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Offline M&M

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FMCG Sector
« Reply #-1 on: September 06, 2012, 09:44:37 PM »
Fast Moving Consumer Goods (FMCG)
« Last Edit: November 23, 2012, 12:22:15 PM by M&M »
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FMCG Sector
« Reply #-1 on: September 06, 2012, 09:44:37 PM »

Offline saifullahkhan7

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Re: FMCG Sector
« on: September 15, 2012, 09:56:37 PM »
Though KSE 100 has showed an impressive return of 36% since the start of the year, consumer stocks have outshined the benchmark by 12%. Limited float is often cited, but we believe consumer stock out performance is also on account of phenomenal earning growth of the last few years. Our sample that consists of 23 companies (as illustrated by accompanying table) has depicted a strong sales and earning growth of 20% and 19% in last 4-years (2009-2012). Further, extrapolating 2012 earnings are expected to grow by 35%, which we believe have culminated into recent upsurge in stock prices.

Evidence from the strong consumer dynamics also comes from performance of wholesale and retail sector. Where Pakistan went through one of the lowest growth periods in last 5-years (FY08-09), the sector has grown by an average 3.1%.

Consumerism: behind consumer stocks jubilee

The growth story comes from increased consumerism that stems from i) demographic changes, ii) growing middle class and iii) rising health awareness. With above regional average population growth of 2%, and sixth largest population (179mn), increasing urbanization and improving communication/distribution means, Pakistan is always been a heaven for consumer goods.

Further, decreasing family size, improving literacy rate and women inclination to work are further augmenting households to shop more and increasing middle class base. Hygiene awareness due to increasing literacy is bringing food sector turn over as people are shifting from unregulated unpacked food products.

Mid-cap lifted consumers to 48% return

Contrary to the general perception of large cap stock driving the sector, analysis revealed that mid and small cap stocks are major gainers. During the period, Mitchell led the way by 331% return followed by National Food (269%), Noon Pakistan (228%) and EFOODS (221%). Our analysis reveals that in variant order these are the same companies that have depicted highest 4 year earning CAGR. Therefore, we believe that though these companies are marked by low free float (12% against KSE average of 25%) profitability growth was also the major factor.

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Offline saifullahkhan7

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Re: FMCG Sector
« Reply #1 on: September 20, 2012, 09:32:31 PM »
Clover Pakistan
DPS 100% (10 Rs./Share)
Share Price 92.5

Do the Maths!!!

M&M Bhai, Space Bhai, Qadir Bhai your kind Comments?
« Last Edit: September 20, 2012, 09:34:56 PM by saifullahkhan7 »
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Offline kamal

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Re: FMCG Sector
« Reply #2 on: September 21, 2012, 12:10:49 AM »
Clover Pakistan
DPS 100% (10 Rs./Share)
Share Price 92.5

Do the Maths!!!

M&M Bhai, Space Bhai, Qadir Bhai your kind Comments?

Maths is simple ...but science is rockt ...

10 Rs DPS is great ..
EPS arnd 50+ last year 5

Gross PRofit decreases from last year ..

Operating losses increases thrice arnd..

39 mln ..

Discontinuing Operations ki sale pai one of 600 mln ka gain hai that made it profitable ...ispai taxation reliefs bhee hotay hain ...

55 eps ka hisab sai 5 kai multiple pai bhee yeh arnd 250 ka hai ..

But no funda ... if u getting gains enjoy ride ..jab tak lock khulay nahee ..jis din khulay exit and wapis nahee ana ..
Advice ..rest urs decision
Realize Profit when and wherever u can. Coz its profit for which we are here for not marrying scrips. Fundamentals at KSE  weigh not more than 20-30%. Move with the moves of market. If u move against than u'll be loser and accumulating dividend only.

Offline M&M

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Re: FMCG Sector
« Reply #3 on: September 21, 2012, 10:50:12 AM »
there are stocks in this sector with such low market liquidity but they can give you 50%+ gains in bullish trends
right stock or the right timing .. anyway also look at COLG and SHEZ
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Offline mra901

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Re: FMCG Sector
« Reply #4 on: September 21, 2012, 02:50:19 PM »
Strong Food & Beverage Demand Draws Investments in Pak Agribusiness  


US venture investor Tim Draper, Swiss food giant Nestle, and American beverage titan Coca Cola are investing heavily in Pakistan's agribusiness.

Silicon Valley private equity investor Tim Draper, a well-known international venture capitalist, is quietly investing in Pakistan's agribusiness, the largest provider of food commodities in the Middle East, according to San Francisco Examiner.

The share of livestock in Pakistan's agriculture output nearly doubled from 25.3 percent in 1996 to 49.6 percent in 2006, according to FAO. As part of the continuing livestock revolution, Nestle is investing $334 million to double its dairy output in Pakistan, according to Businessweek. Reuters is reporting that the company has already installed 3,200 industrial-size milk refrigerators at collection points across the country to start the kind of cold storage chain essential for a modern dairy industry, and give farmers a steady market for their milk. In another development on the infrastructure front, Express Tribune has reported that  Pakistan Horti Fresh Processing (Pvt) Limited has invested in the world's largest hot treatment plant to process 15 tons of mangoes per hour for exports.  Hot water treatment  will also help reduce waste of fruits and vegetables by increasing shelf-life for domestic consumption.
 

