

Now, all the men said their farming incomes had double or tripled, to as much as $230 a month, compared with the $90 or less that they could earn working in a factory, and migration to the cities is declining.
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Reviving agriculture has been life-changing for many rural Pakistanis. Zeba Bibi, who also cultivates a garden in Liliani village, wants to know how she can make her mango trees healthier and more productive. She aspires to one day buy a tractor with extra income from crops grown on her family’s desalinated land. “We are looking forward to a better life,” she said.


http://www.nytimes.com/2011/11/17/business/energy-environment/soil-renewal-puts-pakistans-poor-on-stronger-ground.html
Riaz Haq said…
Rising per capita income and a growing, young population spending more time online and at Western movies are helping build a mass market in Pakistan, according to Businessweek:

One way to take a city’s economic pulse is to check out where locals shop. In Karachi, Pakistan, shoppers are flocking to Port Grand, which opened in May. Built as a promenade by the historic harbor for almost $23 million, the center caters to Pakistanis eager to indulge themselves. This city of 20 million has seen more than 1,500 deaths from political and sectarian violence from January to August. At Port Grand the only hint of the turmoil is the presence of security details and surveillance cameras. “The whole world is going through a new security environment,” says Shahid Firoz, 61, Port Grand’s developer. “We have to be very conscious of security just as any other significant facility anywhere in the world needs to be.”

Young people stroll the promenade eating burgers and fries and browsing through 60 stores and stalls that sell everything from high fashion to silver bracelets to ice cream. Ornate benches dot a landscaped area around a 150-year-old banyan tree. “Port Grand is something fresh for the city, very aesthetically pleasing and unique,” says Yasmine Ibrahim, a 25-year-old Lebanese American who is helping set up a student affairs office at a new university in Karachi.

One-third of Pakistan’s 170 million people are under the age of 15, which means the leisure business will continue to grow, says Naveed Vakil, head of research at AKD Securities. Per capita income has grown to $1,254 a year in June from $1,073 three years ago.

The appetite for things American is strong despite the rise in tensions between the two allies. Hardee’s opened its first Karachi outlet in September: In the first few days customers waited for hours. It plans to open 10 more restaurants in Pakistan in the next two and a half years, says franchisee Imran Ahmed Khan. U.S. movies are attracting crowds to the recently opened Atrium Cinemas, which would not be out of place in suburban Chicago. Current features include The Adventures of Tintin and the latest Twilight Saga installment. Mission: Impossible—Ghost Protocol is coming soon. Operator Nadeem Mandviwalla says the cinema industry in Pakistan is growing 30 percent a year.

Exposure to Western lifestyles through cable television and the Internet is raising demand for these goods and services. Pakistan has 20 million Internet users, compared with 133,900 a decade ago, while 25 foreign channels, such as CNN (TWX) and BBC World News, are now available. And for many Pakistanis, reruns of the U.S. sitcom Everybody Loves Raymond are a regular treat.

The bottom line: With per capita income rising quickly, Pakistan is developing a mass market eager for Western goods.


http://www.businessweek.com/magazine/pakistans-consumers-flex-their-newfound-muscle-12012011.html
Riaz Haq said…
Here's an Express Tribune report tiled "Nokia Sees Pakistan Becoming a High-Growth Market":

KARACHI: Foreign delegates and local entrepreneurs discussed challenges facing businesses, sought greater industry-academia collaboration and highlighted business models to succeed in an emerging market at the 12th Management Association of Pakistan (MAP) Convention on Leadership Challenges for Business Success here on Wednesday.

Emerging markets will account for 80% of the world’s growth the next decade and Pakistan will be an important emerging market in future, Senior Vice President of Nokia India, Middle East and Africa Shivakumar said in a speech titled “Winning in emerging markets”.

Speaking to a conference packed with businessmen, Shivakumar – who is also the senior vice president of All India Management Association (AIMA) – said growth in developed economies has slowed down dramatically and the world is now looking at emerging markets, which account for 42% of population and 13% of income.

Pakistan is listed in four categories of emerging markets including Dow Jones 35 and emerging and growth level economies (EAGLES), he said. “Pakistan will be an important high-growth emerging market.”

In order to succeed in an emerging economy, he said, it is important to understand its segments and consumers. The emerging market consumers – most of whom live under $2 a day – are value-sensitive and not price-sensitive, he said and added entrepreneurs have to work on their business models to accommodate that segment of consumers who believe in the doctrine of “pay more, get more” and “pay less, get less”.

Sharing his experiences, he said, there are three things that he applied and succeeded. “Always put the country’s interest first, keep fixed costs very low and turn as many cost variables as possible,” he said.

“Never cut the features and offer your product at half the price. Consumers don’t want an incomplete product.”

Speaking to the participants earlier on, event’s chief guest and State Bank of Pakistan Governor Yaseen Anwar said it is time for all business leaders and managers to take the lead. Leaders must be more aware of the challenges facing the country – inflation, unemployment and power crisis.

There are no shortcuts to sustained economic development, Anwar said. “We need to develop the right strategies and then translate these strategies into action.”

AIMA President Rajiv Vastupal also addressed the event, saying IMF has lowered growth projection for both 2011 and 2012. “Today’s corporate leaders must focus on innovation to counter the global economic challenges,” he said. He elaborated the successful example of Apple’s iPad, which was launched during recession and earned a great success.


http://tribune.com.pk/story/306766/nokia-sees-pakistan-becoming-a-high-growth-market/
Riaz Haq said…
Here's an Express Tribune story speculating about Wallmart entry in Pakistan retail market:

...“We have not made any announcements concerning Pakistan,” said Megan Murphy, Walmart’s international corporate affairs manager in an e-mail. Walmart does not comment on market entry speculation, she added.

Murphy, however, said their priorities are to “concentrate on the markets where we already have operations and look for growth opportunities in markets where customers want to see us and where it makes sense for our long-term growth.”

While Pakistan clearly does not fall into the first category, its regulatory environment has been far more welcoming than neighbouring India, where the government was recently forced by populist protests to roll back reforms that would have allowed Walmart and other foreign retailers in. The Pakistani retail market, currently estimated at $42 billion and rapidly growing, is viewed as an attractive opportunity for foreign investors.

“To say Pakistan is not on Walmart’s opportunity radar screen, I don’t agree,” said Afnan Ahsan, CEO of Engro Foods, one of the largest consumer goods companies and a subsidiary of the Engro Corporation.

Pakistan is a very large and concentrated consumer opportunity. Karachi alone accounts for 40% of any consumer business, Ahsan said. “It is on every big player’s radar screen,” he added.

Despite recent troubles, Pakistan’s $210 billion economy has been mentioned by several global analysts as a potent force to be reckoned with in the future, including Goldman Sachs’ Jim O’Neill, the man famous for creating the term BRICs. Goldman includes Pakistan in its list called the Next Eleven, economies that are expected to become some of the most important sources of global growth.

The growing middle class – one-third of the country’s population of 180 million, of which 55% age below 30 – has already prompted international players like Germany’s Metro Cash and Carry and France’s Carrefour to enter the market.

MCC has recently acquired Makro and now has a network of 10 stores in Karachi, Lahore, Faisalabad and Islamabad. Hyperstar – Carrefour’s joint venture with the UAE’s Majid Al Futtaim Group – has one store each in Karachi and Lahore. It also announced opening of four more stores in Karachi and extend its chain to every metropolitan city in Pakistan.

