The headlines may be screaming about violence and extremism but ‘the world’s biggest snacking company’ is betting its money, quietly, on the Pakistani consumer. From acquisition to localised manufacturing, Mondelez International is doing all it can to expand its retail footprint in a country it counts among the world’s top five growth markets.
Based out of Illinois, United States (US), Mondelez Pakistan− formerly Kraft Foods Pakistan− has been aggressively expanding its retail footprint in the country, which raises an obvious question: what is driving its interest in this market?
“As the world’s biggest snacking company, we’ve seen a significant growth in our snack brands here in Pakistan, which is among the highest in the world,” said Ian Buchan, Mondelez International’s General Manager, New Markets, Middle East and Africa, while talking to The Express Tribune. The New Markets business covers nine countries including Pakistan.
Buchan did not disclose the company’s revenue or growth figures but confirmed that “Pakistan has been one of their top five growth markets in the world” in recent years.
With over Rs4 billion in sales during fiscal 2012, the company has maintained a strong compound annual growth rate of 44% from fiscal year (FY) 2009 to FY2012, according to sources.
Pakistan is among the top 10 future growth markets for Mondelez, Buchan said, adding the country’s confectionary market is worth approximately $100 million and growing strongly.
The multinational snack and confectionary giant already has strong positions in a number of categories, specifically in the snacking business that includes its Cadbury portfolio. “To date, the Cadbury Dairy Milk and Tang are the fastest growing brands in Pakistan with strong sales results of Rs1 billion per annum,” Buchan said.
In 2012, the company, which apparently keeps low profile in Pakistan, bought out Tang business from Clover - the sole distributor of Tang, a top brand in the powdered beverages category. Last month, the company launched its flagship biscuit brand Oreo through its Pakistani joint venture Continental Biscuits Limited. Oreo is the first ever recipe of Mondelez to be manufactured locally through a joint venture.
“Our strategy is to grow through brand investment and to sustain competitive advantage via investment in local manufacturing and route to market capability,” Buchan said. “We have invested heavily in local manufacturing in Pakistan for our brands which has allowed us to tailor a portfolio of products for the market designed to appeal to all consumer segments,” he said.
The American snacking giant did not disclose investment figures for Pakistan but as per the latest numbers, the country’s food sector attracted $31.8 million in foreign direct investment (FDI) in July to October 2013, an increase of over 130% compared to $13.8 million in the corresponding period last year.
The company has been investing consistently every year in capacity expansion in their Tang, chocolate and wafer manufacturing capability, according to Buchan, and sees long term growth opportunities but there are certain challenges it faces along the way.
It is a challenge to build cost effective distribution in rural areas, particularly in the chocolate business that requires robust temperature controlled supply chain all the way from the factory to the store, Buchan said. Besides positioning a large number of refrigerated display units in stores, one has to invest in chilled vehicles and warehousing as well, he said – a challenge compounded by loadshedding across the country.
However, despite these challenges the company is confident that there is room to grow significantly in the years to come, according Buchan.
“We expect the business to double in the next three to four years,” Buchan said.
Correction: An earlier version of the article incorrectly stated that the country’s food sector attracted $31.8 million in foreign direct investment in July to October 2014. The error is regretted.
Published in The Express Tribune, November 20th, 2013.
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