The local food companies are eating into the market share of established global brands, while the Pakistani youth’s appetite for fast food is not expected to satiate anytime soon.
The traditional outlets still claim 80pc of family spending on outside food. The young population is driving the growth of fast food companies and pushing up sales of fries, sandwiches, burgers, pizza and pasta.
In the absence of robust cultural activities, the leisure spending is generally on eating trips. And the security scare has given a major boost to food-ordering businesses, as many people prefer to avoid late night outings.
According to multiple sources, the growth graph of local brands has got steeper over the last three years compared to their global counterparts in the Rs200bn (estimated spending on fresh outside food) market.
In the last decade, a near identical trend was also identified in the drug industry, where local firms with solid technical standards and best corporate practices ended the domination of global players in the domestic market.
The owners of local food brands confirmed they did receive franchise requests from local and overseas investors. So far, however, they have declined the offers, as they want to establish a solid business foundation, identity and brand loyalty. They did not rule out the possibility of entering in a franchise partnership in the future to expand their footprints globally.
The international food chains did remarkably well in Pakistan till 2011. The huge success of McDonald’s, KFC and Pizza Hut inspired Nando’s, Domino’s, Subway, Cinnabon, Dunkin’ Donuts, Gloria Jean’s, Denny’s, Burger King, Hardee’s, Fatburger and Taco Maker etc. to include Pakistan into the list of their business destinations in Asia. Today, foreign food brands collectively have around 200 outlets across the country.
‘The crop of motivated businessmen learned from global food chains operating in Pakistan and complimented the knowledge with their deeper understanding of society and palate to deliver stellar performance’
However, the higher pace of growth of local fast food brands such as 14th Street Pizza, One Potato Two Potato (OPTP), Mr Burger, BarBQ Tonite, Hot and Spicy, Ginsoy and Hogies etc. is attributed to heavy investment in intangibles, such as technology and staff training, to achieve global business standards.
“The crop of motivated businessmen learned from global food chains operating in Pakistan and complimented the knowledge with their deeper understanding of society and palate to deliver stellar performance,” observed an analyst working for a private market survey company.
Commenting on the actual size, he said “It ought to be huge when the sale of the food court of a seafront mall was Rs850m in 2014”.
Tanvir Yousuf, CEO of 14th Street Pizza, feels that the flexibility of smaller brands in quickly making market adjustments gives them an edge over franchises that have to get clearance from their principals for any change they want to introduce.
“We better understand the sensibilities of the society and are learning to capitalise on the knowledge pool by offering them what they consider value for the money. If taste and quality of service is good, it clicks,” he says.
According to an intelligent assessment, one in 10 Pakistanis, or 20m people, spend from their pockets on food or tea outside their homes every day. A sizeable portion of the workforce consumes one meal outside home.
The Rs200bn outside food market includes spending at dhabas (cheap street outlets) by individuals. Several active players back the projection that 2pc of the elite contributes a high 20pc (Rs40bn) to the total annual sales.
The kitchen in an average Pakistani home is active 24/7, but there are some weak signals suggesting a change. As family incomes improve, so does the working hours; nuclear families of professionals thus more often dine out or order food from outside.
The market competition has improved quality and service and rationalised prices to a level where even upper-middle income families more frequently order outside food to supplement home dishes for parties. In the absence of domestic help, the choice is convenient and often financially more viable.
The total spending on fresh ready-to-eat food might be the highest in Karachi because of the size and the profile of the population, but individual order sizes are projected to be bigger (double) in Lahore. Besides, single-person orders are significantly higher in Karachi as compared to other parts of the country. The trend resonates with the self-centric orientation of the people of cosmopolitan societies as compared to those in smaller old cities.
In the absence of organised data, the size of the market was projected by extrapolating on the projected size of the Rs20bn home delivery business in the country in 2014. Food-ordering is said to be around 10pc of the total fresh food business. This does not include pre-packaged food or bakery items.
Many food business operators talked to this scribe on the condition of anonymity. “Your observation is correct. Many local food companies are doing astonishingly well. I believe the trend of personalised service is paying off,” commented an entrepreneur who does well in the upscale market.
“It is hard to keep pace with the demand surge when the enterprise is keen to not just maintain but improve standards. The benchmarks set by global giants are high and require huge investment in staff training and technology,” another CEO told Dawn over telephone.
“The 3/4G facility has curbed the cost and time for gathering information and has enabled better monitoring and quicker response. Making the right decision at the right time is the key that decides the fate of a business,” said the gentleman, who was weary of the media projection, which, he thinks, hurts more than helps businesses.
No one in the relevant official circles was aware or in a position to comment on the trend, its drivers or its possible impact on the economy at the macro level.
Published in Dawn, Economic & Business, February 9th, 2015