Besides international wholesalers and retailers, local supermarkets – Imtiaz Supermarket in particular – have also been expanding their businesses.

Government officials also have a more welcoming attitude. “Personally speaking, Walmart will be very viable in Pakistan,” said Liaquat Ali Gohar, head of marketing at the Small and Medium Enterprise Development Authority. He said that the retail sector so far has not been able to meet the overall demand.

While the retail sector has grown significantly over the last few years, most of the development took place in the big cities. Misbah Iqbal, a consumer goods analyst at AKD Securities, pointed out that the rural people – about 55% to 60% of the total – are still underserved.

Pakistan is rapidly urbanising, Iqbal said. Despite many new entrants in the supermarket business, all of them are attracting huge traffic and growing significantly, she said, though largely in the major metropolitan areas.

Poor infrastructure in rural areas prevents investment. Nevertheless, many consumer goods companies are actively marketing to rural consumers, creating awareness about branded products, Iqbal said. Retailers will automatically benefit from that, she added....


http://tribune.com.pk/story/311892/retail-expansion-worlds-largest-chain-silent-on-entering-pakistani-market/
Riaz Haq said…
Glaxo Smith Kline plans to expand in Pakistan, reports Express Tribune:

Focused on emerging markets, GlaxoSmithKline’s Pakistan subsidiary is gearing up for expansion in its consumer healthcare arm. The company has been making targeted acquisitions and is looking to expand its core area away from the products in which the government regulates prices.

“GSK Pakistan is still mainly pharmaceutical; its consumer healthcare arm is about 10% of the business,” CEO Salman Burney said in an interview with The Express Tribune. The company wants to grow its consumer healthcare unit, he added.

The GSK chief said they want to do it in two steps: maximise support for the existing portfolio brands that include Panadol, Sensodyne and Aquafresh – in oral care – and Horlicks on the nutrition side. In the second step, Burney said, GSK – which has revenue growth of about 12% in its pharmaceutical line – may also go for new opportunities such as acquisitions and other new launches.

Paul Marson, GSK’s head of finance for their Middle East and Near East consumer healthcare division, in an interview with The Express Tribune earlier this year, already announced that GSK has decided to invest at least Rs2 billion in Pakistan in consumer healthcare over the next five years. “Pakistan is one of the countries where we want to aggressively invest in the near future,” he added.

On the pharma side, the company has been acquiring rival industries on a targeted basis – antibiotic manufacturers for example. It has been investing heavily on acquisitions of new assets and rebranding of certain products. “The current strategy is to broaden our business base and rebalance,” Burney said. GSK Pakistan, therefore, made acquisitions on a targeted basis.

“GSK launched five new products this year including Votrient, Duodart, Avamys, Synflorix and Fixval,” Burney said. The company is soon going to launch one or two antibiotic products, he added.

GSK’s selling marketing and distribution expenses amounted to Rs2 billion for the nine months ended September 30, up 20.6% from Rs1.68 billion in the corresponding period last year – reflecting its recent investments.

“We re-launched some of our products and these are mostly consumer side expenses,” Burney said.

GSK’s operating profit for the nine months ended September 30 amounted to Rs1.8 billion, up 33% from Rs1.4 billion in the corresponding period of 2010. However, earnings per share in the third quarter of 2011 dropped to Rs0.99 from Rs1.44 in the third quarter of 2010.

“Inflation hit our cost of production,” Burney said, “and at the same time we did not make price adjustments. With the exception of few products, we have not had a price increase since 2001.”

Rupee devaluation also affected gross margin, Burney said. “We also capitalized some capital base reserves which diluted the gross margin,” he added.

Burney said increase in profits – to some extent – will depend on business growth, inflation, price increases and how fast GSK can expand its products portfolio. Burney said the government should approve a pricing policy and allow a price increase across the board to urgently support the industry.

The government of Pakistan currently controls the price of pharmaceutical products it deems “life saving”, a policy that has hurt investment in the sector. Sources say the Swiss pharmaceutical company Roche wound up its operations in Pakistan for this very reason....


http://tribune.com.pk/story/307833/pharma-and-healthcare-gsk-looking-to-aggressively-expand-in-pakistan/
Riaz Haq said…
Here's an Express Tribune story on the opening of British Dept store Debenhams:

When Pizza Hut opened its first franchise in Pakistan in 1993, few were familiar with the concept of franchising. Soon it became a household name, and was followed by other fast food franchises. Many observers viewed these import-oriented luxuries in an underdeveloped country like Pakistan, with scepticism and considered it a waste of our precious foreign exchange. However, the trend of foreign retail outlets continues to expand into other products, services, and brands.

The press launching of the 200 years old British department store, Debenhams’ branch in Karachi earlier this month on 27,000 square feet space, at the upbeat Dolmen City Mall, was attended by important personalities, like, UK Minister of State for Trade and Investment, Lord Stephen Green and UK Cabinet Minister Baroness Sayeeda Warsi. It appears to have pushed the retail franchising business to another level. The skeptics are turning into fans.

This will be the first international department store in Pakistan offering a complete range of product categories synonymous with Debenhams, including a full range of women’s, men’s and children’s clothing, as well as, home, beauty and accessories. It is promised to be a truly world class shopping experience.

“I am very bullish on retail, not just for local but also foreign brands,” said Yasin Paracha, Managing Director, Team-A Ventures (Pvt) Ltd, which is the franchisee in Pakistan for Debenhams. “Foreign brands will perhaps give Pakistan that softer image we need; that we are normal people, with normal tastes and preferences and actually do drive in cars and wear western clothes! Furthermore, foreign brands will give the local brands the required positioning on the brand scene and will give customers the choice to decide where they want to spend their money.”

It is worth noting that before the fast food franchises, auxiliary industries like the home-delivery service and suppliers of quality poultry, meat etc, according to modern quality standards, hardly existed.

Paracha is very upbeat about the employment possibilities this presents. “This creates immense number of jobs; the average requirement per 1,000 square foot, of retail space is around six, which means Dolmen City, with a leasable area of 650,000 square feet will provide jobs to around 4,000 people! These will be mostly undergrads who might struggle to find good jobs in offices. Here they have the chance to work in a comfortable environment, look nice, and develop the discipline to deal professionally with customers. It also provides students the opportunity to work. Almost every teenager in the UK has worked in a retail environment.”

About government revenue and taxation, Mr. Paracha says, “This adds immense revenue, as most brands will progress towards declaring and paying taxes, they are too much ‘in your face’ to avoid it. Furthermore, instead of considering this as an outflow of foreign exchange, it actually saves it, as most people spend on shopping when they travel, they will convert to shopping within the country if they have the option and the right environment.”...


http://tribune.com.pk/story/325554/the-fast-track-growth-of-foreign-retail-franchises-in-pakistan/
Riaz Haq said…
"As the green revolution tapered off, a poultry revolution began; in the late 1970s. Ever since, Pakistan has been gnawing away at broiler chicken and there’s no turning back", wrote Punjab's director general of board of investments in a recent Op Ed in Dawn.

In 2011/12 K&N’s expects to produce 80 million layer and broiler chicks, reports thepoultrysite.com.

In the 1960’s and 1970’s, obtaining safe, reliable sources of poultry feed was an insurmountable challenge in Pakistan. This led Khalil to set up his own feed mill to produce feed for K&N’s operations at Karachi in 1971. With the growing need of feed for the integrated production operations in Central Punjab province and Northern areas of the country, a feed mill established by a multi-national company at Lahore, was acquired by K&N’s to take advantage of low-cost feed ingredients available in the Central part of Pakistan.

