KARACHI: The market size of the biscuit industry — formal and informal — has grown to Rs60 billion now from Rs40bn in 2014 while the total crisps (potato chips, etc) market is over Rs20bn as compared to Rs15bn in 2014.

The largest segment in the confectionery business comprises plain biscuits category, with a total of over 50 per cent share in volume, followed by cream and chocolate chips biscuits, followed by wafers.

The Rs20 billion chips market in value is divided into two categories — extruded and potato chips. Besides, biscuits, chips, toffees and chocolates are showing an annual average growth of six to eight per cent.

Nationwide market of candies, toffees and jellies (manufactured in the formal and informal sector) now stands at Rs40-50bn as compared to Rs35bn in 2014.

Managing Director Ismail Industries Limited (IIL), Maqsood Ismail said 65pc of the overall national volume is sold in the urban centres whereas 35pc in the rural markets.

To increase the market share, IIL is permeating the rural markets by introducing chocolate chip cookies, Chocolatto and Cocomo, Mr Ismail added.

Talking about investment plans, he said that in 2015 a new milk chocolate line was installed, making IIL the only local company in Pakistan capable of producing milk chocolates.

A new biscuit factory was established in Port Qasim and has started production from this fiscal year to expand the manufacturing of Cocomo and Novita while also creating space to add additional innovative lines in 2017 and 2018. The company is the third largest fastest growing biscuit player in Pakistan.

Established in 1988, the company in less than 30 years has expanded to a total of eight factories across Pakistan, manufacturing biscuits, snacks and chocolates.

Currently the company has over 4,000 personnel working in its factories and offices and is exporting to over 50 countries including the GCC region, Afghanistan, USA, Australia, New Zealand, Africa and the UK.

Mr Ismail said local brands are flourishing as they continuously innovate, advertise heavily, strengthen their distribution and improve product quality.

“Imported brands don’t pose an immediate threat because of substantial price differences, weak distribution and low brand awareness. Large local players invest heavily in marketing and distribution to counter threats from the unorganised sectors which are usually of inferior quality,” he added.

He said imported products are quite expensive in Pakistan and the prices are usually 50-100pc more costly if compared on a per gram basis with locally-produced chips and biscuits.

The distribution of imported chips is very small and limited to just high-end outlets and supermarkets in Pakistan and only a small percentage of the population is willing to pay a premium for these products.

When asked why prices of biscuits and chips are higher and weight of packets is reduced, he said the cost increases in this sector are either due to inflation which is generally around 6-10pc or due to the increase in prices of critical raw materials like sugar, flour and potatoes.

“The Pakistani market is quite price sensitive which means if an increase is made from Re1 to Rs2 it may mean your volumes decrease to one third although the increase may be just Re1. This has resulted in squeezed margins and emphasis on price points as all manufacturers try to make the products available at lower price points since these are accessible to a larger part of the population,” he explained.

Secondly, he said, the country has an active unorganised sector which always responds if any player increases prices. As a result, Pakistan is one of the most competitive markets in the world with regards to biscuits, candy and chips, he added.

He said hundreds of smaller players in the biscuit, snacks and confectionery market compete at the lowest price points which target low income areas or in small urban or rural cities.

The market size of this sector, however, would be smaller than the organised sector. The industry is facing severe threat from manufacturers of counterfeit biscuits and candies.

IIL makes potato chips, candies, chocolates, biscuits and it is also in packaging business in which it produces about 40,000 tonnes of various packaging films.

Published in Dawn, January 22nd, 2017

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