Wednesday, April 3, 2013

International Consumer Brand Names Find Success in Pakistan's Retail Sector

Consumer spending in Pakistan has increased at a 26 percent average pace the past three years, compared with 7.7 percent for Asia, according to data compiled by Euromonitor International, a consumer research firm. Pakistan's rising middle class consumers  in major cities like Karachi, Lahore and Islamabad are driving sales of international brand name products and services.  Real estate developers and retailers are responding to it by opening new mega shopping malls such as Dolmen in Karachi and Centaurus in Islamabad.

Dolmen City, Clifton, Karachi


Here's a recent video of a CNN report on "British Brand Invasion" from Dolmen Mall in Clifton district of Karachi:



 http://edition.cnn.com/video/#/video/world/2013/04/01/mohsin-bristish-brands-in-pakistan.cnn

Pakistan has continued to offer much greater upward economic and social mobility to its citizens than neighboring India over the last two decades. Since 1990, Pakistan's middle class had expanded by 36.5% and India's by only 12.8%, according to an ADB report titled "Asia's Emerging Middle Class: Past, Present And Future.


A string of strong earnings announcements by Karachi Stock Exchange listed companies and the Central Bank's 1.5% rate cut have already helped Karachi's KSE-100 index surge nearly 50% (37% in US $ terms) in 2012 to top all Asian market indices. It was followed by Bangkok's SET index which advanced 36%. It also easily beat India's Sensex index which was the top performer among BRICs with 25.19% annual gain.


Dolmen Mall Clifton Featured on CNN from DHAToday on Vimeo.



Related Links:

Haq's Musings

Pakistan's Construction Boom

Educational Attainment in Pakistan

Pakistan Among Top Outsourcing Countries

Foreign Visitors to Pakistan Pleasantly Surprised

Pakistan's Infrastructure and M2 Motorway

India Pakistan Comparison 2011

Resilient Pakistan Defies Doomsayers


FMCG Consumption Boom in Rural Pakistan

Pakistan Visits Open  Indian Eyes

8 comments:

Riaz Haq said...

Here's an excerpt of a Reuters' report on Karachi shares market:

The market's benchmark index continues to soar to record highs -- up 10.34 percent year to date -- fueled in part by expectations May elections will mark Pakistan's first transfer of power from one democratic government to another. Previous civilian governments were all dismissed by Pakistan's ultimate power: the military.

"Pakistan has a lot to offer investors and this is our chance to show it," said Nadeem Naqvi, the KSE chairman. He plans to embark on a series of roadshows for potential foreign partners that will take him to London, Frankfurt and Hong Kong in the coming months.

Many of the companies listed on the KSE offer double-digit returns, low stock prices and resilient business models in this frontier market with a population of 180 million. The index still has an attractive price/earnings ratio of $8.50 despite the soaring returns of the past few years.

Pakistan now has a 4 percent weighting in the MSCI Frontiers Market Index and has become somewhat of a discovery for foreign investors chasing new markets and yields.

THE SEAMIER SIDE

But the KSE's spectacular rise last year can at least be partly attributed to another factor entirely - the cleansing of "black money".

The market took off last year just as a government decree was finalized allowing people to buy stocks with no questions asked about the source of the cash. Average daily volume more than doubled last year to 173 million shares from 79 million in 2011.

Authorities say the measure will bring undocumented funds into the tax net in a country where few pay taxes. But some critics decried it as a gift to corrupt officials and criminals seeking to launder dirty cash.

"Politics and dirty money go hand in hand in Pakistan," said Dr. Ikramul Haq, a Supreme Court lawyer and a professor on tax law.

"People want to be outside the regulatory framework and outside the tax net."

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The Securities and Exchange Commission of Pakistan (SECP) said it found 23 violations of securities laws that merited fines in fiscal year 2011-12 (April/March). The market regulator sent warning letters in another 19 cases, it said in its annual report. (www.secp.gov.pk/)

That's a drop in the bucket, says Ashraf Tiwana, dismissed as head of SECP's legal department after years of clashes with his bosses over fraud in the market. He has petitioned the Supreme Court to replace the SECP chairman and commissioners.

"There's a lot of fraud, a lot of market manipulation ... but not enough action has been taken, especially not enough criminal action has been taken," Tiwana told Reuters. "They're just passing small fines and giving out warning letters."