The growth of commercial poultry production through the decades changed the mindset of consumers towards farm raised broilers and eggs, helped by lower prices and greater availability. Today, Desi chicken and eggs are produced in lower volumes and considered more of a delicacy.

Yet the strength of the live/wet chicken market culture, the negligible overheads of roadside sales – a butcher’s knife costs less than US$1 – and the reassurance of Halal slaughter remain significant influences slowing the uptake of processing, says Adil Sattar.

Practical problems, particularly the limited availability of cool chain facilities and frequent power breakdowns, have to be overcome with production and distribution of processed products inevitably involving high overheads.

"Earlier, within our industry, poultry processing was considered a non-viable poultry business activity as many firms had tried but ended up closing down their operations," says Adil. "At K&N’s, we endeavoured to develop the market, and other companies are now looking to start processing operations."

Today, chicken is the most popular protein source in Pakistan, primarily through the industry’s growth and success leading to lower cost and widespread availability, with per-capita consumption about 7kg (15.4lb) per year. The tradition is to eat chicken at home, always skinless cooked in curries, with rice or barbecued.

Restaurants offer local cuisine including a variety of curries, barbecue dishes and different types of rice, with a number of upmarket cafes and restaurants serving western cuisine and many of the international fast food caterers such as McDonald’s, KFC, Pizza Hut, Nando’s, Hardees and Subway also present.
Riaz Haq said…
Here's a News report on meat consumption in Pakistan:

The consumption of poultry meat increased by 239 percent in 11 years from 322 million tons in 1999/2000 to 767 million tons in 2010/11, but it is still only 0.7 percent of the global poultry production, experts said on Monday.

At a seminar organised by Big Bird to commemorate its 20 years association with the global poultry giant Hubbard pioneer of poultry in Pakistan Dr Yaqoob Bhatti in his paper revealed that the value of poultry infrastructure exceeds Rs300 billion and annual turnover of commercial poultry is Rs40 billion.

With 105 hatcheries, the annual broiler chick production is 820 million, he said, adding that the commercial egg production is 8.690 billion per annum in addition to 3.742 million production of rural eggs.

Pakistan Poultry Association former chairman Abdul Basit said that poultry is the cheapest source of animal protein not only in Pakistan, but the world over. The average daily animal protein consumption in Pakistan is only 17 grams per capita, while the average minimum requirement is 27 grams, he said.

There is a dire need to increase poultry production in the country that has largely grown without helpful government policies or facilitation, said Basit. The industry, for instance, has since long been demanding the government to disallow poultry farm clusters through a law as chicken farms at least 1.5km apart greatly reduce the risk of spread of diseases among various poultry flocks, he said.

He said his concern has to relocate its very large chicken farms each time when place was surrounded with many other farms too close to his farms. He said he has shifted his major high quality grand parent farms to Thar deserts. Dr Mustafa Kamal said that the consumption of mutton has declined rapidly, while that of beef and poultry has increased.

The share of poultry meat increased from 16.4 percent to 24.3 percent, he said, adding that the consumption of mutton declined from 0.649 million tons to 0.616 million tons, showing a fall of 20 percent in total meat consumption share.

Still, he said, Pakistan as a meat eating country produces around 50 percent broiler chickens of those produced in India, which has seven times human population and has a good chance to develop Grand Parent breeding operations, which has an existing capacity of producing eight million parent stocks for domestic as well as for export purposes.

Olvier Behaghel of Hubbard France said that Pakistani poultry improved efficiencies rapidly during the last 20 year that has helped it control the cost. Maturing time of a broiler has reduced during this period from four days to 46 days and from 38 days to 40 days, he said.

The weight gain of the chick at the time of maturity has increased from 1.5-1.7kg to 1.9 to 2kg and feed consumption by the time of maturity has declined from 2.2-2.5kg to 1.7-1.9kg. “Pakistan, he said, is gradually reaching global and Hubbard standards in chicken health, morality and efficiency in productive processes.

http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=70726&Cat=3
Riaz Haq said…
Unilver Pakistan reports record sales and profit, according to Business Recorder newspaper:

Unilever Pakistan Limited has delivered profit after tax of Rs 4.094 billion in the year ended December 31, 2011, up 25 percent on previous year's profit of Rs 3.273 billion.

The company's earning per share increased to Rs 308 in the period under review against Rs 246 in the same period a year back.


The board of directors of the company in its meeting held here on February 9, recommended final cash dividend of Rs 202 per ordinary share ie 404 percent.

With the interim dividend of Rs 105 per ordinary share already paid during the year, the total dividend for the year 2011 amounts to Rs 307 per ordinary share of Rs 50 each against Rs 246 per ordinary share paid in 2010.

Total profit distributed byway of dividend amounts to 99.7 percent in 2011 against 99.9 percent in 2010.

The final dividend will be payable to the members on the number of ordinary shares held by them at the close of business on March 27.

According to the financial results sent to Karachi Stock Exchange, the company's sales increased by 16 percent to Rs 51.876 billion in 2011 against Rs 44.671 billion in 2010.

The cost of sales increased to Rs 33.792 billion against Rs 30.094 billion.

The company said the operating conditions in Pakistan remained tough as economic growth for the second consecutive year was marred by floods, prolonged power outages, rising commodity costs and adverse security environment.

Notwithstanding this, consumer demand remained resilient.

Unilever further strengthened its foothold by launching seven new brands - the highest ever in a single year.

The company now has a footprint that is significantly broader and a reach much deeper, helping millions of Pakistanis feel good, look good and get more out of life, it added.

Home and Personal Care continues to deliver double digit growth in key categories; laundry, hair care and skin care.

Six new brand launches, product renovations and market activations continue to be the drivers.

Beverages sales grew mainly on the back of price increases following an inflationary material cost environment, compounded by government levies.

Smuggled tea continues to pose a threat to branded players; high government levies lead to high consumer price, deny the formal sector fuel to grow and provide smugglers incentive to evade.

Despite challenges, ice cream sales grew by 11 percent fuelled by strong innovation and launch of Fruttare.

Greater focus on costs, a better product mix and pricing actions helped improve gross margins.

Input cost continued to increase on the back of rising commodity costs, margins, however benefited from improved scale and timely but measured price corrections.

This helped preserve consumer value.

Greater scale and improved mix led to increase in gross and operating margins by 223bps and 73bps respectively, resulting in 25 percent higher profit after tax and earning per share.

The company's profit before taxation increased to Rs 5.925 billion in 2011 as compared to Rs 4.780 billion in the year 2010.


http://www.brecorder.com/company-news/single/601/235/1152662/
Riaz Haq said…
Here's a Fiber2Fashion report on Pakistan's bumper cotton crop:

With around 14,548,845 bales already reaching the ginneries by March 15, Pakistan’s cotton output for the current season is expected to surpass record 15 million bales, according to Pakistan Cotton Ginners Association (PCGA).

PCGA Chairman Amanullah Qureshi said the country’s cotton output for next season is pegged at 17 million bales.

He reiterated the need for formulation of National Cotton Policy in consultation with all the industry stakeholders including ginners and growers, so as to protect their interests.

Mr. Qureshi said the Government should develop a mechanism to stabilise the cotton prices, instead of leaving the farmers and ginners at the mercy of textile mill owners.

He claimed that all production estimates presented by Governmental agencies and departments have proved to be incorrect, while those by PCGA have proved right.

