Pakistan has highest consumption ratio in region
High population base fuels consumerism, growth of FMCG companies.
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
KARACHI:
With Pakistanis accounting for the highest consumption ratio in the region, consumerism in the country is booming and so are stocks of consumer goods companies, Topline Securities reveals in a report titled “Pakistan Consumer Sector 2013 Review”.
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.
With Pakistanis accounting for the highest consumption ratio in the region, consumerism in the country is booming and so are stocks of consumer goods companies, Topline Securities reveals in a report titled “Pakistan Consumer Sector 2013 Review”.
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.