FCEPL Managing Director Ali Ahmed Khan.
The Netherlands-based FrieslandCampina, having €12.1 billion in annual revenues, acquired 51% voting shares in Engro Foods at an estimated price of $446.81 million.
Engro Foods was the second most profitable subsidiary of Engro Corporation, considered Pakistan’s largest private sector conglomerate.
“FrieslandCampina is a champion of safe dairy nutrition in many countries across Asia, Africa, Europe and this rebranding represents our commitment to Pakistan,” said FCEPL Managing Director Ali Ahmed Khan in an email interview with The Express Tribune.
“Our team of experts has ensured that this transition is communicated smoothly across all stakeholders and the new corporate identity will be well established. We are here to stay for now and for generations to come.”
Pakistan’s per capita milk consumption is 119 litres, according to 2011 data of the Planning and Development Division (Nutrition Section).
“Although no study has been published recently to confirm the changes, I believe the figures have changed,” said the MD. “As a nation, we love milk and within the livestock sector, milk is the largest and single most important commodity.”
He expressed concern that in spite of being the fourth largest producer of milk, Pakistan remained the second most malnourished country in Asia and per capita consumption of milk had not yet been met. Pakistan has a low ranking (106) among 119 developing countries in the Global Hunger Index and it is lagging behind countries like India and some states of Africa.
He pointed out that the country’s milk production did not meet the per capita requirements mainly because of low yield per cow.
“Yields can be improved if our farmers are trained in best practices for dairy farming,” he said. “The loose milk consumed by 90% of the population is highly adulterated and to overcome adulteration, the government needs to expedite efforts for implementation of food safety laws, like the minimum pasteurisation law.”
Terming Pakistan an evolving market for the packaged milk industry, he said currently 90% of the market still remained untapped hence there was immense potential for growth.
The acquisition enabled FrieslandCampina to obtain a key position in Central Asia, he said. Though the market was challenging, the company believed as consumers became aware of the importance of consuming safe milk, the change would be reflected in their purchasing behaviour.
“Over time, it will convert consumers from loose milk to safe packaged milk,” he said. The acquisition of Engro Foods by FrieslandCampina was the single largest foreign direct investment (FDI) in the dairy sector in the history of Pakistan. Without doubt, the acquisition was a defining moment for the dairy industry.
“It reflected the confidence of FrieslandCampina in the country and the potential of untapped growth residing in our local dairy sector,” he said. “The government just needs to incentivise the industry and within years, this sector will increase its contribution to the GDP considerably.”
Khan pointed out that the biggest difference between packaged milk and loose milk lied in the fact that the packaged milk was tested and was safe and free from adulteration and aflatoxin.
“We have invested in people, processes and technology to ensure that our milk meets local and international food safety standards and regulations strictly. We conduct milk safety checks at all our milk collection centres,” he said.
“Additionally, we conduct 28 food safety tests at our plants to ensure that the milk reaching the consumers and customers is wholesome, safe and nutritious,” said the MD. “Loose milk, however, which caters to 90% of Pakistan’s population, has zero food safety checks.”
He explained that loose milk contained pathogens and aflatoxins which were not safe for human consumption. It was neither standardised nor transported in food-grade cans, he said.
“The absence of cold supply chain infrastructure affects the nutritional value of milk, hence the chances of adulteration in loose milk are very high,” he said. “Milkmen have no means of checking that loose milk is safe from hazardous chemicals or aflatoxins.”
From chemicals to water and other additives, there have been major crackdowns - with media coverage - by regulatory bodies on loose milk recently, which illustrates how prevalent the adulteration is in loose milk.
According to the MD, lack of awareness among consumers of the importance of safe milk consumption is one problem and affordability for safe packaged milk is another. “It is also a matter of consumer awareness,” he said.
“Changes in consumer behaviour happen over time,” he said. “When 90% of the population realises that no food is nutritious unless safe, then it will reflect in their spending patterns.”
He asked the government to incentivise the industry and bring the dairy sector under the zero tax regime so the benefit could be passed on to the consumers.
The government levied high taxation on the packaged milk industry whereas the loose milk sector remained untaxed and unregulated, he pointed out.
“To ensure that safe packaged milk is available to the masses, the government needs to create tax regimes where the benefit could be directly passed on to the consumers in terms of reduced pricing,” he said. “Currently, the impact of taxation translates into significant price variation between loose milk and packaged milk, which makes affordability for the safe packaged milk an issue.”
Published in The Express Tribune, September 3rd, 2019.
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