Consumerism rides high

FMCG profits up 29 per cent on a quarterly basis, despite flood losses and inflation

KARACHI: A majority of Pakistanis believe that the economy is in recession and that it will not revive within the next 12 months. However, consumer confidence in the country has remained stable during the past six months, despite spiralling inflation, political uncertainty and recent floods.

A report entitled “Nielsen Global Consumer Confidence Survey” for the third quarter of fiscal year 2010, showed that total sales of fast moving consumer goods (FMCG) produced by Nestle Pakistan Limited, Unilever Pakistan Limited and others increased by 11 per cent when compared to the same period last year. The survey also highlighted that despite recent floods in the country, demand for FMCGs dropped a nominal two per cent, on a quarterly basis.

“An expected improvement in agricultural incomes in fiscal year 2012, coupled with increasing urbanisation and a shift towards better value necessities is slated to further enhance demand for FMCGs,” added analyst Misbah Iqbal.

She explained that agricultural incomes are expected to improve due to “the government’s increased focus on the sector, higher soft commodity prices and better water availability”, building the appetite of local consumers.

The nominal fall in revenues was offset by healthier margins during the same period. Gross margins earned by companies increased from 29 per cent in the last quarter of fiscal year 2010 to 31 per cent in the outgoing quarter. “Moreover strict focus on cost control enabled the sector to post a sequential bottom line growth of 29 per cent quarter-on quarter,” added the analyst.

Consumer confidence in Pakistan tallied 89 on the global confidence index against an average of 90. Indian consumers appear most confident in the world regarding the prospects of their economy and the nation tacked on 129 points in the index. In fact nine of the top 10 most confident nations identified by the research are in Asia.

Consumer confidence in the United States fell three notches to 81 while the in the United Kingdom, it stayed at a dismal 75 points, when compared to the previous quarter.

When asked “do you think your country will be out of economic recession in the next 12 months,” 45 per cent of the respondents surveyed in Pakistan responded negatively while only 23 per cent expressed optimism. “Rising food and utility prices are squeezing already constrained family budgets,” added the publication.

The survey asserted that “consumers around the world remain largely pessimistic about job prospects, personal finances and their ability to buy things they want and need over the next year,” adding that people’s concerns over rising food and utility costs will rise above concerns of economic recovery in coming months.

Published in The Express Tribune, December 7^th, 2010.