Areesh
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KARACHI -- As Pakistan's population increases and urbanization gathers pace, demand for consumer goods is booming. A new restaurant or a foreign fashion brand appears almost weekly, underscoring the nation's transformation into a modern consumer society.
Multinationals are flocking here, attracted by an economy whose population is already the world's sixth largest and growing rapidly. U.S. fast-food brands Hardee's, Burger King and Johnny Rockets are all here, and Fatburger's biggest outlet anywhere is in Lahore. American competitor Steak 'n Shake announced plans in March to open 15 restaurants in the country, while Boneheads Grilled Fish and Chicken has chosen Pakistan for its first overseas location.
Retailers hearing the call include fashion chains Next, Mango and Zara, department store Debenhams, footwear brands Clarks and Charles & Keith, and the Body Shop. European retailers H&M and Marks & Spencer are rumored to be coming soon.
"We have just started building malls,'' said Abid Umer, chief executive of Al-Karam Retail, which has partnered with Mango and Lifestyle to launch their brands in Pakistan. "A megacity like Karachi should have at least 10 shopping malls, and we will get there,'' he said. "The market is growing at a tremendous pace as lifestyles shift. Consumers want global brands, a good shopping experience and value for money.''
Despite headlines highlighting the fragile state of security and the economy, the appetite for fast-moving consumer goods is unabated, said Muzzamil Aslam, an economist and managing director of Karachi-based Emerging Economics Research.
Rapid population growth of about 2.1% a year is boosting the workforce. A hefty 28% of the country's 200 million people are in the 15-29 age bracket. Only 38% of the populace lives in towns and cities, leaving significant scope for urbanization.
A booming informal economy and annual remittances of $18 billion from overseas workers are helping fuel a surge in consumption, Aslam said.
Pakistan has a much higher marginal propensity to consume than other economies in the region, where savings are more encouraged, Aslam said. The country has one of the highest household consumption-to-gross domestic product ratios in the world, according to World Bank data, a situation that's likely to continue as the middle class expands, urbanization spurs the growth of megacities and the economy benefits from favorable demographic trends.
Nabeel Khursheed, an analyst at Topline Research in Karachi, put Pakistan's savings-to-GDP ratio in 2014 at 7.5%, about a quarter of the rate in neighboring India.
Clarks, the British shoemaker, launched operations in Pakistan earlier this year. It has one outlet each in Karachi and Lahore -- and is targeting Islamabad and other major cities.
"Demand for foreign brands in Pakistan is high because products are made with better quality material, have appealing designs and are also a status symbol,'' said Ahsan Rashid, Clarks' head of retail for Pakistan.
Designer brands are transforming a clothing scene previously dominated by traditional attire, as the Internet and the changing lifestyles of urban youths are giving the country a new sense of fashion. The growing use of Facebook and other social networks means reaching customers has never been easier -- or less expensive.
Mondelez International, the American confectionery and snack maker whose brands include Cadbury, Oreos and Ritz, has identified Pakistan as one of its top five growth markets. Procter & Gamble, a U.S. consumer goods producer, has described the country similarly.
Food companies listed on the Karachi Stock Exchange, such as Engro Foods, Nestle Pakistan, Unilever Food and National Foods, trade on an average price-earnings ratio of more than 30 compared with a market average of 9, reflecting their superior outlook as demand for processed foods grows.
Improving economic conditions, falling oil prices and political stability have boosted consumer confidence. Changing purchasing habits and increasing attention to health and hygiene are also driving sales as more people switch to buying packaged branded products as opposed to loose goods sold in local markets.
Still, packaged goods account for only 2% of the country's food market, according to Waqar Ahmad, Nestle Pakistan's head of corporate affairs, offering huge growth potential for the company, whose products span dairy, bottled water, breakfast cereals and instant noodles.
Lower international commodity prices have cut business costs and raised margins for consumer-goods makers, as reflected in their first-quarter financial results. A Topline Securities analysis of first-quarter earnings announcements by locally listed consumer goods companies found that sales and profits increased at a record pace. Revenue at companies with a market capitalization of $200 million or more rose an average 21% year-on-year while net profits rose 79%.
Unilever Pakistan estimates that 97% of households use one or more of the company's products, said Sadia Dada, head of corporate affairs. But the producer, whose brands include Persil and PG Tips, still sees significant scope for growth in rural areas. The company has launched a rural customer development initiative that will be rolled out to thousands of villages by 2020.
Nasir Aziz, an adviser and technical director at Lucky One, a mall and residential project coming up in Karachi, said "the mall is our new social/architectural space where middle, upper-middle and elite income groups come to socialize, shop and entertain themselves."
"With the increasing number of shopping malls, local and foreign brand business [is] thriving," he said. "Shopping malls are providing safe space where families can shop, and youngsters can have lunch, watch a movie and socialize in a safe and secure environment away from guns, drugs and other criminal activity."
"It's good to have many new local and foreign fashion brands available in Pakistan," said Ayesha Ansari, a senior official at United Bank in Karachi. "I used to shop for my favorite perfumes and cosmetics whenever I [went] abroad, but now I can shop [for] everything here whenever I want."
Where consumers like to spend: Pakistan proving irresistible to Western brands- Nikkei Asian Review
Dont even get me started on XLI COROLLA.