The Coca-Cola Company is planning to invest another US$280 million by 2013 in Pakistan, according to BMI's Q3 2012 Food & Beverage Report for Pakistan.  Coke plans to channel the bulk of its capital expenditures towards increasing the production of its existing brands as well as expanding its overall beverages portfolio. Coca-Cola plans to introduce more juices and mineral water in the Pakistani market over the coming years. This strategy could diversify Coca- Cola’s presence beyond the carbonates sector and help it secure early footholds in the higher-value bottled water and fruit juice segments, which boast tremendous long-term promise.



In addition to foreign investors, big name Pakistani companies like Dawood Group's Engro, billionaire industrialist Mian Mansha's Nishat Group and former minister Jahangir Khan Tareen's JK Dairies are placing big bets on food and beverage market in the country. Annual milk consumption in Pakistan reached 230 kg per capita in 2005, more than twice India's per capita consumption, according to FAO.

Business Monitor International expects "Pakistani agriculture sector to reap record harvests for key crops such as rice, sugar and cotton owing to favorable weather in 2011 and the year-on-year increase in crop area following floods in 2010". "We expect the dairy, poultry and wheat industries to be the biggest beneficiaries of increased investment in the agriculture sector", adds BMI's report.

 Pakistan is world’s eighth largest consumer of food and food is the second biggest industry in the country, providing 16 per cent employment in production, according to report published in Express Tribune.  In addition to rising domestic demand, growth in agribusiness is supplemented by increased exports as Pakistan expands trade with new partners. BMI expects basmati rice to take up a greater share of the trade as production increases. Cotton production to 2015/16: 45.5% to 12.8 million bales. Increased demand from Europe and emerging markets will drive output. BMI also expect an increase in domestic farmers switching from rice and sugar to cotton cultivation. Sugar production to 2015/16: 22.1% to 4.8 million tons. Large-scale consumers such as confectioners, candy makers and soft drink manufacturers account for about 60% of the total sugar demand and will be the main drivers of growth.

Pakistan witnessed a livestock revolution follow Green Revolution. Here's how International Livestock Research Institute puts the dramatic changes in Pakistan's agriculture sector since the mid 1960s: 

 Since the mid 1960s, investment in Green Revolution technologies – high-yielding varieties of cereals, chemical fertilizers, pesticides, irrigation and mechanization of farm operations – significantly increased cereal crop productivity and output. Success in the crop sector created a platform for diversification of farm and non-farm activities in the rural areas including the livestock sector, especially the dairy sector. Some of the Green Revolution technologies had a direct impact on the dairy sector while others had an indirect impact. Increased cereal productivity and output helped to reduce prices of cereals relative to other commodities in both rural and urban areas. This, along with increased income from high crop-sector growth, created  demand for better-quality foods including livestock products. This created market opportunities and incentives for crop producers to diversify into higher-value products, such as milk, meat, vegetables and fruits.

Pakistan has made significant progress in agriculture and livestock sectors showing that it has the potential to feed its people well and produce huge surpluses to fuel exports boom. The continuation of this progress will depend largely on success in making needed public and private investments in energy and water infrastructure and education and health care.


Offline saifullahkhan7

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Re: FMCG Sector
« Reply #5 on: September 22, 2012, 06:48:49 AM »
Consumer goods firms raking in profit
By Dilawar Hussain | From InpaperMagzine | 10th September, 2012
Nestle (Pakistan), the dairy producer, earned profit after tax amounting to Rs4.7 billion on sales that topped Rs49 billion for the latest year ended Dec 31, 2011. Bata (Pakistan), the shoe maker, made profit of Rs617 million on sales of Rs5 billion; Engro Foods, in the dairy to ice-cream business, launched only eight years ago, earned Rs1 billion on sales of Rs20 billion.

The company with the largest fast moving consumer goods (FMCG), —Unilever Pakistan— that sells butter, soap, shampoos to tea and ghee, sold more than Rs52 billion worth of consumer products, earning a cool sum of Rs4 billion in profit for the year 2011. And GlaxoSmithKline, the biggest pharmaceutical company in the country sold drugs worth Rs22 billion and earned profit of Rs1 billion, last year.

Many people believe that ‘Consumerism is leading the consumer sector’.

Analyst Zeeshan Afzal, at stock brokerage firm Topline Securities, identifies 25 consumer goods companies listed on the Karachi Stock Exchange. He calculates that on average the stock prices of those companies climbed by 48 per cent to date in 2012, outperforming the KSE-100 index gain of 36 per cent. Unilever is the most expensive share among the 574 companies listed on the KSE and currently trades at Rs8,800 for a share of par value of only Rs10.

Analyst Zeeshan says that limited free-float of shares, with three-quarters or more controlling equity held by mainly foreign parents, is often cited as a reason for the stock price spiral of those, mainly multi-national companies. “But consumer stock out-performance is also on account of phenomenal growth. In the last four years (2008-2012) the consumer goods companies have returned, on average, an enviable 20 per cent growth in sales and 19 per cent in earnings”, he calculates.

Economists suggest that the increased consumerism stems from burgeoning middle class, rising health awareness, decreasing family size, improving literacy rate and strong growth in rural income.

In cities, women are more inclined to work, which is augmenting income for families to go for shopping. And above all, the population of Pakistan is the fastest growing in the region at two per cent a year, with already 179 million mouths to feed.

Professor Hasan Zaidi, who teaches economics in a recognised University, says: “Consumerism increases consumption, more consumptionrequires more production, more production means more jobs and more income in society, and more income means more consumption”. He stresses that it is the cycle which ,if managed properly, can bring growth and prosperity to society, adding that although essential to our economy, there should be rules and laws to check profiteering.

