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Pakistan’s fast-moving consumer goods: huge prospects and opportunities

Emerging Asian markets have had a significant impact on the growth of the fast-moving consumer goods (FMCG) segment. The region’s FMCG consumers pack a powerful punch: around a third of Nestlé and Procter & Gamble’s global sales growth between 2014 and 2018 came from emerging Asia. According to a study, emerging market consumers make up less than one-third of global revenue for the 15 largest multinational FMCG manufacturers. However, consumer spending in these markets is expected to grow about three times as quickly as that in developed economies. By 2020 such spending will reach US$6 trillion and account for nearly half of total consumer spending. Similarly in Pakistan, consumer product market has expended many folds in recent years. Indeed, for both large foreign and smaller domestic FMCG firms, participation in the FMCG segment requires a long-term view when it comes to investment and presence, along with sustainable growth. It is also necessary for FMCGs operating in Pakistan to be flexible enough to respond to local dynamics, while simultaneously establishing or maintaining close distribution hubs and creating a powerful marketing presence. Unilever, Nestlé, Procter & Gamble, L’Oréal and the Coca-Cola companies were the top FMCG multinational corporations (MNCs) operating in Pakistan in 2018.

Household consumption drives the majority of sales in the FMCG segment. Growth in this segment has increased considerably in Pakistan in recent years, due in large part to long-term trends such as a growing urban middle class with rising disposable incomes and changing consumer preferences for traditionally Western products.

Pakistan’s packaged food sales, the largest categories of which are dairy, bakery, and fats and oils, posted a compound annual growth rate (CAGR) of over 12% over 2003-18, reaching US$2.5 billion in 2017. The packaged food segment was expected to sustain this momentum. In addition to the increase in demand for packaged food sales, between 2013 and 2018 Pakistan’s expanding middle class also created a rising demand for tissues, hygiene and other FMCG products, which also recorded a growth in value during the period, as well as beauty and personal care sales. It is being said that country would likely to see significant growth in terms of sales volume in the FMCG segment. It is observed that Pakistani consumers are allocating more disposable income to lifestyle products, especially food and durable products for the home.

Domestic firms often have an advantage over their international competitors, because they are closer to their customers and better acquainted with their buying preferences and habits. While MNCs have to work hard to ensure their brands stay relevant by localizing their products, local players such as those in Pakistan have that knowledge built into their FMCG products.

Amidst the challenging economic condition consumer product companies are optimizing their growth. Even though consumer confidence has taken a hit with high inflation rates with increased urbanisation in the local landscape, demand for durables, furnishing and telecommunications has emerged as exponential growth stories. Most of country’s spending is on FMCG still but look out for areas such as telecommunication, housing and furnishing which includes durables.

There is a huge prospects and opportunities of FMCG sector in Pakistan; large number of population: country is a highly populated country. So it can sell whatever companies want by proper strategic planning and market research. Developing rural market: rural markets are not so developed, so it is a big opportunities for FMCG company to capture this market and make a strong position. Increasing purchasing power of customer/increasing income: Now a days in our country the income level of the people are rapidly increasing. Therefore, it is a good sign for FMCG company in the country.

 

Government cooperation in meeting the demand

Currently, the government is giving priority in expanding and promoting local agro-based business in the country. This is a huge advantage to any business. Social changes: The society is changing so as people, people are becoming very conscious about what they are consuming. This is a good prospect for beverage industry. Now-a-days, people lack interest in drinks like Coke, Pepsi and are more inclined towards having juice, tea and when they are outside, having mineral water. May be now the rate is very low, but it is increasing. It shows the prospect for FMCG products.

In the country, the supporting industries are also growing at a faster rate. There is more number of local TV channels going international, new competition in the advertising, market tension, and other factors as well. These things would help in reaching to new customers and also in other part of the business, for example, more number of TV channels and newspapers would mean more promotional activities and decreasing advertising cost.

It is important for FMCG companies to focus more on the small local stores and groceries for their promotional activity, combining both the push and pull strategies. Sales promotions are found to be the most effective tools for generating sales of FMCG therefore, focus should be made on sales promotions. An effective distribution system is the most significant issue in product marketing whereas FMCG Company should also develop their research and development activities. Most of the times, it is noticed that consumer products are out of stock, therefore, companies should make sure the availability of the product in the market. FMCG companies should make an efficient distribution team to facilitate their business activities. They may go for distributorship business to make sure the availability of their brand product in the time of national or political crises. To develop this sector government should take an effective task to avoid fake product marketing and illegal business activities.

For the next few years, companies should focus on ramping up their operations to meet growing demand from MAC households in big cities of Pakistan. But at the same time, they should begin laying the groundwork for a broader expansion as the MAC population continues to grow and as buying power spreads swiftly throughout the country. The strong brand consciousness of Pakistani consumers suggests that the companies that can now establish themselves as trustworthy, build market share, and develop a reputation for delivering good quality will be those that reap the biggest rewards in what promises to be one of world’s next big growth markets. Pakistan’s consumer and retail sector has strong growth prospects given increasing disposable incomes and changing lifestyles, while new taxes in the government budget could reduce consumer spending, rising incomes means a shift to higher spending lifestyles.

The 2018-19 budget have an impact on the sector with some companies raising prices which could reduce consumer spending. But as incomes rise, there will be a shift to higher spending and lifestyle changes. There is a tremendous growth opportunities that will unfold over the coming decade, companies must approach this market with a sophisticated understanding of the Pakistani consumer. Consumer product companies should address the constraints that prevent consumers from acting on their strong desire to purchase brands and should introduce products that meet household budgets.

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