Even as its efforts to enter the Indian retail market have been rebuffed by regulatory constraints, Walmart, the world’s largest retailer, neither confirmed nor denied speculation that it was eyeing opportunities in Pakistan.
“We have not made any announcements concerning Pakistan,” said Megan Murphy, Walmart’s international corporate affairs manager in an e-mail. Walmart does not comment on market entry speculation, she added.
Murphy, however, said their priorities are to “concentrate on the markets where we already have operations and look for growth opportunities in markets where customers want to see us and where it makes sense for our long-term growth.”
While Pakistan clearly does not fall into the first category, its regulatory environment has been far more welcoming than neighbouring India, where the government was recently forced by populist protests to roll back reforms that would have allowed Walmart and other foreign retailers in. The Pakistani retail market, currently estimated at $42 billion and rapidly growing, is viewed as an attractive opportunity for foreign investors.
“To say Pakistan is not on Walmart’s opportunity radar screen, I don’t agree,” said Afnan Ahsan, CEO of Engro Foods, one of the largest consumer goods companies and a subsidiary of the Engro Corporation.
Pakistan is a very large and concentrated consumer opportunity. Karachi alone accounts for 40% of any consumer business, Ahsan said. “It is on every big player’s radar screen,” he added.
Despite recent troubles, Pakistan’s $210 billion economy has been mentioned by several global analysts as a potent force to be reckoned with in the future, including Goldman Sachs’ Jim O’Neill, the man famous for creating the term BRICs. Goldman includes Pakistan in its list called the Next Eleven, economies that are expected to become some of the most important sources of global growth.
The growing middle class – one-third of the country’s population of 180 million, of which 55% age below 30 – has already prompted international players like Germany’s Metro Cash and Carry and France’s Carrefour to enter the market.
MCC has recently acquired Makro and now has a network of 10 stores in Karachi, Lahore, Faisalabad and Islamabad. Hyperstar – Carrefour’s joint venture with the UAE’s Majid Al Futtaim Group – has one store each in Karachi and Lahore. It also announced opening of four more stores in Karachi and extend its chain to every metropolitan city in Pakistan.
Besides international wholesalers and retailers, local supermarkets – Imtiaz Supermarket in particular – have also been expanding their businesses.
Government officials also have a more welcoming attitude. “Personally speaking, Walmart will be very viable in Pakistan,” said Liaquat Ali Gohar, head of marketing at the Small and Medium Enterprise Development Authority. He said that the retail sector so far has not been able to meet the overall demand.
While the retail sector has grown significantly over the last few years, most of the development took place in the big cities. Misbah Iqbal, a consumer goods analyst at AKD Securities, pointed out that the rural people – about 55% to 60% of the total – are still underserved.
Pakistan is rapidly urbanising, Iqbal said. Despite many new entrants in the supermarket business, all of them are attracting huge traffic and growing significantly, she said, though largely in the major metropolitan areas.
Poor infrastructure in rural areas prevents investment. Nevertheless, many consumer goods companies are actively marketing to rural consumers, creating awareness about branded products, Iqbal said. Retailers will automatically benefit from that, she added.
Logistics – and the government’s inadequate investment in the road and rail infrastructure – are the key complaint for nearly all investors in the retail market. A source at Metro said that, when the company launched in Pakistan, its biggest problem was building up its supply chain infrastructure.
The source added that Metro’s attempts to improve its own supply chain have spurred its competitors to follow suit, and should improve the quality of products as well as reduce the amount of wastage for the entire agricultural sector. A lack of a cold supply chain, for instance, destroys 40% of the produce in several categories. Productivity could also be improved by good agricultural practices, especially in harvesting, post-harvesting and processing of the goods.
Despite the problems, however, Metro remains optimistic. “Pakistan is a country of 180 million, most of the consumers are young and going for quality products,” he said. “There are tremendous opportunities to grow the business,” he added.
Published in The Express Tribune, December 26th, 2011.
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wasnt wallmart already in Karachi in early 2000s ? at the place where ARY Cash and carry exists now?? or was it just a knockoff???
@Hu Jintao: This is not a matter of Pakistan alone. It is a matter of the marginalised of this sub-continent getting wiped out. I wish you had the grey matter to realize that.
pakistanis are nice guys, but not necessarilly street smart. walmart might not be a good idea.( seriously)
As such americans have a habit of making a pappu out of pakistan.
@Altaf Hussain, Mumbai:
In 2010, there was direct flood compensation given to 1.6 million affected families at the rate of one hundred thousands rupees each.
The 2011 flood affected only a few districts in southern Sindh, sparing the rest of the country.
Meanwhile, the transfer of over Rs. 300 billion in income from urban to rural economy through higher food and commodity prices has sparked rural economic boom in Pakistan.
Read more at http://www.riazhaq.com/2011/01/pakistans-rural-economy-showing.html
@Riaz Haq: "FMCG retail business in rural Pakistan is booming". Everybody thought rural Pakistan is suffering from dislocation caused by floods and terrorism. At least that is the line taken by your Mr. Zardari and Mr. Gilani while appealing for international aid. They also site several instances of farmer suicides caused by lack of resources. By the way, besides marginal farmers even medium to small retail stores will be pushed out of business when Walmart takes root. That is something policy makers in Pakistan will have to account for while welcoming Walmart or 24/7. Dr. Manmohan Singh and Mrs. Sonia Gandhi have already burnt their fingers for trying it out without getting a prior consensus.