Regulators are too close to the market, Tiwana said. The head of the stock exchange is a former broker and the two top members of the SECP are former employees of Aqeel Karim Dhedhi, founder of one of the country's biggest brokerage houses.

BIG DHEDHI

Nicknamed "Big Dhedhi" for his ability to move markets, Aqeel Karim Dhedhi heads one of Pakistan's largest domestic conglomerates, the AKD Group.

Lately, the well-known philanthropist and leading member of Pakistan's business establishment has been trying to fend off arrest over allegations of insider trading.

An SECP investigator accused traders, including Dhedhi's brokerage, of buying shares in a state-run Sui Southern Gas Co before an official announcement allowing the company to raise its prices. In the weeks before Sui Southern's announcement, the stock price jumped from 13.5 rupees to 20 rupees, its biggest hike in five years.


http://www.reuters.com/article/2013/04/09/us-pakistan-stockmarket-insight-idUSBRE93813Z20130409

Riaz Haq said...

Here's Toronto Globe & Mail on Karachi's stock market:

The seaside metropolis of Karachi is Pakistan’s largest city, its commercial hub and a city plagued by violence. Adding to the already volatile mix is the Pakistan Taliban, which is now firmly embedded in Karachi. But amidst the mayhem, businesses are thriving and capital markets are soaring.

In old Karachi, behind metal gates, barriers and security checks is a low-rise office block from which Canadian Nadeem Naqvi steers the country’s largest stock market: the Karachi Stock Exchange, with a market capitalization of $41.5-billion.

Mr. Naqvi moved to Pakistan in 2005 and took on the managing director job in 2011 with a mandate to modernize the exchange.

The KSE has a market capitalization of $41.5-billion – a tenth of the size of the Bombay stock market. Last year, it ranked among the top emerging markets in Asia.

With historic democratic elections scheduled for May 11, Mr. Naqvi spoke to The Globe and Mail about his optimism about Karachi and Pakistan.

What has it been like steering the exchange – it must be a roller coaster?

In one word: exhilarating. Not without sleepless nights, I can assure you. … On the political front there have been ups and downs, although I was lucky enough to be in an era when we had uninterrupted democratic set-up – the quality of that democratic set-up as a point aside. But that was a first for Pakistan. And now we are in the process of the first democratic transfer of power from one democratic set-up to the next … We have faced direct backlash as a result of Pakistan’s role in terms of war on terror and the backlash Pakistanis have to face every day. But within that dire dynamics you have seen a stock market that has performed incredibly well last year. It was up 50 per cent in local currency terms – the KSE100 Index – and it was up 36 per cent in U.S. dollar terms making it one of the top three best performing emerging markets in Asia last year.....


http://www.theglobeandmail.com/news/world/canadian-director-of-karachi-exchange-bullish-on-growth/article11487626/

Riaz Haq said...

Here's a Daily Times report on PUMA shoe store in Karachi:

KARACHI: PUMA, a leading International sports brand on Friday launched a new outlet in Dolmen Mall, Karachi. This outlet is so far the biggest one in Pakistan out of a total of four in the major cities of the country, Karachi, Lahore and Islamabad. PUMA Pakistan’s inception was in 2010 and the brand is incorporated under the leadership of Atif Husain and Shahid Choudhary with a vision to develop international retail landscape in Pakistan. PUMA designs and develops footwear, apparel and accessories. It is committed to working in ways that contribute to the world by supporting creativity, sustainability and peace, and by staying true to the principles of being fair, honest, positive and creative in decisions made and actions taken.

http://www.dailytimes.com.pk/default.asp?page=2013%5C06%5C15%5Cstory_15-6-2013_pg10_2

Riaz Haq said...

Here's an ET report on global consumer products' giant P&G's expansion plans in Pakistan:

KARACHI: Procter and Gamble (P&G) has identified Pakistan as one of its top 10 emerging markets – that include emerging economies like Brazil and India – and the country will be the focus of it attention for further investments, P&G Pakistan Communications Manager Omeir Dawoodji told a group of journalists during a visit to the company’s state-of-the-art manufacturing facility at Port Qasim on Thursday.
Dawoodji was tight-lipped regarding the amount P&G plans to invest. He, however, confirmed that the Cincinnati, Ohio-based consumer goods giant wants to expand its manufacturing footprint in the country.