He also called upon the Government to approve a bailout package for cotton cultivators who suffered a loss of over Rs. 225 billion due to textile millers lobby.

The PCGA Chairman urged the Government to direct the Trading Corporation of Pakistan (TCP) to buy a minimum 0.7 million bales of unsold cotton from ginners.


http://www.fibre2fashion.com/news/textile-news/newsdetails.aspx?news_id=109146
Riaz Haq said…
Here's a PakistanToday report on SBP's efforts to increase funding of agriculture and financial literacy among farmers:

Presiding over a one-day ‘Farmers’ Financial Literacy & Awareness Program on Agricultural Financing,’ which was jointly organized by State Bank and Habib Bank Ltd. today at NRSP Training Center, Bahawalpur, he said the agriculture sector has a key role in country’s economy and stressed the need for making necessary finances available to farmers for multiple cropping activities. He outlined SBP’s efforts for creating awareness amongst the farming community and developing capacity of commercial banks through its various training and awareness programmes.
--------------------
Dr. Saeed Ahmed, Head, Agricultural Credit and Microfinance Department, SBP said the programme is aimed at creating awareness among the farming community about agriculture financing products & services offered by banks, money management techniques and lending procedures, documentations, etc. Besides, it would also develop capacity of agriculture field officers of banks in agri. financing and synergize the efforts of all stakeholders including policy makers, executing agencies, service providers & farming community to improve access to agricultural credit, he said, adding that SBP’s promotional initiatives and policy interventions have translated into around 200 percent increase in the flow of credit to the agriculture sector from Rs. 137.4 billion in 2005-06 to Rs. 263 billion in 2010-11.
However, he pointed out, despite this encouraging growth, the disbursement to the agriculture sector was around 40% of the total estimated credit requirements. ‘SBP has planned to increase the disbursement to 70-80 percent during the next five years covering 3.3 million borrowers by adopting a multipronged strategy,’ he added.
The inaugural session was followed by a technical session for the agricultural credit staff of banks in which senior officials of SBP and HBL made detailed presentations on dynamics of agriculture finance and related policies. The purpose of this session was to train the agriculture finance officials of banks enabling them to conduct farmers’ financial literacy programs at their end and to share the best practices in agriculture lending with the participants.


http://www.pakistantoday.com.pk/2012/04/12/news/profit/agriculture-can-farm-out-economy/
Riaz Haq said…
Here's a News report on rising sales of cars, motorcycles and tractors in Pakistan:

Sales of automobiles in the first nine months (July-March) of the current fiscal year increased 15 percent to 128,576 units, compared to 111,852 units same period last year, according to the data released by the Pakistan Automotive Manufacturers Association (PAMA).



According to the data, in the third quarter (Jan.-March) of this year, automobile sales increased 7 percent to 46,632 units from 43,753 units in the correspondent quarter last year. When compared with the second quarter of this year, sales in the third quarter showed an impressive growth of 22 percent.



Pak Suzuki Motor Company (PSMC) continued to depict strong sales showing a growth of 32 percent in the July-March period to 81,360 units compared with 61,693 units in the same period last year. Analysts attribute strong growth to the yellow cab scheme announced by the Punjab government. In March 2012 alone, PSMC sales stood at 11,198 units, up 16 percent from same month last year and 12 percent from February 2012.



On the other hand, Indus Motor Company sales growth remained subdued during the period under review. The company sold a total of 38,858 units compared to 37,259 units in the same period last year, up by 4 percent. In the third quarter, the company sold 14,792 units against 14,851 units in the same period last year.



Samina Kanji, an analyst at BMA Research, a 15 percent year-on-year growth in auto sales is primarily due to the yellow cab scheme of the Punjab government. On the other hand, motorcycles and three wheelers sales increased on month-on-month basis and sales in March stood at 70,671 units as compared to 65,011 an increase of 5,660 units, the data showed. Total sales of farm tractors decline to 6,229 units as compared to previous month sales of 8,906 units. Sales of trucks and buses sales in March stood at 379 units as compared to 304 units in February 2012.


http://www.thenews.com.pk/Todays-News-3-102452-Auto-sales-show-15pc-growth-in-nine-months
Riaz Haq said…
Here's an ET story of a celebrated CEO's departure in Pakistan:

(Asad Umar's) tenure at Engro has certainly been a remarkably successful one. When Umar took over as President and CEO of the company in January 2004, Engro was largely just a fertiliser manufacturer with a small petrochemical subsidiary. Under his leadership, however, the company turned into a diversified industrial conglomerate, with interests ranging from fertilizers, foods, petrochemicals, chemical storage, energy and commodity trading.

Small wonder, then, that Dawood was effusive in his praise of Umar when announcing the departure to the company’s employees, noting that under his leadership, Engro’s revenues had grown from just Rs13 billion in 2004 to Rs114 billion in 2011, growing at an annualised rate of nearly 36.4%. (Inflation during that time averaged 12.6% per year.)

Even within the core fertiliser business, Umar took Engro from being a local player to a globally competitive one, leading the firm into the $1.1 billion project that set up the world’s largest single-train urea manufacturing plant in Pakistan.

Umar’s 27-year career at Engro began in 1985, when the company was still a subsidiary of ExxonMobil, the global oil giant. “I still remember the exact figure of my first salary: Rs8,170 per month. My boss at the time said ‘Well, frankly they are paying you too much.’” As CEO of Engro Corporation, Umar was paid Rs68.6 million for the year 2011, which comes to a monthly salary of Rs5.7 million.

In addition to his salary, Umar, 50, was also paid in stock and currently owns about 2 million shares of the company, with options to buy another 924,000, according to Engro’s latest available financial statements. At Monday’s closing price of Rs102.47 per share, that puts the value of Umar’s stocks and options at over Rs300 million.

Umar represents the growing class of executives trained by the country’s business schools who made it big by working their way up the corporate ladder rather than being born into privilege. Umar graduated from the Institute of Business Administration in Karachi in 1984, working for a short stint at HSBC Pakistan before moving to what was then Exxon Chemical Pakistan as a business analyst.

He was the only Pakistani employee of Exxon working abroad (in Canada) when the famous management buyout of Engro took place in 1991. Umar came back to Pakistan and in 1997 was appointed the first CEO of Engro Polymer & Chemicals, the group’s petrochemical arm.

When became president of the company in 2004, he immediately made the company take a global perspective, becoming the first Pakistani private sector firm to hire the top (and expensive) US consulting firm McKinsey & Company to help create the Engro’s strategy. Engro changed its corporate structure as a result of that engagement and is now on a global expansion kick, buying out a US-based food company and considering expanding into the fertiliser business in North Africa to supply the European market.


http://tribune.com.pk/story/365621/corporate-titan-after-27-years-at-engro-asad-umar-calls-it-a-day/
Riaz Haq said…
Here's a <a href="http://www.thenewstribe.com/2012/04/23/ian-james-donald-md-nestle-leaving-pakistan/>news story</a> on progress made by outgoing MD of Nestle Pakistan:

<i>Karachi: Ian James Donald Managing Director Nestle Pakistan is likely to be deputed from Pakistan to other country after one year and eight months of his successful service in the leading nutrition country.

Ian J Donald has been Managing Director at Nestle Pakistan Limited since September 1, 2009. He was deputed from Nestle Malaysia Bhd where he served as a Director of Ice Cream, Chilled Products & Associated Businesses.

