Jan 9 - 15, 20

With growing middle-income group, increasing awareness about foreign brands, expanding urbanization, and consumer's propensity to convenient shopping, Pakistan is emerging as a lucrative retail food market for local as well as international supermarkets, hypermarkets, fast-food restaurants, discount houses, canteen stores department, and so forth.

The food retail and wholesale business constitutes near 20 per cent of the Pakistan's gross domestic product (GDP), according to an official document.

Although over the last few years, the country has witnessed a score of foreign retailers entering the consumer market, these supermarkets and retail outlets account for not more than five per cent of total retail outlets in the country, while majority of the retail businesses are still dominated by street vendors and small shops.

These were the findings of the United Stated Department of Agriculture (USDA).

Internationally renowned retailers such as Makro, Metro, and Carrefour have already made inroads to the major cities across the country that has a growing middle-income group considered as a real consumer base. The consumer middle-income group forms a quarter of the country's population.

Overall, Pakistani consumers spend an average over 40 per cent of their income on food and beverages, according to the USDA's report.

Highlighting the potential of the retail trade, the report prepared by Rashid Y. Raja, agriculture marketing specialist, and approved by Joseph M. Carroll, agriculture counsellor, said the food retail stores dominated by conventional roadside and street grocery shops known as Kiryana stores locally are estimated to have annual gross billing of three billion dollars. Most surprising disclosure is that imported food products in these Kiryana stores make up for marginal one per cent of the total inventory.

On the other hand, the share of imported food items in the modern retail souks both local and international is more than five per cent.

Holding only two per cent of all food retail businesses in the country, foreign outlets rack up $176 million turnover per annum. As against the floor area of average 3,000 to 6,000 square feet of small conventional store, supermarket has an average covered area of 25,000 to 100,000 square feet, according to the report.

Just as the share of local modern retail stores such as utility stores, cash & carry's, etc. in the food retail market stands at three per cent, so annual turnover of these outlets also comes to around $200 million annually. Total six per cent of inventories of such stores are comprised of imported food items.

Over the past six years, exotic retail superstores with plush environment, equipped with modern technologies, and following international retail formats, have started operations in all main metropolises including Karachi, Lahore, Faisalabad, and Islamabad. Together with these, conveniences stores in fuel stations also offer a flurry of products from various beverages, dairy products, ice creams, chocolates, and baby foods to pet foods to the consumers widely exposed to the new retail format.

There is a perceptible change in the consumer buying behaviour. Food manufacturing companies are also increasing production of packaged food products to cash in on the demand emanating from middle and upper middle income groups.

Notably, upper middle class has a high propensity to shell out money on purchases from superstores, 'due to their affordability, strategic locations, and having imported processed foods and multiple choices'. This particular class consists of 17 million people, said USDA.

Shopping household products and kitchen items in the developed countries is itself an entertainment and not just a dull activity as it is for the majority of population in this part of the world.

A typical Pakistani family buys groceries monthly or daily from street shops what the report called 'mom & pop' stores 'due to convenience, perceived freshness, and limited storage space at home'.

Superstores such as Makro that is receiving good response from the consumer market in India's neighbouring country are attracting consumers by including fresh vegetables and meats and seafood assortments in its roster of offerings.

Economically active family with high per capita income now prefer to make purchases monthly from large retail outlets.

With growing numbers of spacious hypermarkets and supermarkets with chic contemporary food courts offering foreign cuisines as well as local culinary favourites, parking facilities, and children play areas, the country is acclimatizing with the novel shopping-cum-entertainment culture.

The paradigm shift in retail food industry is clearly visible in urban centres with numbers of people fast attracted towards organized retail sector expanding day by day. Discount offers abound in the organized retail market capitalizing on the price consciousness of Pakistani consumers.

Unlike well-heeled retailers that import products directly from the manufacturing countries, large portion of retailers in the country import food items from Dubai, said the report.

About the obstacles, it said, insufficient cold storages, limited handling facilities, poor transport infrastructure, cost-pulling distribution channel, corruption, and tariff and non-tariff barriers create hurdles in import of food products.

Karachi has the highest numbers of international retail stores in the country. It has more than 19 million population. The urban centre is an attractive marketplace exerting a pull on foreign and local investments in the modern retail format. Fuel marts and kiosks are common while local and foreign eateries and retail marts are increasing presence in the city. Fast food outlets are ringing in sales on the gastronomic preferences of local residents.

There is no price control mechanism in retail food market. Prices are at odds. Price disparity can be observed at the modern retail outlets especially in relation to the confectionary items or products with independent price tagging.