Dawoodji did not disclose the cost of setting up the Port Qasim plant, currently manufacturing the Ariel brand, but emphasised that P&G intends to make it a mega-manufacturing facility and utilise it for manufacturing other brands as well. The company markets over 300 brands globally, but its Pakistani subsidiary only deals in eight brands.
P&G Pakistan had acquired a huge piece of land for the manufacturing facility, which was inaugurated in 2010, but it utilised about 20% of the acquired land only, leaving enough space for further expansion.
It has been 185 years of growth for the now $85-billion company and further growth has to come through emerging markets, Dawoodji said, explaining why Pakistan is important for the company’s global parent.
The manufacturer of some of the leading brands like Pampers, Always and Safeguard has had tremendous growth during the past three years. P&G’s revenue for the year ended June 2012 was Rs22 billion, about 50% increase over the previous year.
The fiscal year 2012-13, too, will be a high growth year for P&G Pakistan, the company’s country head Faisal Sabzwari told The Express Tribune in a recent interview.
In a sign of its long-term commitment to the country, the Pakistani arm of the consumer goods giant has replicated its global strategy of incorporating the use of renewable energy sources for energy conservation, reducing water consumption and recycling the waste as demonstrated during the plant’s tour.
The facility at Port Qasim has been designed to use skylight during the day with a lot of windows built both in the office and the factory areas. They have been able to reduce their energy consumption by 12% during the last two years, the officials at the site told the media.
The reduction in water usage was about 46% as they have planted palm trees and used gravel instead of grass for the landscape to conserve water. “We put less than 2% of our waste to landfill,” an official said. About 97% of the waste generated is put to beneficial reuse, he said.
“The Port Qasim plant is our pride among the 75-plus plants P&G operates all over the world,” Dawoodji said while highlighting state-of-the-art features of the plant. “Goods manufactured at this facility can be exported to countries with rigorous quality standards.”


http://tribune.com.pk/story/566034/procter-and-gamble-lists-pakistan-among-top-10-emerging-markets/

Riaz Haq said...

Here's an ET story on middle class powering FMCG growth in Pakistan:

Procter & Gamble (P&G), one of the world’s largest consumer goods company, has recognised Pakistan as one of the top 10 emerging markets to focus investment in. This sounds like good news for our cash-strapped economy, and it is equally good news for those who have invested in P&G.
It makes sense for any fast moving consumer goods (FMCG) to invest in a country where the world’s biggest consumer goods names – Unilever, P&G, Nestle and Mondel-z (formerly Kraft Foods) – are not only operating, but also growing significantly.
According to the State Bank of Pakistan, the net profits of FMCG companies listed on the Karachi Stock Exchange grew in excess of 20% in fiscal year (FY) 2011-12. P&G, which is not listed on the KSE, has witnessed tremendous growth in revenues during the past three years – including 50% revenue growth in FY2012. Besides the consumer goods sector, its supporting industries like packaging and distribution companies have also seen their toplines grow significantly.
So what are the factors contributing to this growth?
If the fact that these companies are selling essential food items and consumer goods in the world’s sixth-largest market by consumer size is not satisfying enough for you, here’s a more detailed and nuanced explanation.
“Economics and demographics are together at play in Pakistan,” P&G Pakistan Country Manager Faisal Sabzwari told this correspondent in a recent interview. The boom in the rural economy has also been a major contributor to their growth – thanks to a series of bumper crops of agricultural produce and wheat support prices, which were raised by the government in recent years.
Besides this, according to Sabzwari, Pakistan is one of the top countries adding 20-somethings to its workforce; these are the people establishing families, getting new jobs and helping market sizes grow.
“We have millions of consumers entering independent disposable income space in their lives every year,” Sabzwari said, while referring to the growing middle class.
The market size in Pakistan has also grown in terms of volumes, without taking pricing into account. “Increasing urbanisation and the growing middle class are key drivers of the FMCG business,” Sabzwari said.
Pakistan’s is urbanising faster than other developing countries, according to Sabzwari. “The country’s population is growing at under 3%, while the rate of migration to urban centres is even higher,” according to Muzammil Aslam, managing director at Emerging Markets Rsearch.
“A population base of 180 million talented and hard-working people hungry for prosperity ensures that nothing can hold this country back from growing,” P&G Pakistan’s chief said. While looking at the growing middle class, he said, it is important to look at their consumption habits. “We are exposing more consumers to value brands like Pampers and Always,” he explained.
It may be added here that consumer spending in Pakistan has increased by an average of 26% in three years, according to a Bloomberg report published on November 21, 2012 – a strong sign that people are consuming more goods than ever before.
This rise in consumer demand has spurred the growth of supermarkets across major urban centres, which include, but are no longer limited to Karachi, Hyderabad, Multan, Lahore, Faisalabad and Islamabad.
Such superstores are getting larger and asking manufacturers for broader brand portfolios in order to serve their customers better. They have larger shelves, enabling them to have more sophisticated and developed categories in which they can stock more products than ever before....


