The prevalence of Pakistani families consuming processed food is anticipated to continue expanding, driven by food companies introducing more affordable alternative products tailored to suit individuals who may no longer be able to afford premium brands.

Several major companies have introduced more affordable sub-brands in response to the increasing strain on family budgets due to high inflation and stagnant incomes. This strategic move aims to retain their existing customer base, minimise the chances of customers diverting to cheaper items from smaller companies in the informal sector and secure consistent growth in demand moving forward.

An American food technologist specialising in plant-based proteins mentioned some intriguing shifts in the US food market during a private conversation. He attributed the disruption in the US food market primarily to Covid-19.

“During the pandemic lockdown and social distancing phase, people were at home and had time, so they activated their kitchens. Many discovered the joy of home cooking for the first time, experimenting with tastes and recipes. It added so much value to their life experience that their preferences changed permanently, to the extent that even the market felt it. In the US, the demand for ready-to-cook food and cooking ingredients is growing noticeably faster than ready-to-eat food in the post-Covid period.

While higher production costs have exerted pressure on margins, the market for value-added food is growing despite inflation

“As interest in food preparations grows, so does the level of awareness. People are becoming more vigilant in checking the ingredients of ready-made food and expressing a preference for healthier, ethically produced, organic options,” he noted.

Upon investigation, it became apparent that the reality of the food market in this country, for obvious reasons, differs from that in the US, perhaps also due to a comparatively limited human cost fallout. In Pakistan, many key operators in the processed food industry did not observe any substantial change in the market composition linked to Covid-19, except for a few months in early 2020 due to temporary disruptions in supply and delivery chains, much like any other industry.

Khalil Sattar, founder and CEO of K&N, a vertically integrated poultry enterprise in Pakistan, challenged the perception of the US food technologist. “We have a plant in the US that produces products in both ready-to-eat and cook categories. We have not experienced any loss in sales of ready-made food items in the US market,” he shared during a phone discussion on the market and consumer behaviour.

“In Pakistan, the cost of production has skyrocketed, resulting in increased prices and making packed food products unaffordable for ordinary families. However, the market is vast, and collectively, we process hardly five per cent of poultry the country produces, so for us, business is thriving,” he added.

He regretted exceptionally high taxes and duties, stating they are “strangulating a perfectly vibrant industry with promising potential. “Who taxes food items so heavily?”

Saqib Butt, CEO of PK Group of Companies, primarily dealing in frozen meat products, was candid in discussing the topic. He mentioned that sales of the most popular brands have taken a hit due to soaring inflation.

“We managed to recover the loss in the sales of our premium brand over the last two years by launching a more affordable sub-brand. The cost was reduced by incorporating lower-value alternate ingredients without compromising the health standards, negotiating for lower commissions with major departmental stores and introducing smaller polybags to make the price more accessible for middle-class families,” he summarised.

Rafiq Rangoonwala, CEO of Mon Salwa, messaged his response to relevant queries. “Over the past five years, some premium processed food makers have experienced double-digit growth. A few new entrants went out of business primarily because of their own failings.

“Over the past year and a half, higher production costs have exerted pressure on margins, but the market for value-added food is growing despite inflation,” he mentioned.

Responding to a question on sub-brands, he contested the notion that sub-brands reflect pressure on the food business. “Even in good times, companies do try to expand their base by introducing low-ticket items,” he added.

Agha Salik Ahmed, Executive Director of Convenience Food Industries (Laziza), noted that similar to other places, Covid-19 impacted urban consumers in Pakistan. He emphasised that achieving business success in today’s environment, with widespread social and conventional media access, requires agility for transformation and readjustment.

Regarding innovative plant-based protein products, he expressed the view that the Pakistani market is still evolving, given the cultural prominence of meat consumption. However, he suggested that forward-thinking businesses can explore this segment, producing for export to capitalise on the emerging global trend in both the East and the West.

“The challenge lies in affordability; otherwise, Pakistani consumers are enamoured with processed food for its ability to introduce variety into their cuisine, reduce kitchen time, and spare them the hassle of shopping and handling raw food. More so in meat-based items,” commented an expert.

In the current scenario, it’s difficult to envision an expansion in the country’s industrial base without robust growth in the food and beverage processing industry — the second-largest segment (27pc cent) of value-added production in the country and accounting for 16pc of employment in the manufacturing sector, as per 2020 study by the Trade Development Authority of Pakistan. The same study projected the existence of over 2,500 food processing units in Pakistan.

Published in Dawn, The Business and Finance Weekly, December 11th, 2023

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