Under his leadership, Nestle Pakistan succeeded in delivering robust financial results despite the economic slow down and flood crises in the country, which hit livestock sector and affected productions channels of the company.

The leading FMCG company announced good results heralding a prosperous year and sound financials backing its many initiatives.

The profit and revenues witnessed handsome growth from 2010 to 2011 under his tenure as the profit of the company up by 56.6 percent and revenues increased by 58 percent.

Nestle Pakistan profits and revenues stood at Rs 4.7 billion and Rs 64.8 billion by 2011 as compared with profits and revenues recorded in 2010 at Rs 3 billion and Rs 41 billion.

The business profitability and strategy had been successful in the past two years as the company was witnessed as one of most preferred one in equity market. It share value was stood at Rs 66.27 in 2010, which went to Rs 102.94, showing 55 percent growth.

Managing Director Ian Donald – a South African national who has been with the global parent company for 40 years – has focused on expansion of Nestle business primarily by growing the packaged foods market.

Nestle already has a gigantic infrastructure in Pakistan. The company collects milk from over 190,000 farmers spread out over an area of about 145,000 square kilometers.

Donald believes that the strategy of value addition in existing brands rather than adding newer brands in the market. Besides, his contribution was immense in sales expansion in the rural market, which he believes a driving factor for promoting business and standards of masses’ lives.

The outing MD of Nestle, a Swiss company, has made a three years business expansion plan of Rs 320 million Swiss Francs in its presence in Pakistan’ rural and urban markets.</i>

http://www.thenewstribe.com/2012/04/23/ian-james-donald-md-nestle-leaving-pakistan/
Riaz Haq said…
Here's an ET story on Engro supply chain in Pakistan:

Have you ever wondered where the milk in packaged dairy products comes from? In case you assumed that big food companies maintained their own dairy farms that generated thousands of litres of milk daily and remained insulated from fluctuations in open market rates, you are wide of the mark.

In fact, only 5% of about 1.2 million litres of milk that Engro Foods collects every day for its dairy segment during the flush season – from January to April each year when fodder is available in abundance and milk production is high – comes from its own corporate farm located in Sukkur.

The rest of the milk supplies during the flush season and the summer, when milk production drops by roughly 50%, comes from about 15,000 small farmers scattered between Sanghar and Jhang districts, an area of 135,000 square kilometres.

Streamlined under Engro Milk Automation Network (EMAN), Engro Foods maintains a sales force of 1,500 people across 1,200 villages in Sindh and Punjab. They collect milk, mostly in small quantities, from farmers between 6:00am and 9:30am every day, which is then transported for further processing.

But why would a villager with just a few cattle sell the excess quantity of milk to Engro Foods instead of the traditional milk contractors known as dodhis?

According to Aamir Khawas, who works as head of milk procurement and agri services at Engro Foods, doing business with a large food company offers small farmers a number of benefits. “Animals are susceptible to diseases. Our network of veterinarians ensures sick animals receive immediate treatment. That’s a benefit no traditional milk contractor can offer,” he said.

Moreover, the moment a farmer sells milk to an Engro representative, in whatever small quantity, the transaction is recorded electronically in a centralised database by swiping the EMAN card that each of the 15,000 suppliers carries.

The availability of real-time data ensures that money is transferred to the farmer the day the transaction takes place. This is in contrast to the past practice of issuing receipts on paper that took at least a week before a transaction was recorded and payment processed.

In addition, Engro’s advisory service helps farmers increase milk production. “There’re two ways for a farmer to increase his revenue. If he gets Rs41 instead of Rs40 per litre, his revenue increases by Re1. But if the milk output increases by one litre, his revenue increases by Rs40. We help him do the latter,” Khawas said.

So how does Engro ensure that the milk is pure? “It’s very easy. We pay farmers not on the litres of milk they bring to us. Rather, the basis of payment is total solid contents of the milk,” he said, explaining that milk consists of three things – water, fat and solid non-fat (SNF). Total solid contents are the sum of fat and SNF.

“It’s hard to adulterate when the quantity is low. So no matter how much water you add, the solid contents can easily be determined by running a few tests,” he said.

A total of 13 tests are carried out when a farmer hands over milk to an Engro representative. It is picked up from there by an Engro van that carries out another 20 tests on the collected milk. It then reaches the regional office where 30 more tests are done to check its quality. Eventually, milk is taken to the Engro plant where the final 40 tests take place before it is processed, packaged and dispatched to the retail market.

With the demand of milk increasing by 15% annually and supply rising by just 2% a year in Pakistan, the dairy sector looks like a heaven for investment. The Sukkur farm of Engro Foods has already grown 10 times since its inception with about 3,000 cows. “Yet we’re looking for a major expansion in the near future.”


http://tribune.com.pk/story/378282/the-benefits-of-business-with-a-large-food-company/
Riaz Haq said…
Here's a BR report on PM Raja talking about PPP's pro-farmer policies:

Prime Minister Raja Pervez Ashraf Tuesday said prudent and farmers-friendly policies of the PPP led government has helped injection of Rs500 billion in the rural economy ultimately benefiting the farming community in the country.

"Due to our pro-farming policies and due payments of agriculture produce of the farmers specially in wheat production, Pakistan once an wheat importing country has now become an exporting country and we are self sufficient in wheat production", the Prime Minister said while addressing APP regularization certificate distribution ceremony to distribute letters among the contract and daily wages employees of Associated Press of Pakistan (APP), here at the Prime Minister Secretariat today.


http://www.brecorder.com/top-news/1-front-top-news/66940-pro-farmers-policies-of-government-helped-inject-rs500-billion-in-rural-economy-pm-.html
Riaz Haq said…
Pakistanis consume over 170 Kg of milk per capita and it's growing, according to FAO.

http://www.fao.org/ag/againfo/programmes/en/pplpi/docarc/wp44_3.pdf

Growing milk consumption can help reduce malnutrition in Pakistan.

Here's a story illustrating the value of milk in reducing malnutrition in Africa:

WFP Executive Director Josette Sheeran kept a promise she made to WFP-supported Rilima health centre last July by giving two cows worth 1,360,000 Frw to help reduce malnutrition among poor communities in the area.

WFP Executive Director Josette Sheeran kept a promise she made to WFP-supported Rilima health centre last July by giving two cows worth 1,360,000 Frw to help reduce malnutrition among poor communities in the area.

The milk produced by the cows will be used to feed severely malnourished children and breast feeding mothers. “The health centre expects to get 50 litres of milk to feed over 200 malnourished children per day,” says Pascal Habyarimana assistant director of the health centre.
Rilima nutrition centre assists more than 37,000 people in the area. WFP provides monthly fortified supplementary food to malnourished children under the age of five years and malnourished pregnant or nursing women.

“Since 2009, more than 20,000 malnourished children have been supported and recovered from malnutrition", says WFP Rwanda Country Director Abdoulaye Balde. "WFP will continue to provide relevant suport to reduce malnutrition among poor communities in Rilima sector”.
Parents and nursing women come to the centre not only to collect fortified food provided by WFP but also to be trained on good nutrition practices. Training is focused mainly on balanced meals, hygiene, disease prevention and family planning.
The idea is that, after receiving assistance from nutritoon centres, parents can become agents for change in their communities with the help of a a trained community health worker.

