This article is an upgraded version of my earlier articles on the subject especially as far as statistics are concerned as I have received many requests to update data. Appreciate your enormous support and encouragement, here it comes….enjoy and don’t forget to share your feedback
Market Dynamics & General Business Environment
- Market dominates by domestically produced brands nonetheless foreign brands are becoming increasingly popular especially among urban middle and upper class consumers.
- Swiss and Belgium chocolates are popular in the upscale niche market segment and available at high-end LMTs and IMTs. Besides distributors selected LMTs and Wholesalers also import foreign brands.
- Imported products in general are considered to be of higher quality than the domestic ones , hence trade do charge relatively a higher margin and give it a prominent display . Consumers are also willing to pay higher price for known brands of good quality.
- Market is generally price sensitive. The distinction lies between the larger mass market that is highly price-elastic and the high-end niche market, where despite important, price is secondary to quality and brand image.
- Organized distribution setups are monopolistic in nature though capable of meeting international standards of warehousing, logistics and stock management facilities with national foot-print in the market via direct presence in all major cities ( with proper office setup and dedicated front & back-end support staff ). However a large no. of small towns are normally managed through sub-distributors called SDs where control of primary distributors are limited.
- Trade channel comprises of a large number of intermediaries ( Stockiest , W/S, Retail , LMTs , IMTs and GT) with insufficient storage and refrigeration facilities especially in B class general trade (GT) . Though Cadbury has overcome this issue by providing specially designed low-cost , energy-efficient chillers. Normally chocolates are kept in such chillers or refrigerated coolers in summer.
- The organized sector is gaining ground with the emergence of supermarkets and hypermarkets in metropolitan cities of Pakistan.
- Cold chain facilities are available with renowned distributors from port to retail outlet level . Services can be provided for food & pharmaceutical products (2-8◦C). Temperature monitoring devices with data loggers recording with round-the-clock data to ensure uninterrupted storage & distribution activity at a given temperature are available.
- Though such arrangements make the cost of distribution high and therefore distributor charge a relatively high margins depending upon the worth and ROI of business.
- The import tariffs for confectionery products vary from 30% to 45% . GST for registered trade varies from 15-17%.
- Traditional targets for confectionery products are children, however growth opportunities exist in targeting the youth & adult consumer segment ( Cadbury’s Dairy Milk is a good success story) .
- Pakistan has a large retail base though highly fragmented and dominated by small retailers, competing in terms of Location , personal relationships and product ranges etc.. But a major shift has been observed with the opening of a growing number of large retail chains especially in the major cities where higher concentration of middle and upper-income class exist.
- Growth in the urban middle class and increase in personal disposable income in tier 1 cities have slowly but steadily improved the consumption pattern and welcome the influx of branded non-essential items and luxury goods such as high-end premium chocolates , fast-food chains and leisurely soft goods..Calculation for imported products:
- CNF in US$ (1)
- CNF converted in PKR (2)
- 1% insurance of CNF 3 (= 1% of 2)
- CNF + insurance 4 = (2+3)
- Import value 5 = ( 1% of 4)
- Value for custom duty ( only for valuation purpose) 6 = ( 4+5)
- FED 1 % , 7 ( = 1% of 6)
- Custom duty 8 = (30-35)% of 6
- Regulatory Duty 9 = ( 0% of 6)
- Duty paid Value 10 = 6+7+8+9
- 10 + WHT if applicable + Clearing Charges = Total landed cost
- Estimated Market Size Pakistan Branded Confectionery 2014 :
Value Matrix Local Major Competing Brand Pakistan-2014 Company / Brands Major Product Lines Est. Annual Est. Mkt. Sales Bil. PKR Share Hilal Bubble, Candy, Jellies, Chocolate beans, Powder drinks 14 27% Supari Candyland Jellies, Candy, Chocolates, Lollypops, Biscuits & Snacks 13 25% Cadbury Chocolates, Toffees, Candies, Mint Chewable Candies 8 15% Volka Foods Jellies, Bubble Gum, Candies, Chocolates, Biscuits 8 15% JOJO Bubble Gum, Candies & Toffees 4 8% B.P Sweets Jellies, Candies, Toffees, 1.2 2% Mayfair Bubble Gum, Deposit Candies, Candies, Chews, Biscuits 1.5 3% Mitchell’s Toffees, Chocolates, Moulded Chocolates 0.75 1% Danpak Bubble Gum, Chocolates, Candies and Sweets 1 2% Sweethills Candies, Toffees, Bubble Gum 0.75 1% Total Domestic 52.2 100% Major Imported Brands Mars Mars, Galaxy, Bounty, Snickers etc. 1 26% Ferrero Ferrero, Nutella, Tic Tack 0.75 20% Nestle Kitkat, Polo, Assorted Sweets, Chocolates 0.75 20% Perfetti Van Melle 0.3 8% Others 1 26% Total Imported 3.8 100% Grand Total (Estimated) 56