MNCs harvesting rich crop in Pakistan

Aug 13 - 19, 2007

The ground realities are quite different from the image of Pakistan elsewhere in the world and that needed to be rectified. Roland Decorvet, Managing Director Nestle Pakistan described the business conditions in Pakistan as "world's best kept secret and fastest growing economy of the region. He was of the view that the local food and beverage market is unique and has potential to grow at an accelerated rate. Actually 90 percent of the local market is ruled by the unbranded food and beverages while companies enjoy only 10 percent of the 200 billion markets exists in Pakistan. That depicts enormous potential for investment in Pakistan especially in food and beverages. As far as Nestle was concerned its competitors in Pakistan are the milkman selling lose and unhygienic milk while it fees no competition with the branded products.

The Branded Active Benefits are rolling in billion of dollars for Nestle besides improving its business across the globe. Roland was actually speaking at a seminar organized by the Management of Pakistan. He shared that in 2006 Nestle did around $83 billion business and enjoyed 93 percent of global food and beverage market share. Due to inappropriate diet, most of the Pakistanis suffered from diabetes and cardiac diseases. In this backdrop, Nestle was doing best on reducing sugar and increasing calcium and fibrosis in its products. About 3700 scientists are working for the group all over the world with a research budget of the group touching $1.3 billion to improve quality of products.


Nestle owns three factories and three plants in Pakistan besides other projects and permanent staff of 2300 employees. Nestle Milkpak was major earner for the group with Rs11 billion earnings during 2006. the dry milk product i.e. Nido also fetched over Rs6 billion. As compared to India, Nestle is doing much better in Pakistan despite the fact that India had seven percent more population as compared to Pakistan. The group purchases 95 percent of milk from local farmers and Rs6 billion were spent on milk purchase last year. Nestle has a target of Rs150 billion in Pakistan by 2014 for which strategy has been chalked out.


"Led by double-digit growth in the region, the Procter and Gamble Company has performed beyond expectations this year. This marks the sixth consecutive year of growth above company targets and we strongly believe that these results are the consequence of innovative products, a consumer-centric approach and product and commercial innovation", said Qaisar Shareef, Country Manager, and P&G Pakistan.

For the sixth consecutive year, The Procter & Gamble Company announced growth above company targets. Net sales growth of 12 percent for the fiscal year to $76.5 billion was witnessed. Sales growth was broad-based, driven by successful initiatives across key brands and continued double-digit growth in developing regions. Volume increased by five percent behind broad-based geographic growth, led by double-digit growth in developing regions. Net earnings were up 19 percent to $10.3 billion. Diluted net earnings per share were up 15 percent to $3.04. Earnings increased behind sales growth and significant operating margin improvement. Operating margin improved by 80-basis points for the fiscal year.

For fiscal year 2008, the company expects organic sales to grow four to six percent, in-line with its long-term target range. The combination of pricing and product mix is expected to have a neutral to positive one percent impact on sales growth. The net impact of acquisitions and divestitures is estimated to have a neutral to negative one percent impact on sales growth. Total sales are expected to increase five to seven percent. P&G expects earnings per share of $3.44 to $3.47 for fiscal year 2008, an increase of 13% to 14% versus the prior year. Operating margins are expected to increase by 70 to 100 basis points, and the company estimates its effective tax rate will be at or slightly above 29% for the coming fiscal year.


Prof. Norbert Walter, Chief Economist Deutsche Bank Group, who was in Pakistan recently, has said that economic boom in India and China could be a blessing for Pakistan by taking advantage of economic spills of these economies. Actually, Political stability is however a pre-condition for Pakistan's strong growth to continue. If that remains the case, growth momentum will be favorable and foreign direct investment will be reasonably strong over the next two years, he said.

Prof. Norbert said that Pakistan also continues to build up Forex reserves and enjoy robust portfolio inflows and strong remittances, all of which will continue to strengthen the country strong external liquidity position.

Over the past seven years, remittances have increased over five fold from approximately $ one billion to almost $5.5 billion in 2006-07 while foreign exchange reserves have increased more than seven times from $2.1 billion in the year 2000-01 to $15 billion in 2006-07, the professor remarked.