Abstract
Pakistan is firmly rooted at the foot of BMI’s Asia Pacific Food & Drink
Business Environment Ratings
table for Q309 after a disappointing quarter
that re-emphasised the country’s standing as the region’s
least
attractive investment market. Our forecast that Pakistan’s GDP
will grow by 2.5% in 2009 serves more to
highlight its disconnection from
the global economy than its ability to withstand the wider economic
downturn. Despite the infinite regulatory challenges attributed to operating
in Pakistan, BMI highlights
that with the exception of alcohol, its drinks
industry remains fairly buoyant as discussed in BMI’s
recently
published Pakistan Food & Drink Report for Q309.
Pakistan’s soft
drinks industry is dominated by the basic carbonate range of traditional
giants Coca-Cola
and PepsiCo. Although health consciousness has begun to
surface, the limited spending power of
consumers means the trend has yet
to truly impact the soft drinks industry and is likely to remain confined
to niche markets for the foreseeable future. With this in mind, BMI expects
the carbonates segment to
continue claiming the majority of volume
growth.
Between 2009 and 2013, BMI has forecast soft drink value sales to
increase by 45.3% to US$263mn as a
slight rise in disposable incomes allow
consumers to allocate a greater proportion of their incomes to
consumption. Considering that Pakistan has a growing population of 164mn, per
capita soft drinks
consumption is likely to remain very low for the
foreseeable future, which although frustrating for
incumbent producers,
does underline the industry’s potential for both volume and value sales
gains over
the long term.
Pakistanis are among the highest per capita
tea consumers in the world and unsurprisingly the country
boasts a stellar
tea industry, headed by domestic processor Tapal Tea. The lethargy of the
coffee sector
means tea processors are likely to completely dominate the
hot drinks industry for some time yet (BMI
estimates that coffee sales in
2008 were a mere US$4.2mn).
Tapal is well placed to capitalise on
BMI’s forecast that tea value sales are expected to rise by 45.7%
through to 2013 and reach US$797mn. Intriguingly, the size of the tea industry
comfortably outstrips that
of soft drinks, which is a rarity in most
emerging markets (we estimate tea sales to have been three times
greater
than soft drink sales in 2008). Processors like Tapal will be hoping the
government makes good
on its efforts to curb illegal tea imports into the
country.
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