Branded rice–still a nascent industry

Sector not been able to establish a name for itself, like other food products have.

KARACHI: Rice production in Pakistan exceeds 6 million tons annually, out of which around 40% is consumed domestically while the rest is exported. Rice is a staple food for the Pakistani people, and stands at number two after wheat in consumption. Pakistan produces one of the best varieties of the grain in the world. The strain is known as ‘basmati’ rice, and it is cultivated in Punjab.

Sadly, traditional and outdated post-harvest practices have resulted in substantial losses in the output and quality of basmati – affecting the value of produce and farmers’ profit margins.

A majority of consumers usually buy unbranded rice. Given unhealthy market practices, more efforts are made, therefore, in mixing varieties to lower the net price of the food than in transforming the value chain to ensure good quality at a lower price. This hurts the market for this variety of rice.

A majority of rice millers and producers are export-oriented, as they obtain far better margins from abroad. Only a few companies have brought branded rice to the domestic market in a sustained manner. Matco Rice Processing sells basmati under the brand of ‘Falak’; we have ‘Guard’ basmati, by Guard Rice; and the ‘Mughal’ basmati brand from Garibsons.

These brands, which have cemented their presence in the domestic market over the years, have, however, not been growing at a healthy pace. It is certainly a bitter fact to consider that branded rice holds a mere 2.1% share in total rice consumption in the country.

It would be productive to ask why the branded rice industry has not been able to create a space for itself, as the branded tea and oil sector has. In this regard, a few things come to light.

None of the companies have actually built brands, to the extent that they enjoy distinct recognition and market share in the domestic market, and for which consumers would be willing to pay a premium. In this context, unbranded rice is sold at much cheaper rates in the local market, which knocks out demand for branded rice even before it is put on the shelves.

Furthermore, rice marketers’ distribution network is still at an immature state, leading to irregular supply. Meanwhile, companies compete on prices rather than building a name based on the quality of their product. This erodes margins and hurts customer loyalty towards brands that are already present in the market.

Dr Tariq Ghori, who is the marketing director at Matco, accepts these shortcomings. “The rice industry has a huge potential for branded products to penetrate and grow, but so far we have not been able to fully tap this potential,” he says.

It remains to be seen if the situation will be remedied by an enterprising entrepreneur.

THE WRITER IS A MASTERS IN BUSINESS ADMINISTRATION (MARKETING)

Published in The Express Tribune, October 1^st, 2012.