It's a mistake to underestimate rural consumer boom in Pakistan. Flush with cash from bumper crops at record commodity prices, the farmers are spending on tractors, cars, motorcycles, mobile phones, personal grooming items, packaged foods and beverages and other consumer products like never before. FMCG retail business in rural Pakistan is booming, presenting new opportunities for large retailers.
Any sane company will not enter pakistan until the security situation changes.
Walmart is a nightmare. Just ask the people in America. Horrible working conditions, low pay and complete disruption of local retail chain.
Honestly, I rather they stay in India and China. Pakistan should stay clear of this mess.
just zip it indians. you dont know how terrible you look poking nose in each and every matter of Pakistan
WalMart is most welcome. The more the choices the better
I would like to apologies for my earlier comments seeing middle class people might also be tempted to terrorism against India which I believe from comments its not. Deep down in my heart I dont want pakistan to be mired in terrorism and grow peacefully and we Indians share and learn from each other.
Now what will happen to our Karyana store.... are they out of business yet ???
@antony: Just a frustrated Indian...
Indian politics apart, Walmart is facing unprecedented opposition in India from small grocery stores at road corners of every city, town and village. I am sure the scenario in Pakistan will not be very different. What happens to these millions of families when are they pushed out of small retail business is the question Pakistani politicians will have to answer before welcoming Walmart. So Ladies and Gentlemen, please hold your horses. It will not be easy for your politicians to sell the Walmart concept to your general public. That is what our Dr. Manmohan Singh found out recently.
I don't agree with Walmart coming over in Pakistan. This means probably the end if local businesses and the beginning of mindless monopolizing of retail like it has been happening here in U.S. Agreed that Walmart would give a positive investing exposure to Pakistan but why not endorse Pakistan made products and businesses because all Walmart sells is Made in China which we can gladly do without.
Healthy compititions always proved successful! Regarding news of new entrant Walmart i think it will be a good sign for the country regarding image makeover!
I'm surprised a comment like yours got published. Sad to see the hate from the other side of the border.
Surely Wall-Mart will enjoy the hefty profit if it enters into the Pakistani market. see the rush at the new opened retail chain Hyper Star. Karachi is crazy to shop from retail chains - Agha's, Metro, Makro, Naheed, Chase, Hyper Star - located in the metropolitan.
I hope it never gets through. Not because its American but small businesses still thrive in Pakistan (meatshops, vege shops, fruit shops, spice stores and countless other small businesses) and its one of those beautiful things that western people tend to remember as 'good old days'. Sure, it gives cheaper access to many everyday things but end up ruining small businesses since chainstores' trade volume is so large that a small business just cannot imagine competing with them and ends up signing in for a cashier at the same stores.
@HH: Is it really? So every cobbler at the corner of the street and every paan shop is out there to cheat? If they were all dishonest, they would have abandoned their meager earnings and switched to more lucrative professions. Whoever said the middle class in Pakistan is growing is obviously smoking something amazing (and I would love a puff of that). The middle class is shrinking and the only way to salvage it is to protect local business in all sectors. Walmart will offer lower prices to consumer in the beginning to eat away market share from local retailers but when everybody else is out of the market, they will dictate their policies to their suppliers. This concept is taught in business schools as 'the walmart affect".
Mr Afnan would obviously be happy if Walmart comes to Pakistan because it would need joint ventures with companies like Engro and Habib who are already big players in the market.
Walmart is a tough competitor --- consumers may love the products/prices/convenience but chances are good that smaller locally owned shops are going to feel the pressure. Given the anti American attitude that prevails in Pakistan I would not hold my breath waiting for Walmart to make an investment in Pakistan -- they have better alternatives with less controversy.
@ You Said It
McDonalds & KFC etc are still operating very successfully despite anti american feeling and one or two unfortunate attacks. . Walmart will offer Halal food & Ramadhan offers and Mullahs will love it too :)
Walmart is trying hard to enter India because that the where the grow lies in future. Earlier there was a similar situation with respect to China. Pakistan surely will also come up as a potential destination but only in the next stage. For the time being it is India. Some reasons for that are :
Indian middle class is about 40 Crores and growing. By 2020 40% of India will be urban.This means many more cities and towns will come up. India is so big, unique and diverse that it can become a sourcing hub for companies like Walmart for their global operations.
@HH: I have found Bohra community to be very honest. Their price is fixed and higher but I don't have any problem with quality of things I buy from them. Honest people in business are not common but they are not impossible to find.
Walmart will be most welcome in Pakistan especially with their food franchise such as Pizza etc.
I think the most sought after retail commodity in karachi from future walmart shop will be fertilizer which would not be available and hence not much hope of walmart in pakistan.. Incidently other enquiries for ammonium nitrate from karachi consumers have alarmed US ,German companies on the purpose of these commodities ..
expedite it .......!
@Moise: I second your feelings but honestly, honesty is something that is almost impossible to find in local businesses.
I am sure ,Pakistani nation will never dissappoint international retail chains ......Welcome to Pakistan
As an outing venue it is fine, but it is better to support local honest businesses more than a corporate monstrosity.
I am sure it is only a matter of time before Wal Mart comes to Pakistan. I have been to Metro in Islamabad which is very busy. I agree that the growing middle class will only grow bigger so it makes sense.