Engro Foods Canada set to make profit next year

Aims to increase its halal meat products in major retail chains of N America.

Our Correspondent August 08, 2012

KARACHI: Engro Foods Canada is poised to post a profit next year by increasing availability of its halal meat product line in major chains of retail outlets across the North American continent, Engro Foods CEO Afnan Ahsan said on Wednesday.

The total size of the halal meat market in North America, which includes Canada and the United States, is estimated at $290 billion.

Al Safa Halal is a halal meat brand of Engro Foods Canada and its subsidiary Engro Foods USA, LLC. The brand existed for over 10 years before it was acquired by Engro Foods in May 2011, a first-of-its-kind offshore venture ever undertaken by a Pakistani conglomerate in the $632 billion global foods business.

So far, Al Safa Halal is running in loss. It posted a loss after tax of Canadian $313,000 for January-March 2012, according to Engro Corporation’s directors’ report to the shareholders.

“The total revenue for the first half of 2012 is C$5.8 million,” Ahsan told The Express Tribune, adding that the company is expected to become profitable in 2013.

Current losses are not reflected in the financial performance of Engro Foods. Rather, they are consolidated in Engro Corporation’s financial statements in view of the prevailing corporate laws, according to which a company must remain profitable for three years before acquiring an offshore entity.

“From next year onwards, books of Engro Foods will show the financial performance of Al Safa Halal separately,” he said.

The Halal meat market in North America is highly fragmented, according to Ahsan. Top 10 players collectively have less than 15% share of the Halal meat market, he added. In the segments of chicken, beef, pizza and vegetable, Al Safa Halal currently offers 18 products in Canada and 21 products in the US.

Its presence in the US is clearly not as strong as in Canada, although the former is a 10 times bigger market than the latter. While Al Safa Halal products are available in the outlets of at least 12 leading retail chains across all major cities of Canada, they are available in the US mostly through ethnic stores. The reason for its deeper footprint in Canada is that Al Safa Halal was originally a Canadian company, Ahsan said.

Still, roughly 80% business of Al Safa Halal in Canada comes from ethnic stores. “First-generation immigrants tend to buy food from ethnic stores. But their second generation, which is more integrated into the mainstream society, is likely to buy food from major retail outlets,” he noted.

Estimates say that 83% of all food purchases in North America are carried out in major retail stores. Al Safa Halal aims to increase the share of major retail outlets in its revenues in Canada to 50% in the next five years.

In the US market, however, its products are available mainly in the tri-state area of New York, New Jersey and Pennsylvania. New markets for Al Safa Halal in the US are Chicago, Los Angeles and major cities of Texas, which have a concentration of Muslim population.

Among the top five North America-based management positions in Engro Foods, four are held by people of Pakistani origin. The only white Canadian, who is chief operations officer, was retained by Engro Corporation upon its acquisition of Al Safa Halal, where he had already been working in the sales division.

“Of the 27 people Engro employs in North America, we have people from Iran, Sudan, Ethiopia and Venezuela. I think three or four of them are non-Muslims,” he said, adding that the company is an equal opportunity employer.

Published in The Express Tribune, August 9th, 2012.

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