Fmcg Sector of Pakistan

Topics: Brand management, Brand, Fast moving consumer goods Pages: 6 (1848 words) Published: March 31, 2011
FMCG Sector of Pakistan
Trends, Issues & Opportunities

Consumer Goods Industry of Pakistan
Products which have a quick turnover and relatively low cost are known as Fast Moving consumer Goods (FMCG). FMCG products are those that get replaced within a year or less and the purchase cycle is relatively small as compared to other products and consumer durables. Examples of FMCG products include a wide range of frequently purchased products such as toiletries, soaps, cosmetics, tooth cleaning, shaving detergents as well as some non durables such as glass ware, bulbs, batteries, paper products and plastic goods. 1

In Pakistan the industry has evolved to a great extent even in the face of strict completion both in terms of generic unbranded products and in terms of acceptance level among consumers. Such examples are widespread and can be seen across different FMCG categories. Loose Tea vs. Packaged Tea, unbranded bakery items vs. branded confectionery products e.g. biscuits, chips and other snack foods, local milk vendors vs. tetrapak milk brands are just a few examples of categories where FMCG’s have made great in roads in Pakistan. The progress has been slow as compared to regional markets such as India mainly due to macroeconomic environment and the fact that India has a growing middle class which accounts for the large increase in adoption rates for branded packaged products especially in the FMCG category. However the most successful FMCG category in Pakistan to date has been food and beverages as the per Capita spending on food in Pakistan and in other South East Asian countries is relatively higher as compared to other parts of the world. Encouraging demand drivers in Pakistan include growing young population, rapid urbanization and increased penetration of organized retail. The robust profitability of the corporate sector in the year 2010 bears witness to the fact that demand drivers have in fact acted out as perceived initially.


IGI Securities Research March 2008


To arrive at a prudent estimate of the growth of the FMCG sector in Pakistan, Unilever Pakistan with its various categories may be used as a bench mark for extrapolation. In line with the FMCG categories and products table listed above, one may observe that Unilever Pakistan has presence in most of these categories. Unilever expects its revenue and profitability to grow as follows: Category Wise CAGR for Unilever Pakistan CY08-12E Category CAGR% 08-12E Home & Personal Care (HPC) 17% Frozen Deserts and Food Products 19% Average 18% The average compound annual growth rate for revenues and profitability come around to 18% for Unilever as a whole. Discounting this percentage for the size of Unilever and that fact that it has global muscle, a conservative estimate of the growth in FMCG sector in Pakistan may be around 12-15%. However given these double digit growth numbers, one must not overlook the overbearing impact of inflation on this sector. Some of the price increases have been absorbed by the FMCG companies via reducing their margins however this is not sustainable in the long run and ultimately the impact of supply side disruptions, government policies and taxation, fuel prices etc must all be passed on the consumer. In this context the edible oil industry serves to be a textbook example of all these phenomena. In the case of the edible oil industry, price instability can be greatly attributed to the global fluctuation in palm oil markets. Most edible oil companies be it Habib, Dalda, Soya Supreme or IFFCO, purchase edible oil in bulk in futures contracts. If the stated target prices matures, the company makes large profits, or books a loss if the price rises or does not mature as estimated. In 2009, a spiral of increases in edible oil prices place and company kept on buying in future contracts in anticipation of further price increases. The spiral did not continue and soon the global markets crashed and the company’s booked heavy...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Performance of Pakistan Banking Sector Essay
  • Indian Fmcg Sector Essay
  • Fmcg Sector Essay
  • Fundamental Analysis of Fmcg Sector Essay
  • Fundamental Analysis of FMCG sector Essay
  • Fmcg Sector Essay
  • Essay on Fmcg Sector
  • Essay about Services Sector of Pakistan

Become a StudyMode Member

Sign Up - It's Free