Local mothers are currently learning how to organize vegetable gardens at home. A garden can be established on a small plot and maintained with waste water from the kitchen. The nutrition centre itself has a model garden and vegetables from it are used for cooking demonstrations.
In partnership with World Vision and Rilima health centre, beneficiaries are encouraged to develop good cooking practice at home and share them with their neighbours.


http://www.wfp.org/stories/wfp-executive-director-donates-cows-reduce-malnutrition-rwanda
Riaz Haq said…
Here's a Bloomberg story titled "Pakistan, Land of Entrepreneurs":

On a warm Sunday morning in November, Arif Habib leaves his posh home near the seafront in southern Karachi and drives across town in a silver Toyota Prado SUV. About half an hour later, he arrives to check up on his latest project: a 2,100-acre residential development at the northern tip of this city of 20 million. He hops out, shakes hands with young company call-center workers who are dressed for a cricket match, and joins them at the edge of the playing field for a traditional Pakistani breakfast of curried chickpeas and semolina pudding. After a quick tour of the construction site, he straps on his leg pads, grabs his bat, and heads onto the field. “The principles of cricket are very effective in business,” says Habib, 59. “The goal is to stay at the wicket, hit the right balls, leave the balls that don’t quite work, and keep an eye on the scoreboard. I feel that my childhood association with cricket has contributed to my success.”

Habib, who started as a stockbroker more than four decades ago, has expanded his Arif Habib Group into a 13-company business that has invested $2 billion in financial services, cement, fertilizer, and steel factories since 2004. His group and a clutch of others have become conglomerates of a kind that went out of fashion in the West but seem suited to the often chaotic conditions in Pakistan. Engro (ENGRO), a maker of fertilizer, has moved into packaged foods and coal mining. Billionaire Mian Muhammad Mansha, one of Pakistan’s richest men, is importing 2,500 milk cows from Australia to start a dairy business after running MCB Bank, Nishat Mills, and D.G. Khan Cement.

These companies have prospered in a country that, since joining the U.S. in the war on terror after Sept. 11, has lost more than 40,000 people to retaliatory bombings by the Taliban. Political violence in Karachi has killed 2,000 Pakistanis this year, and an energy crisis—power outages last as long as 18 hours a day—has led to social unrest. Foreign direct investment declined 24 percent to $244 million in the four months ended Oct. 31, according to the central bank.

At the same time, some 70 million Pakistanis—40 percent of the population—have become middle-class, says Sakib Sherani, chief executive of Macro Economic Insights, a research firm in Islamabad. A boom in agriculture and residential property, as well as jobs in hot sectors such as telecom and media, have helped Pakistanis prosper. “Just go to the malls and see the number of customers who are actually buying in upscale stores and that shows you how robust the demand is,” says Azfer Naseem, head of research for Elixir Securities in Karachi. “Despite the energy crisis, we have growth of 3 percent.”

Sherani of Macro Economic Insights estimates the middle class doubled in size between 2002 and 2012. “Those who understand the difference between the perception of Pakistan and the reality have made a killing,” Habib says. “Foreigners don’t come here, so the field is wide open.” The KSE100, the benchmark index of the Karachi Exchange, has risen elevenfold since mid-2001. Shares in the index are up 43 percent this year alone. Over the past decade, stocks have been buoyed by corporate earnings, which were bolstered in turn by rising consumer spending.
---------
Today, Habib has 11,000 employees and annual revenue of 100 billion rupees. He plans to expand into commodities trading and warehousing. “I’ve created all my wealth in Pakistan and reinvested all of it here,” says Habib, who drives himself to his cricket matches and is never accompanied by security guards. In 1998, when Pakistan’s share index fell to a record low after the government tested nuclear weapons, Habib bought shares even though “people thought I was mad.”...


http://www.businessweek.com/articles/2012-11-29/pakistan-land-of-entrepreneurs
Riaz Haq said…
Here's a Dawn story on growing retail sector in Pakistan:

Karachi’s Dolmen City Mall is a large, plush building that would not be out of place in Dubai. Heavily fortified with security guards, the interior is impressive, with its cavernous corridors and gleaming marble floor – a far cry from the hustle and bustle of the city’s other shopping areas.

Newly arrived from London earlier this year, Karachi residents were insistent that I must see this wonderful new addition to the city. When I did, it was something of a home from home. In addition to high end local clothing brands were a whole plethora of foreign stores, from Mango, to Next, to the Body Shop. Many (though not all) of these are British imports.

The latest to open its doors was Debenhams, stalwart of the British high street, which this year became the first international department store in Pakistan with its branch in Dolmen. It joins other UK brands such as Next, Early Learning Centre, Accessorize and Monsoon.

So what is behind the influx of foreign stores to Karachi’s high streets? Internationally, Pakistan is not viewed as an obvious market for retail brands due to security concerns – both real and perceived – and the attendant difficulties of doing business.

However, the numbers tell a different story. The retail sector is one of the fastest-growing in Pakistan, and is expected to grow at a rate of 7 per cent per year until 2015. To give some indication of the growth it has already seen in recent years, compare the market value in 2006 – £19124.1 million – with 2010, when it had increased to £26541.2 million.

Yasin Paracha runs Team A Ventures, the company which holds the franchises for UK brands Debenhams, Next, Early Learning Centre, Accessorize, and Mothercare. He explains that the historic ties between the two countries means that British brands have instant recognition in Pakistan.

“People in our target market are used to travelling to London frequently,” he says – many people will have visited the UK as tourists, students, or on family or business visits.

Indeed, the growth of this target market – young, urban, and with significant disposable income – is crucial to increased retail operations in Pakistan. The urbanized middle classes are a steadily growing group.

Of Pakistan’s 180-million strong population, around 55 million live in cities such as Karachi, Lahore, and Faisalabad. Consumerism is on the up, fuelled by a recent boom in consumer banking and the media industry, and encouraged by ever-increasing investment from both local and foreign chains. Traditionally, many people in this target market have preferred to do much of their shopping abroad, meaning that they are already predisposed to foreign brands.

But what about the security risks for new businesses? Karachi, in particular, is home to outbreaks of sectarian and ethnic violence, terrorist attacks, and a high instance of crime including extortion rackets.

“Of course it’s a concern for new investors,” says Paracha. “On the surface of it, a lot of brands are hesitant, but when they first make the trip to Pakistan, they are reassured because they realise that the things on the ground are very different from what they see in the media.”

However, the situation cannot be ignored. “One has to be cautious,” Paracha continues. “You can’t go into a very aggressive expansion because you can’t deny the security issue, especially in some cities. But so far we have not had a major negative impact on our operations.”

The visible success of household names like Debenhams and Next in Pakistan is likely t encourage other British brands to see the country as a potentially viable market. In addition to this, there is a concerted drive from the UK government to encourage British investment in Pakistan, due to a bilateral trade agreement between the two countries....


http://dawn.com/2012/12/05/banking-on-history-british-brands-thrive-in-pakistan/
Riaz Haq said…
Here's a Forbes piece on Millat tractors in Pakistan:

Almost a year after floods devastated Pakistan, swamping 5.8 million acres of farmland and displacing millions of people, Ashaq Malik, who grows cotton, sugarcane and wheat on 865 acres in Punjab province, has reason to feel optimistic. After nearly a third of his land was inundated, today he is seeing a strong harvest. "As soon as the water level fell down, we started reconstructing the houses and working on the fields," says Malik. "Today there is no problem with the crops."

Companies that service the agriculture sector are also thriving in the rebound, none more than Millat Tractors of Lahore, which also manufactures other farm gear. Last year Millat earned 2.3 billion rupees ($29 million) on sales of $263 million, a 40% increase from the previous year. In the first quarter of 2011 profits grew 52% from the same period a year earlier..

