MONEY MINTING FOOD INDUSTRY

SHAMSUL GHANI
(feedback@pgeconomist.com)
Mar 21 - 27, 20
11

According to the global hunger stats:

* 925 million of people do not have enough to eat more than the populations of USA, Canada and the European Union

* 98 percent of the world's hungry live in developing countries

* 65 percent of the world's hungry live only in seven countries: India, China, the DR of Congo, Bangladesh, Indonesia, Ethiopia and Pakistan

* More than 70 percent of the world's 146 million underweight children under age five years live in just 10 countries, with more than 50 percent located in South Asia alone

* 10.9 million children under five die in developing countries each year. Malnutrition and hunger related diseases cause 60 percent of the deaths

* Iron deficiency is the most prevalent form of malnutrition worldwide. In developing countries, it affects 40-60 million children. Eradicating iron deficiency can improve national productivity by 20 percent.

The following table gives an overview of mortality rate in some of the leading nations of Asia.

VITAL SOCIAL INDICATORS IN ASIA (SELECTED COUNTRIES)

COUNTRY LIFE EXPECTANCY
(2008)
INFANT MORTALITY
RATE PER 1000 (2009)
MORTALITY RATE UNDER 5 PER 1000
 (2009)
POPULATION AVERAGE
ANNUAL (%) GROWTH
Pakistan 66.5 65.1 95.2 2.10
India 63.7 30.1 78.6 1.55
Sri Lanka 74.1 18.5 12.9 0.94
Bangladesh 66.1 59.0 69.3 1.29
Nepal 66.7 47.5 71.6 1.28
China 73.1 20.2 29.4 0.66
Thailand 68.9 17.6 15.1 0.62
Philippines 71.1 20.5 27.2 1.96
Malaysia 74.4 15.8 11.3 1.72
Indonesia 70.8 29.9 31.8 1.14
(Source: World Bank, U.S. Census Bureau, International Database; Planning Commission)

After going through these stats, one wonders at the mad rush at junk food shops and buffet-style high-price food restaurants operating in Pakistan. The sophisticated 24/7 TV cookery shows bombarding on viewers the secrets of preparing high-cholesterol expensive foods and dishes making use of exotic culinary herbs seem to portray us as a high-income developed nation. Those conceiving these programs and also those taking part in them have perhaps no idea that 40 percent of our people living under poverty line know nothing about Cheese, Mayonnaise, dessert garnishes and things of the sort. They have to struggle hard to manage even a single non-nutrient meal a day. In a fruit-rich country, where their children have to live an iron-deficient life, what interest they can have in knowing the recipe for Fruit Salad and French Peach Melba? But, that is how it goes in our country; food business and food industry growing like a grapevine taking full advantage of a society divided on the basis of highly disparate incomes. On one end are those who love to throng any food outlet without caring about the size of a single-dinner bill, and on the other are those that frequently figure in WFP hunger reports and stats.

The food industry in Pakistan ostensibly targets high-income groups with a product range that attracts, through high-budget promotional efforts, the outgoing youth and affluent kids. The following is an excerpt from Directors' Report forming part of the financials of a leading multi-national food processing company: "The company achieved a robust 19.6 per cent growth despite challenging economic conditions. All major categories contributed to this growth. The year saw an exciting 'Quest for the Noodle Pot' campaign for Knor Noodles. Knor posted a robust value growth of 39.7 per cent making it the fastest growth category. Growth was broad based with all sub-categories contributing positively. The portfolio includes noodles, bouillon cubes, soups, meal makers, sauces, ketchup, and yakhni. Noodles, Cubes and Soups were the star performers. 'Quest for the Noodle Pot' was a strong 360 degree campaign which helped bring Knor noodles to the top of the mind and created excitement among kids through well executed on ground activation at key consumer touch points."

India, a better economy for many reasons, is not much different when it comes to disparity of incomes. According to a report, the Indian food retail industry at around $70 billion in early 2010 is expected to grow to $150 billion by 2025. The Indian food and beverage market is expanding rapidly at a compounded annual growth rate (CAGR) of 7.5 percent and is projected to touch the $330 billion mark by 2013. India's below-the-poverty-line indicator is almost the same as Pakistan's - 37percent. Nevertheless, the huge size of its population makes this indicator more revealing and more horrific.

The food industry of Pakistan is dominated by a few international and local food and beverage companies. Out of those quoted on stock exchange, six are doing well financially, while many others are reported under 'defaulter' section. The key financial indicators of some of the leading food processing companies operating in Pakistan are given in the table.

FINANCIAL INDICATORS OF LEADING FOOD PROCESSORS IN PAKISTAN

COMPANY SALES
(RS IN MILLION)
PROFIT BEFORE TAX
(RS IN MILLION)
PROFIT AFTER TAX
(RS IN MILLION)
EARNING
PER SHARE (RS)
SHARE PRICE ON 16
MARCH 2011
Nestle Pak (9 month Sept 2010) 38,200 - 3,090 - 3,500
Rafhan Maize (Full year 2010) 13,913 2,800 1,838 199.0 2,793
Uniliver Food (Full year 2010) 4,041 647 437 71.04 1,126
National Foods (Full year 2009) 3,759 221 139 - 55
Ismail Industries (6-month 2010) 2,057 106 75 1.58 82
Sheezan Int. (6-month Dec-10) 1,785 61 43 7.12 145
Mitchells Farms (Full year 2010) 1,377 66 47 - 69