The output of food and beverage companies has bounced back this year owing to low base effect, higher domestic demand and improvement in some areas of food exports.

Over seven months — July-January 2016-17 — food, beverages and tobacco companies have recorded about 4.8pc growth in production, according to the Pakistan Bureau of Statistics.

This has come in the backdrop of 0.56pc expansion last fiscal year and a negative growth of 1.38pc in FY15. “So, we can attribute it, first, to low base effect,” says a senior central banker.

“Then, demand for processed food is on the rise as 4.7pc economic growth in FY16 and the resultant rise in income levels have increased the domestic demand. Plus, limited export-led demand is also visible.”

Food companies’ output is higher this year also because the agriculture sector, too, is doing better so far than the last year. According to initial official estimates, increasing wheat and sugarcane output and brisk activity in livestock sector suggest that agricultural growth in FY17 may reach close to the target of 3.5pc. In FY16, agriculture had contracted by 0.2pc.

Domestic demand for food and beverages has been growing for some years, thanks to the development of food-based service industry, higher spending by households on food items and a rising trend of online processed food buying.

According to Household Income and Expenditure Survey, average monthly spending on readymade food by the top quintile has increased from Rs309 in FY05 to Rs1009 in FY14.

Use of processed ready to cook food has not only increased in urban households but, to some extent, in rural families as well. And, food supplying web portals such as Foodpanda, Eatoye, Khaopio and Foodgenie are also doing roaring businesses. In 2016, Foodpanda alone reported a huge 120pc growth in its customer traffic.


Modernisation of some fish processing units and investment made in companies producing soft drinks, biscuits, sweets and confectionaries are all examples of growing confidence of the corporate sector in the food market


However, the performance of food and beverages — a sub-sector of large-scale manufacturing (LSM) — does not reflect a consistent growth. This sub-sector saw a mere 0.56pc rise in output in FY16 and a contraction of 1.38pc in FY15, preceded by healthy growth in previous three years. Why is it so?

“For the purpose of LSM growth monitoring, we rely on output of industries as per CMI (Census of Manufacturing Industries) 2005-06. We calculate growth in different sectors of LSM on the basis of periodic change in aggregate output of CMI 2005-06 industries,” explains an official of Pakistan Bureau of Statistics. “Real growth in food and beverages sector that has come a long way since 2005-06 can actually be higher than reported.”

This means that food and beverages production of 1,800 companies (CMI 2005-06) does not include output of other companies in this sector that have come up later.

“Food and beverages is one of the few sub-sectors of LSM wherein many companies have started operating after 2005-06 and are doing very well. Once the ongoing industrial census is complete and new companies are included in each sub-sector of LSM, reporting will become more accurate.”

According to Securities and Exchange Commission of Pakistan (SECP), the total number of food and beverages companies registered with SECP as of end-June 2015 stood around 2500, of which 145 had been registered in FY15 alone.

“I cannot tell you offhand how many of the companies being registered with SECP every year and those functional in the food and beverages category will qualify for LSM,” said another official of PBS. “But some of them definitely will come under our data coverage once the base year of CMI is changed.”

So the food sector’s growth cannot be judged by the LSM data alone. Performance of food chains, hotels, traditional dhabas and modern-day motels and eateries and food courts in shopping malls also matters.

Food business being carried out through web-portals and activities of food industries in the informal sector also count. Analysts say if measured by these and other yardsticks (for example food exports), food sector is showing lots of progress.

The recent acquisition of 51pc share of Engro Foods by a Dutch company for $448m shows we had a food business company efficient enough to attract the attention of foreign investment.

Besides, it also suggests the level of optimism about the potentials of our domestic food market. There is a huge potential in the country for marketing of packaged milk that currently accounts for less than 5pc of total milk consumption.

Setting up of Fauji Meat in the recently, modernisation of some fish processing units and investment made in companies producing soft drinks, biscuits, sweets and confectionaries, all are examples of a growing confidence of the corporate sector in food market potential.

In food exports, too, the situation is not that gloomy despite the fact that overall food exports have remained stagnant for years, primarily due to little or no growth in the earnings of rice that accounts for 45pc of the total food exports.

Export earnings of meat and meat preparations, for example, surged 54pc in four years to $269m in FY16 from $175m in FY12. Foreign sales of spices shot up 52pc, also in the last four years (to $76m in FY16 from $50m in FY12).

Published in Dawn, Economic & Business, April 10th, 2017

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