Consumer stocks gained 86% in 2013, outperforming the benchmark KSE 100-share index by 37 percentage points, the report said, as the broader index of KSE posted a 49% return. PHOTO: REUTERS/FILE
Consumer stocks gained 86% in 2013, outperforming the benchmark KSE 100-share index by 37 percentage points, the report said, as the broader index of the Karachi Stock Exchange (KSE) posted a 49% return.
The numbers indicate a stronger performance by selected consumer stocks compared with 2012 when they outperformed the KSE-100 index by 28 percentage points, posting a return of 80%.
The analysis comes from a diversified sample of 28 consumer goods companies with aggregate market capitalisation of Rs1.2 trillion or $12 billion, which is 18% of the KSE’s capitalisation. The sample includes food, beverage, pharmaceutical, tobacco, foot wear and personal care producers.
Topline’s research excluded Engro Foods, a major player in the fast moving consumer goods (FMCG) sector, on account of distribution issues.
Despite some signs of slowdown, the sample firms listed on the KSE showed stable sales and profitability growth in calendar year 2013.
Sales revenue increased 12.2% compared with 13.5% in 2012 – the 2013 growth was, however, slower than five-year (2009 to 2013) Compound Annual Growth Rate (CAGR) of 16.6%.
Profits increased 19.5% compared with 21% in 2012, which was in line with the five-year CAGR of 17.2%. In 2013, net profit margins rose 51 basis points to 8.3%.
Pakistan Tobacco Company, Wyeth Pakistan, Hum Network, Searle Pakistan, Murree Brewery Company and Service Industries were the star performers with respective gains of 777%, 372%, 320%, 295%, 233% and 224%.
What’s causing consumer boom?
Pakistan’s household consumption is 82.5% of gross domestic product (GDP), the highest in the region. The ratio stands at 60.2% for India, 76.8% for Bangladesh, 63.3% for Vietnam, 47.4% for Nigeria and 48.9% for Malaysia, the report said.
Pakistan ranks fourth in developing Asia after China, India and Indonesia in absolute middle-class population, the report said, quoting the Asian Development Bank. Its per capita income reached $1,368 at the end of financial year 2012-13, showing 10-year (2004 to 2013) CAGR of 8.9%.
“Reasonable population base and its above-average growth fuel consumerism and provide an ideal ground for FMCGs to grow,” the report said.
The country’s $491 billion GDP – in terms of Purchasing Power Parity (PPP) – is ranked 26th in the world. It forms the world’s sixth largest population base. Of its 184 million people, 55% are below 25 years of age – the population growth is one of the highest in the region.
Among other factors driving this growth is the increasing literacy rate and inclination of women to work, which is scaling up from poor to the middle class.
Rising remittances is another reason for massive growth in consumption, which is increasing purchasing power and living standards, especially in rural areas. In the last five years, the remittances grew 16.6% CAGR.
Higher agricultural production, commodity support prices and income support programmes have also provided the push in the shape of higher demand in rural areas, according to the report.
Rapid urbanisation and reduction in family size are other factors. Currently, 37% of population is concentrated in urban areas against 35% in 2008, while a consistent decrease in average family size is resulting in increased spending. Average family size was 6.4 persons in 2012, down from 6.8 persons in 2006.
Published in The Express Tribune, March 18th, 2014.
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COMMENTS (11)
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@nop: My friend take some time out and do some google research and you will find out the numbers...I commented on the news item and no intention of teaching you on how percentages are deceptive indicators... :)
@Mohammad Afzal: How do you explain the numbers from India and Bangladesh then? They have comparable income levels yet their savings rate is higher. Blaming it on poor income levels doesn't make sense.
@nop: You are right. Realistic speaking, there are many barriers in Pakistan. Almost a wealthy thing to have an account!
@nop: To further elaborate my point about percentages and about consumerism: Assume a population of 100 people in Pakistan. 60% living below poverty line of which they earn about US$2 per day. Will they be 100% consumerism or would you expect them to open a bank account in their own language :) . If you are good in maths work out the rest of the figures using the balance 40% with your estimates of income. Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a year, or other given period of time. GDP per capita is often considered an indicator of a country's standard of living. Hence my friend we need to improve of GDP and stop making babies and the consumerism percentage will come down...Hope this explains
The numbers are as a percentage of GDP so it is not about having low incomes or low GDP compared to other countries.
There are three main reasons:
Pakistani society discourages saving and encourages spending. People spend way too much showing off. Real interest rates on saving accounts are negative so there is no incentive to save. Fixed deposits pay higher rates but have insane documentary requirements so most people don't bother. There is a religious angle too. Interest is considered bad. Inflation means that your money is worth less tomorrow so might as well spend it today. Opening a bank account is too difficult. Most people can't meet the documentary requirements or the minimum balance requirements. There is also the language barrier - all bank documents like account statements and cheques are in English. All of this is why only about 22% of the population has a bank account.@Ch Nasir Iftikhar: ..and press the prices down through better consumer options!
Good or bad news doesn't matter. What matters is that the socalled consumerism will last and expand for primarily 6 reasons;
1) Public in growth 2) More people getting out of poverty 3) More awareness on equality 4) Increased foreign capital spent in PK 5) More products & services available 6) Eventually, more competition on products & services will also increase the overall demand.
Now Pakistan needs to intensify in-house production with plants in order to control the import rates of raw materials. Adam Motors car project would be one right step to realize hereafter..
@TheGuy. It means that if a Pakistani earns $100 and a Malaysian earns $500. They both have to buy a product which cost $50. Usually these items are FMCG, like shampoos, soap etc.
$50 is 50% of $100 and just 10% of $500. Which means the Pakistani has to may MORE % of his income to buy stuff. This is bad instead of good.
I hope you understand.
@Afzal, would you please explain "mathematical problem and percentage jugulary"?
The reason for high ratio of consumption, is the usual mathematical problem and percentage jugulary. The issue at hand is not consumption, but the lowest GDP in the region, standing at 48th position in the world. Our politicians need to focus on increasing the GDP, with one single step only..i.e. providing the energy (gas and power) to industrial sector.