Rising urbanization and growing middle class are key drivers of FMCG business in the country
In Pakistan, a large middle-class section, some 60 per cent of which is young, has been emerging and it looks for quality products and services with an expectation for value for money. In major cities like Karachi, Lahore and Islamabad, Pakistan’s rising middle class consumers are driving sales of international brand name products and services. New mega shopping malls are being opened by real estate developers and retailers. Although Fast-Moving Consumer Goods (FMCG) sector is mainly dominated by MNCs, there are a few local players that are giving tough time to their MNC counterparts.
Pakistan is one of the top countries adding 20-years old men and women to its workforce; these are the people establishing families, getting new jobs and helping market sizes grow. Without taking pricing into account, the market size in Pakistan has also grown in terms of volumes. Increasing urbanization and the growing middle class are key drivers of the FMCG business. Urbanizing in Pakistan is faster than other developing countries. The country’s population is growing at under 3 percent, while the rate of migration to urban centers is even higher. This rise in consumer demand has spurred the growth of supermarkets across major urban centers, 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. The shelves are large with more sophisticated and developed categories in which more products could be stocked than ever before.
An interesting comparison should be local supermarket chains such as Imtiaz Super Market against their MNC counterpart Hyperstar (a local version of French Carrefour managed by UAE’s Majid Al Futtaim group). Both Imtiaz and Hyperstar are perceived to be big discount stores with ample parking spaces where one can do their grocery and other shopping under one roof. As per an estimate, the yearly turnover of Imtiaz is from Rs 60 billion to Rs 80 billion. In the past few years, Imtiaz has emerged as the biggest store chain in Pakistan. Presently, it has five stores in Karachi, with two new ones in the pipeline. Imtiaz’s first Punjab store is at Gujranwala’s King’s Mall and the second store is in Faisalabad, opened last month.
Similarly, Hyperstar is also growing and shoppers want to associate themselves with it. Hyperstar has six stores in Lahore, Karachi and Islamabad. Opening of large-sized malls in urban centres of the country is a positive trend that is supporting the hypermarkets. The Dolmen and Lucky One malls in Karachi, Centaurus in Islamabad and Emporium and Packages malls in Lahore display the trend as the right mix of convenience stores. On the other hand, Imtiaz and Chase Up chose to open their outlets in separate premises. In Karachi, Imtiaz has five stores while Metro has three. According to a report, Imtiaz accounts for one-fifth of the Karachi’s retail segment.
The coming year may see more shopping malls of varying formats in Pakistan, even in cities like Hyderabad and Faisalabad. Most people would want to experiment with digital online platforms with improved home delivery options. Imtiaz alone has more than one million home-delivery customers.
With the rise of Pakistan’s middle class and growing brand recognition among consumers, Pakistani companies are establishing their own brands. Some of the Pakistani brands include Engro Foods, Haleeb Foods, Shezan juices, Rooh Afza, Tapal tea, Shan spices, JJ (Junaid Jamshed clothing), Gul Ahmad (textiles), K&N chicken, Tibet Snow cream, Kala Kola hair color, Dawlance, Shahi supari etc. that are providing tough competition to MNCs. The growth of consumption within the Pakistani market dictates that these companies spend more in order to be able to supply the consumers with the value they deserve. Hence, the investment climate within Pakistan is as good as it ever was.