The chairperson, Competition Commission of Pakistan (CCP), Ms. Rahat Kaunain Hassan, when asked to comment said: “While enforcement of competition law is indeed for the public good and protecting consumers from anticompetitive practices — controlling or regulating prices does not fall within the CCP’s purview”.

However, the consumer protection and competition law complement each other. Directly or indirectly elimination of anticompetitive practices (i.e. breaking cartels, preventing abuse of dominance and preventing deceptive marketing) result in lowering of prices, encouraging competition, innovation and promoting and enhancing economic efficiency.

Companies complain that high government levies lead to high consumer prices, while smuggling of certain items to neighbouring countries mainly Afghanistan, create shortages in the country.

Muzzamil Aslam, MD, Emerging Economics Research, says that the increasing use of FMCG is a healthy sign, for it creates uniformity and price stability in products of everyday use. He subscribes to the view that the recent phenomenal growth in use of packaged products is due to its earlier low penetration.

“A couple of year ago only five per cent of the population used packaged milk, compare it with the current household usage”, he says.

Yet he argues and several other economists admit that consumerism for goods that are not produced in the country,
but only assembled are a burden on the economy.

Luxurious automobiles, several sets of cell phones in one pocket and non-essential electronic items were nothing but lavish consumer habits that fatten import bills, resulting in wider current account deficit.

All of that puts pressure on the foreign exchange reserves, causes currency devaluation, which leads to higher inflation and forces the central bank’s hand in raising interest rates. “When people begin to spend more, they do so by compromising savings”, said a banker.

But economists say that the GDP growth rate of the country was a stunted three per cent in the four years (2008-2012) that saw stellar growth in sales and profits of FMCG companies. The economic growth, therefore, does not support consumerism. So where does the bagful of money spent on consumer goods come from? The increasing remittance of expatriate workers to their families is one known source of rural and urban peoples’ spending on consumption of quality goods.

But many suspect that the massive undocumented and unregulated economy provides the funds that lead to growing public spending on durable and consumer goods.
Source: http://dawn.com/2012/09/10/consumer-goods-firms-raking-in-profit/
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Offline SBM

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Re: FMCG Sector
« Reply #6 on: November 10, 2012, 06:24:09 PM »
Beverages: Why Coca Cola is investing another $248m in Pakistan
By Farooq TirmiziPublished: November 10, 2012

The new plants will follow the establishment of a Coca Cola facility, already completed in 2011, which manufactures Coke cans. GRAPHIC: JAMAL KHURSHID
LAHORE:
It was an announcement made so quietly that it did not even make the headlines: having already invested $172 million in Pakistan this past year, The Coca Cola Company – one of the world’s largest beverage companies – is planning on investing another $248 million in the country over the next two years.
It may have something to do with the fact that Pakistanis are estimated to have spent approximately Rs110 billion ($1.3 billion) on carbonated beverages in 2011, according to an analysis by The Express Tribune based on figures compiled from industry sources. Coca Cola currently enjoys a 30% market share, second only to arch-rival PepsiCo.
“We see great potential in Pakistan’s future, which is why the company is investing significantly in upgrading infrastructure and adding value to allied industries,” said Rizwan Khan, general manager for The Coca Cola Company in Pakistan and Afghanistan.
The money will be spent on two new bottling plants, one each in Karachi and Multan, as well as investing in more coolers, which will be distributed amongst retailers to help with the company’s retail sales efforts. Company officials were quick to point out that the investment is not simply the recycling of profits and cash flows from existing operations in Pakistan, but green-field foreign direct investment that will flow into the country over the next two years.
The expansion plans come as rising demand makes it difficult for Coca Cola to keep pace with its existing production capacity in Karachi and Punjab. The new plants will follow the establishment of a Coca Cola facility, already completed in 2011, which manufactures Coke cans. Previously, Coca Cola used to import cans from its factories in other countries.
Coca Cola’s business model in Pakistan is somewhat unique. The global US-based parent owns a subsidiary called The Coca Cola Export Company, which has a Pakistan branch. That Pakistan branch conducts all marketing and brand building activities and manufactures the concentrate for the company’s signature beverages from a plant it owns and operates in Raiwind.
The concentrate is then sold to Coca Cola Beverages Pakistan, a joint venture between the US-based parent and Coca Cola Içiçek, a Turkey-based partner of the group. Coca Cola Beverages Pakistan operates six bottling factories in Pakistan, located in Karachi, Gujranwala, Multan, Lahore, Rahimyar Khan, and Faisalabad.
Coca Cola used to have eight franchisees for its bottling facilities in Pakistan, but in the mid-1980s the company felt that the business model was not working. It then spent the next decade buying out every single franchisee in Pakistan, consolidating them under one umbrella to form Coca Cola Beverages Pakistan. This entity was a wholly-owned subsidiary of the US-based parent until 2008, when Coca Cola Içiçek took a 49% share.
The company declined to provide a precise revenue figure or growth numbers, but said that it buys close to Rs13 billion in raw materials from its 300 local suppliers. According to Coca Cola Içiçek’s annual report, the company’s revenue growth rate in Pakistan is in the high teens. Coca Cola has over 4,000 employees in Pakistan, and employs another 6,000 indirectly. Company officials say that it paid Rs11 billion in taxes last year.
Taxation is something of a sore point for Coca Cola, since it is forced to pay excise duty on both the concentrate and the finished product, in addition to paying sales taxes on the final product. It also pays the full corporate income tax on its net income. In 2010, the federal government removed the requirement to pay excise duty on the concentrate, but Coca Cola still feels that the burden of what it calls double taxation needs to be lightened.
“Our aim is to inspire economic activity, create employment and increase tax revenue for the government. However, it is the government’s responsibility to ensure that a productive investment and business operating environment is provided to local and international companies,” said Khan.
In the meantime, Coca Cola has tried to cut back on other costs, notably its logistics and distribution costs. One innovation it has introduced is called “pre-sell”, where instead of simply going up to every retailer with a truck, the company asks for orders to be placed via text messages. This method has saved the company approximately 30% in man-hours of delivery time.
Published in The Express Tribune, November 10th, 201
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Offline Farzooq

