Pakistan Food and Drink Report Q4 2009

Pakistan remains rooted to the bottom of BMI's Asia Pacific Food & Drink Business Environment Ratings table for Q409 after a disappointing quarter that reaffirmed the country's standing as the region's least attractive investment market by some distance. Our forecast that Pakistan's GDP will grow by 2.5% in 2009, as opposed to recording a contraction, has more to do with its relative disconnection from the global economy. Despite the immeasurable regulatory challenges facing firms operating in Pakistan, BMI points out that the country's food processing and soft drinks industries remain promising as discussed in our recently published Pakistan Food & Drink Report for Q409.

Having entered in 1989, Nestl?(C) has steadily developed into one of Pakistan's largest fast-moving consumer goods companies. It has a particularly strong position in the dairy industry (it owns the domestic dairy company Milkpak). Nestl?(C) is also present across a number of other high-growth segments such as confectionery (Kitkat), bottled water (Pure life) and hot drinks (Nescafe).

With per capita food consumption estimated to have been a mere US$140 in 2008, Pakistani consumers remain highly price sensitive. With a turnover of US$410mn in 2008 in the country, Nestl?(C) has barely scratched the surface of Pakistan's potential with its 164mn population. It will look to capitalise on BMI's forecast that through to 2013, food consumption in Pakistan will increase by 37.2% and reach PKR1,935bn.

Unilever also has a growing presence in Pakistan, particularly within tea. BMI points out that Pakistan is among the highest per capita tea consumers in the world. We do not see the industry slowing down anytime soon. Between 2009 and 2013, we expect tea value sales to increase by 40.5% and reach PKR59.2bn. Unilever's main tea-category competitor is the domestic company Tapal Tea Pakistan's soft drinks industry continues to be dominated by the basic carbonate range of global powerhouses Coca-Cola and PepsiCo. Turkey's Coca-Cola Icicles has a major stake in Pakistan and sees the market as a key long-term growth engine. Although health consciousness has begun to surface, the meek spending power of consumers means the trends have yet to truly impact the trajectory of the industry. With this in mind, BMI expects the carbonates segment to continue claiming the majority of the industry's volume growth. Through to 2013, soft drinks value sales are forecast to increase by 39.8% and reach PKR19.5bn.