To buy his 150,000 shares, Ansari--then a 39-year-old general manager--sold a plot of land, liquidated his retirement funds and borrowed money from his father. "It was a lot of money to me back then," he says. "Today it's like a lottery coming your way. The value has increased many, many fold since then."

Today the public, including Millat's 1,600 employees, owns 42% of the company; management and kin 28%; and banks and other institutions the rest. Employees are prosperous because of stock dividends and their salaries. Most of Millat's employees pay income tax--a sign of affluence in Pakistan--and have their own cars.
..


http://www.forbes.com/global/2011/0912/best-under-a-billion-11-millat-tractors-pakistan-after-flood.html
Riaz Haq said…
Here's a Nation newspaper report on US help for Pak agriculture:

“Since the 1950s, the United States has been working to support agriculture in Pakistan by introducing the orange and helping to double the country’ wheat production. Today, we continue our support because improving crop yields protecting food sources from disease and boosting milk production will increase incomes of the farmers which would ultimately strengthen Pakistan’s prosperity, US ambassador said addressing a gathering of government officials, researchers and farmers during his visit to the National Agriculture Research Center (NARC) here on Wednesday.
Ambassador Olson said that the US government is committed to help the small farmers of Pakistan through projects that enhance agricultural productivity.
The introduction of this wheat variety helps protect Pakistan against UG 99 a dangerous wheat disease in the region that poses a threat to country’ farming community, he claimed.
Olson added that US government has provided new harvesting machine to support the Wheat Productivity Enhancement Project and also is also providing specialized training opportunities to Pakistani wheat scientists to fight against wheat diseases.
While talking on the occasion, Dr. Muhammad Imtiaz, Country Liaison Officer for the International Maize and Wheat Improvement Center, noted that without disease-resistant varieties of wheat experts estimate that Pakistan’s annual wheat harvest could be reduced by 50 percent if when UG 99 arrives.
“Agriculture contributes 21 percent to the GDP of Pakistan and employs 45 percent of the labor force, making it one of the most significant economic drivers of Pakistan,” Dr. Imtiaz said.


http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/islamabad/08-May-2013/us-keen-to-promote-agriculture-in-pakistan-ambassador-olson
Riaz Haq said…
Here's a Frontier Post piece on USAID helping dairy sector in Pakistan:

The USAID Dairy Project has spurred growth in Pakistan’s rural economy by helping women farmers increase their incomes and improve their livelihoods.

Realizing the pivotal role rural women play in Pakistan’s livestock sector, USAID is creating a pool of up to 5,000 locally-trained and readily-available female livestock extension workers to provide veterinary services and advice on the care and feeding of cattle to rural dairy farmers. The project also meets farmers’ basic needs by providing them with quality supplies for their animals, such as feed, vitamins, and medication.

The USAID Dairy Project is a catalyst to create new jobs and improve rural livelihoods in Pakistan. “My husband used to work at a private school, but he had to quit his job because of an illness. Now he is unemployed. I was educated through the 12th grade, but I could not find a job,” said Asma, a resident of Toba Tek Singh in Punjab.

“I was worried about my husband’s health and the fact that I couldn’t do anything for my children’s future even though I am educated. I couldn’t sleep at night. But then I heard about this USAID project. I am happy to say that I am now working in my village as a livestock extension worker, providing basic animal healthcare services in my village.”

USAID’s Dairy Project, launched in July 2011, selects dynamic rural women with a high school diploma and trains them in basic animal health management techniques and entrepreneurship. The program has already trained 2,470 unemployed rural women, helping them earn an average of 2,500 rupees per month. It aims to train an additional 2,530 farmers.

“I am advising people in my village about how to improve milk production,” Asma added. “This USAID project has connected us with livestock experts and pharmaceutical companies we didn’t know about before. So far, I have treated around 600 animals and earned 46,000 rupees. Now, our household is prosperous and my sick husband is getting treatment. I am also re-investing in my own agriculture business.”

Naazra, another beneficiary of the project and a resident of Cheechawatnee, was trained as a livestock extension worker and is now successfully running her own business supplying concentrated feed to local dairy farmers.

“USAID trainers introduced me to a quality manufacturer of cattle feed and gave me a mobile phone so I could easily contact suppliers and customers. I have earned 30,000 rupees in three months by selling quality feed. I used the money to develop my business and meet the basic needs of my family. I even bought a refrigerator, which has been very useful for the summer season.”

These women represent a symbol of change and are a testimony to the fact that careful interventions, designed based on community needs, can truly transform rural livelihoods. Women like Aasma and Naazra are helping to modernize Pakistan’s dairy sector in line with international practices.

The dairy and livestock sectors contribute about 11 percent to the gross domestic product of Pakistan. Forty-five percent of Pakistanis are employed in the agricultural sector. Most dairy farmers have only two to three cattle, and few have access to veterinary services that are crucial to improving milk yields.

Dairy farming is vital for the rural economy of Pakistan, and USAID’s extensive training programs for dairy farmers, women livestock extension workers, and artificial insemination technicians will continue to play an important role in transforming livelihoods in rural communities...


http://www.thefrontierpost.com/article/13010/
Riaz Haq said…
Here's an excerpt of Express Tribune report on LG Electronics investment in Pakistan:

“We have decided to expand our operations by enhancing production capacities to capture growing consumer demand in Pakistan,” said DY Kim, President of LG Electronics Gulf, while talking to The Express Tribune on Thursday.
“Currently, our production in Pakistan is only limited to televisions and LCDs, but in a couple of months we will start producing other household items like microwaves and washing machines,” he added.
LG Electronics is a global leader and technology innovator in consumer electronics, mobile communications and home appliances with 117 operations around the world.
LG achieved global sales of $49 billion in 2011. It is offering products in four segments – home entertainment, mobile communications, home appliances and air conditioning & energy solutions.
In Pakistan, LG is increasing investment to enhance production capacity, but Kim did not divulge exact figure and only said it would be in billions of rupees.
The company is looking to compete with Samsung, which has increased its market share in recent years.
“We want to give consumers with some other option and we are hopeful this will not take much time,” Kim said.


http://tribune.com.pk/story/550418/lg-to-invest-billions-to-capture-pakistan-market/
Riaz Haq said…
Here's Express Tribune report on rising consumption of branded packaged products in Pakistan:

.....
Stocks of major consumer goods and food companies listed on the Karachi Stock Exchange have appreciated 73.1% to date in 2013, outperforming the benchmark KSE-100 index, which has gained 50.8%.
The numbers were taken from a sample of MNCs listed on the Karachi bourse including Unilever Pakistan, Unilever Foods, Nestle Pakistan, Colgate-Palmolive and Gillette Pakistan. The current year’s market performance of these stocks, according to statistics compiled by Topline Securities, is 10.2 percentage points higher than 62.9% they gained last year.
The Express Tribune, in this report, tries to analyse what factors have been contributing to this growth and keeping these giants interested in a market confronted by deteriorating law and order and crippling power outages.
“Pakistan, with its nearly 200 million population, is simply a too large and attractive market to ignore,” Unilever Pakistan CEO Ehsan Malik said, explaining why the Anglo-Dutch food and consumer goods giant is interested in this market.