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Re: FMCG Sector
« Reply #7 on: November 20, 2012, 12:21:54 PM »
Food sector hurtling with ample margins due to price play
Food sector always have a high propensity of growth in margins and revenue. Overall, we see
increase in shelf off?take amid ever increasing product pricing which is leading to profitability of this
sector. The companies are moving albeit inflation?effect wherein prices are increased almost every
quarter at least. This is something which is affecting public pockets but since there is no consumer
protection or rights group hence these companies either local or multinationals take undue
advantage of soaring prices.
High pricing can be envisaged from the following margins study:
In Nestle, key segments such as milk and nutrition proving to be cash cows with overall margins of
15% vide 9MCY12. EFOODS (the company we actively cover in our universe) is showing exponential
growth in dairy and juices segment generating Rs.27mn of revenue and achieved segment gain of
Rs.1.9mn.yielding 16% return on segment’s assets.
In the herd of our top picks such as EFOODS, we see NATF roars with utmost margins with 35% in
1QFY13 shown growth of 5% from 30% in 1QFY12. Though we do not cover NATF.
Valuation
We always see food trading at higher multiples as against other companies in Pakistan. Hence we
assign higher target multiples for EFOODS at least.
EFOODS is currently yielding at a CY13 P/E of 24x which is lower than industry average of 26x and
PBV of 6.5x makes it attractive acquisition. Even though our earnings estimation for EFOODS for
CY13 is a bit higher.
However, NATF is yielding much lower P/E of 18x and PBV of 16x which is again much lower than
other peers in the industry.

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Engro fatima ogdc pol pso dgkc mlcf kapco npl ubl atrl nml efoods aicl hcar searl

Offline stockz_123

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Re: FMCG Sector
« Reply #8 on: November 23, 2012, 12:14:18 PM »
Food Producers have shown commendable revenue CAGR of 27% and PAT
CAGR of 26% over the last five years. The growth has remained smooth and
consistent even though macro-economic indicators have been mediocre at
best during this period
? We attribute 1) rising consumerism in Pakistan, 2) ever increasing
disposable income of growing middle class in the country and 3) emerging
young population to have driven these growth trends
? Going forward, any macroeconomic improvement characterized by
declining inflation (down to 8.8% in 4MFY12), monetary easing and rising
remittances (up 9% YoY to USD3.6bn in 1QFY12) will serve to accelerate an
already impressive growth momentum
? Our relative valuations indicate that SHEZ, ISIL, MUREB, EFOODS and
NATF are available at cheap multiples relative to peers

We take a look at the performance of Pakistan’s listed food producers over the long
run. We have included listed consumer facing food producers with bottom-line of over
PKR100mn in this analysis. The sector has shown commendable revenue CAGR of
27% and PAT CAGR of 26% over the last five years. The growth has remained smooth
and consistent even though macro-economic indicators have been mediocre at best
during this period.

What’s driving the consumers?
The sector topline has grown by impressive 230% to PKR176.7bn from CY06/FY07 to
CY11/FY12. This sustainable growth trend has been driven equally by volumetric
uptick and easy pass-on of inflationary pressure. To illustrate, net margins for our
sample companies have stayed within a tight band of 5.5%-7.5% over the period,
having bottomed out in FY09. We attribute 1) rising consumerism in Pakistan, 2) ever
increasing disposable income of growing middle class in the country and 3) emerging
young population to have driven these growth trends and believe the same will
continue driving sustained growth for all directly consumer facing stocks; with food
producing group on the forefront.

Our conviction for the future stems from...
Despite challenging macroeconomic circumstances having prevailed for last five years,
characterized by low average GDP growth of 3.0% and towering average CPI of 13.8%
(or cumulative inflation of 69.2%), the sector has continued smooth ride of profits
without any hit on margins. Going forward, any macroeconomic improvement
characterized by declining inflation (down to 8.8% in 4MFY12), monetary easing and
rising remittances (up 9% YoY to USD3.6bn in 1QFY12) will serve to accelerate an
already impressive growth momentum. These have already started reflecting in the
sector’s profitability, as the last quarter (3QCY11/1QFY12) saw their combined profits
rise by whopping 44% YoY to PKR4.0bn. The sector stands to benefit from Pakistan’s
emerging young population whose demands for prosperous lifestyle will not only fuel
consumerism but also provide rapid market development opportunities for new
products.

