ICI, Unibrands to market and distribute infant formulae

ICI board of directors approve investment of Rs960 million.

KARACHI: ICI Pakistan has joined hands with Unibrands to market and distribute infant foods and drinks locally.

ICI’s board of directors approved an investment of Rs960 million for a 40% stake in Nutrico Pakistan, which will be run jointly with Unibrands, to sell Japan’s Morinaga infant formula in Pakistan, company officials said.

Unibrands, a wholly-owned subsidiary of pharmaceutical concern Searle Pakistan, has been distributing Morinaga’s products in Pakistan for 35 years. ICI’s equity investment is aimed at capturing a bigger slice of the lucrative business.

“It’s market worth Rs20 billion,” said an ICI official. “Around 60% of this demand is met through imports while the rest of the market is led by companies like Nestle.”

Morinaga’s products, which target babies up to 12 weeks old, enjoy a market share of 35% to 38%. “Its immediate competitor is another Japanese company Meiji, which also has a market share of 35% to 40%,” said the official.

ICI’s decision to enter the infant nutrition business follows a detailed due diligence of Unibrands. The company has even hinted at making the products within Pakistan if all goes according to plan.

“The investment in Nutrico will provide an opportunity in the future to evaluate the setting up of a facility for the local manufacture of Morinaga infant formulae and nutrition products in Pakistan,” ICI said in a notice to the stock exchange on Monday.

Pakistanis spend over $165 million to import milk cream and milk food for infants, according to the Pakistan Bureau of Statistics (PBS). They spent $132 million to import 42,000 tons of such products from July 2013 to April 2014.

ICI posted a profit of Rs1.158 billion in the nine months to March 2014 against Rs644 million reported in the same period previous year.

The company has four business divisions – soda ash, polyester, life sciences and chemicals. A major chunk of its revenue and earning depends on polyester and soda ash.

ICI has been aggressively exploring ways to diversify its business away from polyester since Yunus Brothers Group took over the company in 2012, industry people say.

Producers of polyester staple fibre in Pakistan have been battered by competition from relentless imports.

A venture into the infant nutritional products also poses challenge from the medical fraternity.  Almost all makers of infant nutrition, including Morinaga, follow the practice of advising parents to consult doctors before picking up their products. But doctors say young parents have taking a liking for baby formulae.

“In late 1990s we carried out a survey which showed that only 16% to 20% mothers were breastfeeding their child,” says Professor Dr Iqbal A Memon, President Pakistan Paediatric Association Centre. “Things haven’t changed a bit since then.” He said that there is a widely held perception among new mothers that supplements helps strengthens their baby. “That isn’t true.”

No one from Searle Pakistan was available to comment.

Published in The Express Tribune, May 28^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.