If being the world’s sixth largest consumer base is not enough, it is the country’s population growth rate that will create a high demand for food and consumer goods in the years to come.
Pakistan will soon become the fourth most populous country in the world, Nestle Pakistan’s Head of Corporate Affairs Waqar Ahmed said.
Pakistan’s population is growing at four million people a year and in four years, he says, the increase in food consumers will be larger than the population of Switzerland (15 million).
“The growth of consumption within the Pakistani market dictates that we spend more in order to be able to supply the consumers with the value they deserve. Hence for us, the investment climate within Pakistan is as good as it ever was.”
Nestle is a very good example of the country’s growth potential, Topline Securities Manager Research Zeeshan Afzal said. The Swiss giant almost doubled its sales from Rs41 billion in 2009 to Rs79 billion in 2012.
The data highlights the performance of listed MNCs but unlisted foods and consumer goods companies have also grown manifold.
Mondelez International – a subsidiary of Kraft Group based in Chicago – says Pakistan has been one of their top-five growth markets in the world.

The confectionary giant saw a significant growth in their snack brands in Pakistan, which is among the highest in the world. Their Cadbury Dairy Milk and Tang brands alone earn Rs1 billion a year in sales.
In food and consumer goods business, says Afzal, law and order is not that big a problem. The goods are produced by MNCs but the rest is done by distributors who are local people. What matters in this business, he says, is the growth and in Pakistan the growth is driven by volumes and not the price.
Beverages giant Coca-Cola, for example, didn’t need investment from its parent company, it rather invested in its new plants from profits generated by its local operations, the analyst said.
The energy shortage, he said, is also not an issue for most MNCs because of their high profitability.
Explaining the population demographics that have driven this growth, Afzal said more women are entering the workforce contributing to a rise in their family’s incomes.
Rising urbanisation, growing middle class and sophisticated consumption habits, he said, have all contributed to this growth. A big chunk of its population is young while it is one of the top countries adding 20-year-olds to the world.
These people get jobs and establish families, thus contribute to the growth of the consumer goods business.
The country’s food consumption is very high but there is still a lot of room for further growth, believe analysts as well as industry officials...


http://tribune.com.pk/story/642820/consumer-goods-multinationals-bask-in-high-growth-market-business/
Riaz Haq said…
The trend of online shopping has witnessed rapid growth recently with several retail market portals springing up.
But, a recent increase in their penetration into far-flung areas has also boosted future prospects of the e-commerce market. What used to be limited to metropolitan cities has now spread to semi-urban and rural areas of the country. This is another potential market not only for shopping portals but also for fast moving consumer good (FMCG) companies, due to better availability of internet facilities throughout the country.
Online shopping portal, Daraz.pk, claims that online shopping websites have penetrated into the rural areas. In a recent survey, they revealed that around 48% of all orders placed in the first six months of 2014 were outside of Pakistan’s biggest cities – Karachi, Lahore and Islamabad.
“Half the world’s population will have internet access by 2017, showcasing the potential of e-commerce in the future,” said Daraz.pk co-founder Muneeb Idrees. “It is also expected that the number of mobile-connected devices will surpass the number of people. These statistics represent the expanding ecosphere of e-commerce.”
Established in August 2012, Daraz.pk is a project of Rocket Internet, the world’s largest incubator. The portal is currently offering over 400 brands in 200 cities across Pakistan. After the initial success, other venture capital firms took notice and starting initiating contact with local businessmen in the industry to fund entrepreneurs.
The website gets receives their highest number of orders (six per cent) from Ghotki, a semi-urban area in Sindh. The highest basket size across the country was from Lala Musa in Punjab, doubling the average order size of Lahore.
“In general, more than half our orders are from outside Karachi, Lahore and Islamabad,” said Idrees. “People in smaller towns have access to social media and television. They learn about new products, but don’t have malls in their cities to buy these products.”
The e-commerce market in Pakistan is estimated at around $25-30 million, in comparison to the total retail market of approximately $42 billion. Internet availability, along with introduction of branchless banking through cellular technology, has done wonders for the market.
According to estimates, branchless banking transactions have witnessed a growth of 327% during 2011-13. Daraz.pk is one of the few businesses utilising mobile commerce in Pakistan with great numbers. The management said that 20% of the transactions of the portal take place via mobile phones.
FMCG giant Unilever recently entered in an agreement with Daraz.pk to use its marketing reach all over Pakistan for its beauty and personal care products. The management thinks that this deal could be vital for the retail industry as previously no FMCG had seriously looked into the e-commerce sector. http://tribune.com.pk/story/749770/e-commerce-online-shopping-making-its-way-into-rural-areas/
Riaz Haq said…
Nestle Pakistan Ltd., a unit of the world’s biggest food company, has started selling pasteurized fresh milk in a pilot project as it seeks to develop a new segment in the South Asian country’s $23 billion dairy market.
The company has been delivering plastic pouches of milk to 100 homes in Lahore for the past three months on motorbikes and three-wheeler taxis.
“It’s like when we started with our water gallons 20 years ago, which started with delivery to offices and households, it starts small and then spreads,” Nestle Pakistan Chief Executive Officer Magdi Batato, 56, said in an interview at the company’s headquarters in Lahore. “There is a potential, but it’s still niche in my view.”
Nestle wants to diversify in the world’s fifth-largest milk market, where 95 percent of dairy products sold are unprocessed with people buying the liquid raw and then boiling it. Companies already sell milk in ultra-high temperature form that has a longer shelf amid long hours of energy outages in the blackout-prone nation.
Pakistan’s dairy industry has a value of about 2.3 trillion rupees ($23 billion) a year, according to Zoya Ahmed Zaidi, an analyst at AKD Securities in Karachi. She projects the sector will increase in value by about 10 percent over the next five years.
‘Right Direction’
Engro Foods Ltd., a Pakistani dairy and juice company, discontinued branded shop sales of fresh, pasteurized milk after about a year in the southern city of Karachi in December. The company was hampered by the city’s frequent power outages, said Nauman Khan, research head at Foundation Securities.
Nestle is “going in the right direction as demand is rising for branded products with the upper-middle class becoming more hygiene-conscious.” Amreen Soorani, an analyst at Karachi-based JS Global Capital, said by phone. Home delivery “is more convenient and makes it more accessible.”
Pakistan’s sale of processed drinking milk products are projected to have more than double in the past five years to 134.6 billion rupees in 2014, and are forecast to reach 203 billion rupees by 2019, according to Euromonitor International.
Batato said he expects the Pakistani processed milk market to grow to 7 percent or 8 percent in five years. “It won’t be a step change like Turkey.''
Turkey gave farmers incentives to sell milk to documented processing companies as part of its efforts to join the European Union, which boosted the share of the pasteurized-milk sector to 70 percent from 10 percent, according to Batato.
Pakistan’s middle class more than doubled to 84 million in 2002-2011, bringing almost half the nation into that segment for the first time, according to a study by Dr. Jawaid Abdul Ghani, a professor at the Karachi School for Business and Leadership, published last year.
Full Capacity
Nestle started its Pakistani operations in 1988 in a joint venture with Milk Pak Ltd. before taking over management of that company four years later, according to company’s website. About 80 percent of revenue is generated from milk and nutrition products including baby formula and cerelac, while the rest comes from water and beverages, according to data compiled by Bloomberg.
The company’s powdered milk plants in Pakistan are running at ‘‘full capacity,” Batato said. “We are taking every single drop. There is an opportunity to import tactically a bit, but this is not our business model.”

http://www.bloomberg.com/news/articles/2015-02-26/nestle-pakistan-sells-pasteurized-milk-in-23-billion-market

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