http://tribune.com.pk/story/567315/in-resilient-pakistan-emerging-middle-class-powers-fmcg-sector/

Riaz Haq said...

With the rise of Pakistan's middle class and growing brand recognition among consumers, Pakistani companies are establishing their own brands.

Some of the Pakistani brands include Engro Foods, Haleeb Foods, Shezan juices, Rooh Afza, Tapal tea, Shan spices, JJ (Junaid Jamshed clothing), Gul Ahmad (textiles), K&N chicken, Tibet Snow cream, Kala Kola hair color, Dawlance, Shahi supri,

http://www.ijbssnet.com/journals/Vol._2_No._13_Special_Issue_July_2011/31.pdf

http://www.campaignasia.com/Article/256186,pakistan-focus-top-10-brands-by-nielsen.aspx

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...

Here's a WSJ story on a high-priced designer Peshawari chappal knock-off:

Imitation, it is often said, is the sincerest form of flattery, but many in Pakistan failed to take the compliment when British designer Paul Smith released a new sandal bearing close resemblance to the country’s Peshawari chappal (slipper), called it Robert, and sold it for $595.

The company received a torrent of abuse on social media for the design on Monday.

While the Pakistani sandal sells in markets across the country for around $6, Paul Smith’s version of the shoe is on sale for a 9,816% mark up.

Most of the criticism on Twitter focused on the sandal’s price, while others called for Paul Smith to give credit to the shoe’s Pakistani origin.
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The Peshawari chappal is originally from the northwestern town of Peshawar, but is today manufactured across the country. You can find the shoe from Karachi to Gilgit and on the feet of markets traders, government officials and young bridegrooms.

“It is as much of a part of our national identity as is the chicken tikka in our traditional cuisine,” said journalist Madeeha Syed of the shoe in an article for local English-language newspaper, Dawn.

Paul Smith’s version of the sandal is not the first time that the quintessentially Pakistani shoe has ventured overseas. A number of Pakistan-based online outlets already sell the sandal to customers around the world. They mostly target the widespread Pakistani diaspora, but the sandal has also proved very popular in France, says Sidra Qasim, co-founder of Hometown, a Pakistan-based online shop that sells Peshawari chappals.

“They like it because it has quality and good design and it is having a good impact,” she told The Wall Street Journal.

Hometown was started in 2010 by Ms. Qasim and Waqas Ali with the goal of providing a bigger market to local shoemakers in Pakistan. All the shoes sold by Hometown are made by a small group of craftsman in a small village in Punjab province, and are sold via the company’s site in 17 different countries. The biggest markets are India, the U.K. and France, said Ms. Qasim.

Despite the outrage from Pakistan’s vocal Twitter population, Ms. Qasim said that she thought it was mostly positive that Paul Smith had decided to use the Pakistani design in his summer collection.

“One thing we are very concerned about is that Hometown is about promoting Pakistani artisans to the global level, so at least they [Paul Smith] should give the right credit,” she said, “We are really happy, on the other side, that someone on the global level has recognized this design”

Hometown’s version of the Peshawari chappal starts at $90 – still a steep markup from the average market price. Another Peshawar-based online chappal shop, Zalmay, sells the sandals for around £27 ($45.)


http://blogs.wsj.com/indiarealtime/2014/03/11/how-paul-smith-sandals-peeved-pakistan/