BMA

Offline SBM

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Re: FMCG Sector
« Reply #9 on: November 24, 2012, 02:54:24 AM »
 :bangin: uuu

isil has a free float of 0.76% ...
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Offline SBM

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Re: FMCG Sector
« Reply #10 on: May 05, 2013, 02:04:47 PM »
KARACHI:
While the Pakistan People’s Party’s (PPP) performance on the overall economic front is highly debatable, many seem to agree that the agriculture sector is better off today compared to what it looked like five years ago. As agricultural income remains tax-free, regular increases in support prices of major crops has ensured a continuous influx of money into the rural economy, making farmers better off, by and large.
However, according to Karachi Stock Exchange (KSE) Managing Director Nadeem Naqvi, growth in the agriculture sector is likely to slow down as the country is expected to join an International Monetary Fund (IMF) programme under the next government.
“I do not see the high level of support to the agriculture sector to continue, given the very limited financial leeway available to the (next) government. Approaching the IMF will lead to a drastic reduction in power-sector subsidies, effectively increasing the input costs for farmers. Secondly, there will be real pressure to reform the tax system, which can possibly mean RGST as well as a tax on agriculture income,” he said.
Disregarding quality differentials and considering average prices, revenues of four major crops – wheat, cotton, sugarcane and rice – were approximately Rs530 billion in 2007, according to Naqvi. “The revenue figure for 2011-12 for the same crops was Rs1.5 trillion. This means that revenues of the agriculture sector increased by Rs1 trillion in five years,” he said. That translates into an annualised increase of over 23% in farmers’ income over the five years when the PPP government was in power. “In dollar terms, that is an influx of around $12-13 billion into the rural economy in just half a decade,” he added.
As per the recent rebasing exercise by the Pakistan Bureau of Statistics, the size of the agricultural sector now stands at 23% of total gross domestic product (GDP), as opposed to the earlier estimated share of 20.3%. Agriculture sector growth for fiscal 2008, 2009, 2010, 2011 and 2012 remained 1%, 4%, 0.6%, 2.4% and 3.1%, respectively. In 2012-13, the agriculture sector is estimated to have grown at the rate of 3.4%.
Fallout
The KSE MD believes growth in agricultural income over the next five years will be lower than what it has been in the last five years. He also noted that as power subsidies come down and electricity becomes expensive, retail prices of consumer goods will go up, hurting the margins of the fast-moving consumer goods (FMCG). “I foresee a slowdown in the earnings growth of the FMCG sector. As earnings slow down, their valuations can also possibly be affected. As a result, I see sector rotation in the next five years with less emphasis on the FMCG sector in contrast to the last five years,” he said.
Currently, stocks in the FMCG sector trade at nearly 34 times 2012 earnings, compared to the seven times earnings that the overall market trades at, according to BMA Capital, a brokerage house based in Karachi.
In a separate report released in January early this year, the State Bank of Pakistan said the net profits of FMCGs listed on the KSE grew by over 20% in FY12. “It is important to mention that the FMCG’s bottom-line has been growing this rapidly for the last five years, and the sector has outperformed the KSE 100-Index with a wider margin,” the SBP report said.
“I think we are going to see a shift in income generation from rural to urban in the next five years. As that happens, I think manufacturing entities, textiles, cement, oil and gas and telecoms will probably be the more attractive sectors for investors [in the future],” Naqvi said.
Published in The Express Tribune, May 5th, 2013.
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Offline mshakilsadiq

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Re: FMCG Sector
« Reply #11 on: May 18, 2013, 02:28:07 PM »
If you want a 'Pension Plan' then think about EFOODS and FCCL.

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Re: FMCG Sector
« Reply #14 on: June 13, 2013, 11:33:50 AM »
FMCGs: Budgetary measures
• Imposition of 9% FED from 6% on aerated water beverages
(carbonated drinks) and introduction of capacity based taxation
• GST increased by 1% to 17% while an additional 2% will be charged
on supplies to non-registered persons.
• Turnover tax increased to 1% from 0.5%
• Decline in corporate tax rate to 34% from previous 35%
• Certain products containing milk were exempt from sales tax.
These exemptions now stand withdrawn.
• Imposition of 2 stage FED at Rs2,325 if retail prices in more than
Rs2,286 per thousand sticks and Rs880 if retail price is less than
Rs2,325 per thousand sticks
• Reduction in the duty of water treatment plants to 15% from
20%
Impact: 'Neutral' for FMCGs
• Although, Milk preparations has been excluded from the sixth
schedule of Sales tax act which deals with exemptions from GST.
Govt has issues a SRO to allow zero rating on import and supplies of
Milk, fat filled milk, flavored milk, cream, butter yogurt etc.
• Imposition of 1% extra GST and 9% FED on aerated water
beverages will result into increase in prices and negative impact on
volumes.
• As per our understanding, imposition of fixed FED in rupees term
instead of FBR's proposal of FED as a percent of retail price is positive
for the sector.
• Reduction in corporate tax rate will bode well for the FMCGs with
the EPS impact of Rs0.09 per share for Efoods. Imposition of 1%
turnover will be negative for companies falling under turnover tax
regime.

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Re: Latest News
« Reply #15 on: June 24, 2013, 03:23:11 AM »

