Agriculture plays a major role in the development of an agrarian country like Pakistan. The sector contributes over 37.44 per cent of total employment and more than 19pc of GDP in the national economy. Over 63pc of Pakistan’s population is rural, deriving at least a part of their income from agriculture or its sub-sectors. As a majority of them are small farmers, any addition to the value of the commodities they produce can help reduce the rural poverty level in the country.
One way, hitherto ignored, of increasing the value of the commodities is by branding them for creating extra consumer demand and giving producers leverage in negotiations with buyers. This also enables the producers, whether individual farmers, companies or countries, to reach out to a wider audience and make the maximum profit by selling their produce with a distinctive brand name.
Various studies suggest that consumers are influenced 25pc by price and packaging and 25pc by communication and promotions, whereas the quality of a product, positioning, availability and origin each has a 12.5pc impact on consumers. That means consumers are influenced more by branding and marketing than the quality of the product.
Market players say lack of awareness on the part of producers, a certain mindset of consumers, cost escalation and apathy of the government towards creating an enabling environment are stumbling blocks in the ways of promotion of branding culture, particularly in the agriculture sector.
Based on guesstimates, Pakistan can earn at least $100m per annum more against the current volume of exports of agricultural commodities if the consignments are sent as branded products
“Poor awareness on the part of producers and/or sellers about the positive impact of branding on sales is more to blame than any other factor for the absence of this important marketing tool in the country,” says Shehzad Ali Malik, CEO of Guard Agricultural Research & Services.
“There is no concept of branding of agricultural commodities when we stepped into the market with our brand of rice around three decades ago. The commodity used to be sold in the loose form then. But we challenged the mindset of the consumers about packed commodities and these are now claiming a major share in the local market.”
Building a brand, however, requires a consistent investment of both time and money. Many producers lose patience and sell their commodities without any branding at the cost of their premium.
Ahmad Jawad of the Pakistan Business Forum argues that a small expense on attractive packaging to improve the presentation of the product may help earn a premium price for the same quantity of a commodity because jo dikhta hai woh bikta hai (what is seen is sold).
Highlighting the growing importance of packaging, he quotes Statista, a statistics portal for market data, claiming that the global agricultural packaging market is expected to cross the $5 billion mark by the end of 2023. He assesses that Pakistan can earn at least $100 million per annum more against the current volume of export of agricultural commodities if the consignments are sent as branded products.
“But branding is not just a name or symbol that one spends a petty amount on to get a logo designed and a label affixed to differentiate one’s products from others,” says Mr Malik. “Rather, it’s more about attaining and maintaining high standards in production and processing and ensuring consistency of the product. Only then can the seller claim a premium price,” he explains.
“It takes years and a worthwhile financial investment to establish a brand. But most people prefer earning easy money through the sale of loose commodities rather than hard work in terms of time and money needed to build their brand.”
The impression among consumers that branded products cost more is another factor that dissuades producers from going for branding. Consumers are mostly not ready to pay the premium price for the guaranteed quality of a product and that’s a dilemma for the producers.
“Branded products do cost more because publicity campaigns and printed wrappings have their price and added to it is the margin we have to pay to distributors because self-distribution is close to impossible,” says Mr Malik. “But, you have to convince the consumers that the benefits they are getting by paying the premium are worth it ie a guaranteed quality and quantity of the product and all other stated attributes. A brand will do anything to save its reputation, whereas ordinary producers/sellers may compromise on these fronts because they have nothing to lose in the trade.”
Unlike the local market, the cost is not a factor for exports, says Mr Jawad. “The cost of the produce of an export consignment may not be more than 45pc and the rest will be logistics (by sea or air), packing charges and labour costs. Attractive packaging, like for a 10kg pack, costs not more than a dollar and that can be easily adjusted.”
Domestic branding is the first and inevitable step before going to international consumers, says Mr Malik, complaining that no official support is available for exploiting the world markets unlike neighbouring India, where the government had set up a Rs100bn fund to lend technical, marketing and branding support to micro food enterprises for modernising their production techniques and branding their produce.
New Delhi is also launching the Brand India Campaign to give momentum to exports of both services and products in new markets, he says.
He suggests that the government should re-initiate the Ayub-era export bonus voucher scheme as a way to encourage brand exporters. Under the scheme, the exporters may be allowed to import raw material and machinery at zero duty for the amount equal to their export earnings. He argues that the development of a brand means branding a region and country too.
As the financial status of producers always plays an important role in branding, some believe that the government should offer easy loans to the local producers and farmers financially enabling them to focus on marketing. “Producers, a majority of them being small landholders, are financially weak people, who cannot afford to allocate funds for brand development. The government should incentivise them by offering low markup, if not interest-free, loans on soft terms,” demands Aamer Hayat Bhandara, a progressive farmer.
Other areas where the government should, and could, play a proactive role include creating a supportive regulatory environment, protecting against outside competition and domestic overproduction, working for grant of geographical indicators and introducing quality certification and grading systems as a help for those who wish to establish their brands, he says.
Published in Dawn, The Business and Finance Weekly, August 8th, 2022