This rise in consumer demand has spurred the growth of supermarkets across major urban centres. PHOTO:FILE
KARACHI:
Procter & Gamble (P&G), one of the world’s largest consumer goods company, has recognised Pakistan as one of the top 10 emerging markets to focus investment in. This sounds like good news for our cash-strapped economy, and it is equally good news for those who have invested in P&G.
It makes sense for any fast moving consumer goods (FMCG) to invest in a country where the world’s biggest consumer goods names – Unilever, P&G, Nestle and Mondel-z (formerly Kraft Foods) – are not only operating, but also growing significantly.
According to the State Bank of Pakistan, the net profits of FMCG companies listed on the Karachi Stock Exchange grew in excess of 20% in fiscal year (FY) 2011-12. P&G, which is not listed on the KSE, has witnessed tremendous growth in revenues during the past three years – including 50% revenue growth in FY2012. Besides the consumer goods sector, its supporting industries like packaging and distribution companies have also seen their toplines grow significantly.
So what are the factors contributing to this growth?
If the fact that these companies are selling essential food items and consumer goods in the world’s sixth-largest market by consumer size is not satisfying enough for you, here’s a more detailed and nuanced explanation.
“Economics and demographics are together at play in Pakistan,” P&G Pakistan Country Manager Faisal Sabzwari told this correspondent in a recent interview. The boom in the rural economy has also been a major contributor to their growth – thanks to a series of bumper crops of agricultural produce and wheat support prices, which were raised by the government in recent years.
Besides this, according to Sabzwari, Pakistan is one of the top countries adding 20-somethings to its workforce; these are the people establishing families, getting new jobs and helping market sizes grow.
“We have millions of consumers entering independent disposable income space in their lives every year,” Sabzwari said, while referring to the growing middle class.
The market size in Pakistan has also grown in terms of volumes, without taking pricing into account. “Increasing urbanisation and the growing middle class are key drivers of the FMCG business,” Sabzwari said.
Pakistan’s is urbanising faster than other developing countries, according to Sabzwari. “The country’s population is growing at under 3%, while the rate of migration to urban centres is even higher,” according to Muzammil Aslam, managing director at Emerging Markets Rsearch.
“A population base of 180 million talented and hard-working people hungry for prosperity ensures that nothing can hold this country back from growing,” P&G Pakistan’s chief said. While looking at the growing middle class, he said, it is important to look at their consumption habits. “We are exposing more consumers to value brands like Pampers and Always,” he explained.
It may be added here that consumer spending in Pakistan has increased by an average of 26% in three years, according to a Bloomberg report published on November 21, 2012 – a strong sign that people are consuming more goods than ever before.
This rise in consumer demand has spurred the growth of supermarkets across major urban centres, which include, but are no longer limited to Karachi, Hyderabad, Multan, Lahore, Faisalabad and Islamabad.
Such superstores are getting larger and asking manufacturers for broader brand portfolios in order to serve their customers better. They have larger shelves, enabling them to have more sophisticated and developed categories in which they can stock more products than ever before.
This growth, Sabzwari said, is also testament to an emerging class population segment called the Pakistan One Plus class. This is a growing bulk of affluent consumers that want to be serviced: they demand products which have been launched in Europe but are not yet available here, he said. These are expensive, premier brands; and retailers are asking P&G for such products to service their customers.
These factors are the ones actually driving growth in the FMCG sector and allied industries over the past few years, in utter disregard to all the negative aspects of the Pakistani economy.
Published in The Express Tribune, June 24th, 2013.
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Re: FMCG Sector
« Reply #16 on: November 08, 2013, 12:40:06 PM »
Winning and losing: Distributors make or break FMCG companies fortunes
By Farooq Baloch / Creative: Talha Ahmed KhanPublished: November 8, 2013

Distributors perform one of the most important supply chain functions: the distributor has to ensure the utilisation of space at the retailer’s shelf; it has to make sure the retailer does not run out of inventory at anytime, said the official. DESIGN: TALHA AHMED KHAN
KARACHI:
A general slowdown in consumer spending may have forced fast moving consumer goods (FMCG) companies to revise their sales targets, but a comparison of the recent performance by some major FMCG players shows it is an efficient distribution network, that distinguished winners from losers in these challenging times.
Take the example of Engro Foods, a subsidiary of Pakistan’s largest private sector conglomerate Engro Corporation, whose revenues declined 4% year-on-year (YoY) to Rs18.9 billion during the first six months of calendar year 2013 (CY2013). The negative growth was a result of a troubled distribution network.
The local food giant had been trying to fix its distribution arm for a couple of years now. While acknowledging this problem, its CEO, Sarfaraz A Rehman had told The Express Tribune that they were trying to put in new distributors.
On the other hand, Procter and Gamble Pakistan – a subsidiary of the Ohio-based consumer goods giant Procter and Gamble – has had three consecutive years of high growth. The company had a turnover of Rs22 billion in fiscal year 2012 (FY2012), which according to the officials was then highest growth year in the company’s history, recording a 50% YoY increase in its turnover.
Procter and Gamble engaged a single distributor in Pakistan, Abudawood Group, according to the company’s country head Faisal Sabzwari. This distributor, according to Sabzwari, gave them unprecedented ability to reach the right standards of accessibility in the retail stores.
Continental Biscuits Limited (CBL), a joint venture between family of Hasan Ali Khan and Kraft Foods – now Mondel-z International – is another example of the difference a distributor can make in the FMCG sector.
With Rs10 billion in sales during FY2013, CBL’s revenues have been growing by 50% for the last two years, the company officials say. The recent expansion in CBL’s distribution network gave it larger market penetration by taking the products to rural markets, said the company’s Director Marketing, Rafey Zuberi.
In all three examples, it was the distribution network that played an important role in driving, or hampering, the growth of these companies.

Selling capability is the function of distributors, said an official from a logistics company. Distributors perform one of the most important supply chain functions: the distributor has to ensure the utilisation of space at the retailer’s shelf; it has to make sure the retailer does not run out of inventory at anytime, said the official.
In a standard supply chain, the official said, a manufacturer produces and markets its products while the logistics firms transport, store and deliver the product to the retail outlets while distributors take orders and manage sales on behalf of the manufacturer.
By contrast, most companies try to integrate this function into their existing operations, expecting the third party to only provide storage, the official said. This sometimes leads to problems. For example, when Engro Foods launched its ice cream brand Omore, the refrigerators reached the outlets but the ice cream didn’t, said the official.

Responding to a question about Engro’s distribution problems, the official said they initially had a single distributor, Agility, but that didn’t work for them. Agility was mainly a logistics company but also acted as a distribution company for them. Later on, he said, they separated logistics and distribution by hiring other distributors zone-wise.
If the logistics industry can develop itself, the official said, it can perform distribution function efficiently.
Players like Abudawood are already doing that by offering value added services. A subsidiary of Jeddah-based Abudawood Trading Company, Abudawood Pakistan has established itself as a sales management company. In the near future, according to its website, their services will also include special packaging of goods, repacking, promotion handling and merchandising related services.

The company, according to an official, has a robust IT system for efficient supply chain management. It covers 95% of the categories in rural and 100% in urban markets. It is perhaps this efficiency, which helped the company grow phenomenally within three years of its entry in the Pakistani market – it grossed Rs24 billion in revenues during FY2012 and is growing at a compound annual growth rate of 22%
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Re: FMCG Sector
« Reply #17 on: November 18, 2013, 10:58:08 AM »
'In the next three years Coca-Cola will invest another $380 million in Pakistan'

November 18, 2013 RECORDER REPORT 0 CommentsE-mailPrintPDF
In 2005 Rizwan Ullah Khan was appointed as Coca-Cola's Country Manager for Pakistan and Afghanistan. Over the years, he has been a strong advocate of System Alignment between the Company and Bottling system, which has resulted in Pakistan becoming one of the Company's high priority markets, with the business doubling in 4 years.

Mr. Khan was one of the founding members of the American Business Forum, an association of leading US organisations in Pakistan, which he currently also heads. He has also served on the Board of Directors of Pakistan Human Development Forum (National Commission for Human Development) and is a governing body member of Rising Sun Education and Welfare Society. Following is a brief excerpt from a recent conversation he had with BR Research in Lahore

BR Research: Coca-Cola has slowly but steadily been investing in the Pakistani market for the last couple of years. What is it that makes Pakistan such an enticing market for companies the likes of Coke?

Rizwanullah Khan: Well for starters, a few years down the line, you're looking at a population of around 230 million, 65 percent of which comprises of youths below the age of 29 years. And you're essentially looking at a middle class of 60 to 70 million people, people with refined tastes and sensibilities. So for all the political uncertainty and the myriad hurdles that businesses -especially multinationals- face here, the end results are just that much more rewarding.

So from the point of view of an investor such as Coke, the Pakistani market is amongst the most promising in the world. Our commitment with the country is cemented by the fact that we have spent nearly $350 million in significant upgradations and value addition to our own distribution footprint within the span of the last 7 years. And what's more is, the money brought in has not merely been a re-investment of cash-flows being generated locally, but instead is genuine green-field FDI being flown in to expand our business from the ground up.

BRR: Coke has been about taking branding to a whole new level. In the context of Pakistan however, a surge in popularity only came by in the late 000's. Tell us about Coke's revival and its rise to prominence amongst the so called Pakistani 'Generation X'?

RUK: It all started in 2005. In my mind, that's the time where I draw the line between the metaphorical 'Before' and 'After'. Since 2001, in my previous capacity within the organisation, we had been working to bring our parent company's senior executives to Pakistan and show them the kind of raw opportunities that a market of this scope presented. So when we were able to do that, a plan for heavy investment followed suit and it did take us a while but here we are today.

These giant leaps of growth that you see today are a result of those investments which in turn prompted revenue growth. In the last 7 years we have grown 3.5 times of what were in 2006 and have achieved steady double digit volumetric growth during this period.

Now obviously a lot of this has come as a direct result of focus on brand building. Then we also had to work on capacity expansion and we have ended up expanding almost every Coke plant in the country. Additionally we also expanded our distribution footwork and our supply chain with a complete focus on tackling our competitors in a head-on fashion.

But one aspect of this growth has been creating the brand 'Coca-Cola' in the Pakistani market. We have indeed made inroads into Pakistani consumer's psyche but I truly believe that we did so by first earning our social license from the people of this country. This is a belief we at Coke have always held onto. We believe that success and revenue growth will always follow suit but first you have to earn your social license by cementing your place in the hearts of the consumers and really, that is what we have been trying to do all along.

BRR: Tell us how Coke Studio the phenomenon came about?

RUK: In our business, you never really get a day off. You need to constantly be able to keep your consumers engaged and create a perennial pull and a demand. So we started out with research and looked into how we could tap into different consumer segments and we found that there were two things that universally brought people together in these parts of the world: Music and Cricket.

So by 2008 we were able to put together the concept of Coke Studio, which is essentially all about presenting a creative genius that broke boundaries and fused together the like and the opposite, the old and the new. And from day one, the response has been positive in ways that we simply could not have foreseen.

Coke Studio is in fact the one feat that we at Coca-Cola Pakistan are particularly proud of. It is now a case study in consumer engagement in and of itself and something that started literally as a home-grown organic idea is now being rolled out globally, in places as far as South Africa and Latin America. So we did set precedence, and it gives me immense pride every time I talk about it.

BRR: Would you go so far as to say that Coke Studio played a big role in helping Coca-Cola grab elusive market share?

RUK: Well Coke Studio definitely did help us connect with our target audience in a much faster way. It gave us a jump-start in reaching out to the young adult market, something that might have taken one or two years if we had gone about the process organically. So it did give us a foothold there.

But then we also came up with massive genius of a marketing campaign in tandem with Coke Studio so you can't really say that it has been a one trick pony. We were the first ones to activate a number of marketing opportunities and everyone else has been inspired to follow suit. In cricket for instance, we have taken marketing beyond the customary branding through logos and product placement and made a breakthrough by reaching out to fans like no other brand had ever done.

So, all of that has been greatly conducive to Coke's growth in this market. And today we are the biggest single brand name in Pakistan. And I'm basing this on two parameters; namely brand equity and market share. Right now our brand equity is much higher than our mainstay competitors and volumewise we are not far behind.

BRR: If you take the per capita consumption of carbonated beverages at around 70 bottles per person, how does Pakistan stand amongst regional peers? How do we compare with other developing countries in terms of our consumption patterns?

RUK: We have much better per capita consumption than India, but compared to the rest of the world, even if you take a country like Egypt -which has per capita consumption of around 100 bottles- we are lagging a bit behind. So amongst emerging countries, Pakistan has a lot of room left to grow.

But we also need to look at these numbers in perspective. In 2005 for instance, we were at a per capita consumption of around 18 bottles, so the overall industry has also grown by 3.5 times. So as an industry, the growth has been phenomenal.

BRR: There is a general perception amongst people that Coke is more of an urban brand whereas Pepsi has a lot of pull from the rural strata. Is that perception right?

RUK: I really wouldn't go as far as to say something like that. While it is indeed a game of perception, the fact that Coke might have greater pull in urban areas can simply be explained by the fact that that's where our marketing has been concentrated. But we are changing that and moving very rapidly into rural markets.

The thing is, expansion is costly, and we really started getting into it by 2005, so it's going to take us another couple of years to expand fully, but we're getting there. And I think that going forward a couple of things will be aligning for Coke. First of all our production standards are world class and the handling and distribution network is unmatched in Pakistan. Then of course we have the marketing edge and the brand equity we have painstakingly built over the course of the last 7 years. So all in all, things are looking great.

BRR: Where is Coke poised to go next?

RUK: We've had a phenomenal run in the last 7 years and now we are poised to go right ahead and in another 3 to 4 years we will be in a position to be the market leaders in Pakistan.

When I took over at 2005, we had only a couple of thousand employees, and today we have over 6,000 employees. Today we inspire billions of Rupee's worth of economic activity and our operations directly affect millions of retailers, and other elements in the supply chain. We purchase raw material worth billions of Rupees every year and are one of the most respected multi-national operations in the country.

Going forward, we are looking to open new plants in Karachi, Multan and Islamabad and will be investing around $380 million in these endeavours in the next 3 years. So by 2020, we intend to make Pakistan a $1 billion investment destination for Coca Cola International.
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Re: FMCG Sector
« Reply #18 on: November 20, 2013, 03:20:29 PM »
KARACHI:
The headlines may be screaming about violence and extremism but ‘the world’s biggest snacking company’ is betting its money, quietly, on the Pakistani consumer. From acquisition to localised manufacturing, Mondelez International is doing all it can to expand its retail footprint in a country it counts among the world’s top five growth markets.
Based out of Illinois, United States (US), Mondelez Pakistan? formerly Kraft Foods Pakistan? has been aggressively expanding its retail footprint in the country, which raises an obvious question: what is driving its interest in this market?
“As the world’s biggest snacking company, we’ve seen a significant growth in our snack brands here in Pakistan, which is among the highest in the world,” said Ian Buchan, Mondelez International’s General Manager, New Markets, Middle East and Africa, while talking to The Express Tribune. The New Markets business covers nine countries including Pakistan.
Buchan did not disclose the company’s revenue or growth figures but confirmed that “Pakistan has been one of their top five growth markets in the world” in recent years.

With over Rs4 billion in sales during fiscal 2012, the company has maintained a strong compound annual growth rate of 44% from fiscal year (FY) 2009 to FY2012, according to sources.
Pakistan is among the top 10 future growth markets for Mondelez, Buchan said, adding the country’s confectionary market is worth approximately $100 million and growing strongly.
The multinational snack and confectionary giant already has strong positions in a number of categories, specifically in the snacking business that includes its Cadbury portfolio. “To date, the Cadbury Dairy Milk and Tang are the fastest growing brands in Pakistan with strong sales results of Rs1 billion per annum,” Buchan said.
In 2012, the company, which apparently keeps low profile in Pakistan, bought out Clover? the sole distributor of Tang, a top brand in the powdered beverages category. Last month, the company launched its flagship biscuit brand Oreo through its Pakistani joint venture Continental Biscuits Limited. Oreo is the first ever recipe of Mondelez to be manufactured locally through a joint venture.
“Our strategy is to grow through brand investment and to sustain competitive advantage via investment in local manufacturing and route to market capability,” Buchan said. “We have invested heavily in local manufacturing in Pakistan for our brands which has allowed us to tailor a portfolio of products for the market designed to appeal to all consumer segments,” he said.
The American snacking giant did not disclose investment figures for Pakistan but as per the latest numbers, the country’s food sector attracted $31.8 million in foreign direct investment (FDI) in July to October 2014, an increase of over 130% compared to $13.8 million in the corresponding period last year.
The company has been investing consistently every year in capacity expansion in their Tang, chocolate and wafer manufacturing capability, according to Buchan, and sees long term growth opportunities but there are certain challenges it faces along the way.
It is a challenge to build cost effective distribution in rural areas, particularly in the chocolate business that requires robust temperature controlled supply chain all the way from the factory to the store, Buchan said. Besides positioning a large number of refrigerated display units in stores, one has to invest in chilled vehicles and warehousing as well, he said – a challenge compounded by loadshedding across the country.
However, despite these challenges the company is confident that there is room to grow significantly in the years to come, according Buchan.
“We expect the business to double in the next three to four years,” Buchan said.
Published in The Express Tribune, November 20th, 2013
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