ANALYSIS OF PAKISTAN INDUSTRIES

FOOD INDUSTRY

Presented by: Essa IqbaL (7140)Hassam Azhar (7545)Ahmed Ali (7106)

Introduction The Study analyses the food processing industry in Pakistan and

benchmarks it against the approach taken in other countries.

Most of the world’s major food processing companies are American or European. US food technology and standards tend to set a worldwide benchmark.

Globally the industry is driven by value-added products.

Global-scale food processing companies are now led by Tyson Foods Inc. (sales of more than $25 billion) which topped Kraft (No.2 with sales of $22 billion) in the world 100 Food Companies listing.

Third after Kraft is Pepsico (US$19 billion sales).

Other well-known major names include Nestle, Mars, Heinz, Cargill.

 

Main Elements Agriculture: raising of crops and livestock, seafood and horticultural

products

Food processing: preparation of fresh products for market, manufacture of prepared food products

Marketing: promotion of generic products (e.g. milk board), new products, public opinion, through advertising, packaging, public relations, etc

Wholesale and distribution: warehousing, transportation, logistics

Retail: supermarket chains and independent food stores, direct-to-consumer, restaurants, food services

Appealing Facts (Importance) Accelerating Demand of Food Worldwide Demographics are the key to understanding

the food industry in any country. Demand for processed food derives mainly

from the urban areas. (a large enough population to sustain a food processing sector)

International trade in foodstuffs Pakistan’s large and growing population.

Pakistan’s advancing edge Pakistan ranks 5th in the Muslim World and

20th worldwide in farm output. World's 5th largest milk producer. Pakistan is one of the world's largest

producers and suppliers of the following:

Chickpea (2nd) Apricot (4th)

Sugarcane (4th) Onion (5th)

Date Palm (6th) Milk (5th)

Mango (3rd) Rice (8th)

Wheat (9th) Oranges (10th)

Cont… (Importance) Pakistan's principal natural resources are

arable land and water. About 25% of Pakistan's total land area is

under cultivation and is watered by one of the largest irrigation systems in the world.

Pakistan irrigates three times more acres than Russia.

Agriculture accounts for about 23% of GDP and employs about 44% of the labor force.

Food Industry in Pakistan The Food and its allied products industry is considered

Pakistan's largest industry and is believed to account for 27% of its value-added production, while 16% of the total employment by the manufacturing sector.

It is estimated that in Pakistan there may be around 80,000 small businesses and more than 2 million micro-enterprises many of which are food manufacturers.

Many of the SMEs and micro-enterprises are in rural areas and fall into the category of food processors, depending heavily on agricultural rawmaterials and poorly skilled non-farm labor.

About 40% of these small businesses are in the milling sub-sector (wheat and rice).

Pakistan Food Processing Industry

Issues faced by Pakistan Traditional approach prevailing. No advances in technology. The Industry is highly labor intensive and so the sector is a major

employer. Employment pays low wages and uses the skills of the most ill-

educated Lack of integration from the farmer to the consumer along the

supply chain is the principal reason why Pakistan food processors are uncompetitive compared with overseas companies.

About 75% of the rural-based food manufacturers are in the so-called informal sector. This informal economy is unregulated and finds difficulty in accessing essential raw materials and other resources especially finance skills, knowledge and management.

Marketing and quality (especially hygiene) standards are especially lacking.

Cont… (Problems)

Inability to manage raw material supply Erratic inputs and poor labor skills – in particular supplies

of potable water often present problems Poor literacy levels and basic artisan skills Poor financial support – Companies report that

commercial banks often fail to understand that their businesses depend on the natural environment, so that credit is extended or only short periods of time.

Poor technical choices and a lack of innovation – leads to bad quality products

Poor or non-existent standards of safety in the workplace and for the consumer

Cont.. (Problems)Furthermore Pakistan faces

Significant non-tariff barriers to trade related to poor performance.

A number of bans, for example most recently fish and seafood exports have been banned to the EU following a 2007 inspection of Karachi Fish Harbor that found unhygienic conditions.

Pakistan’s food industry is generally deficient in food quality and standards for

reasons that have been mentioned repeatedly.

Product standards are usually deficient because consumers are often unwilling to pay for high quality products and don’t insist on adequate packaging and labeling.

Poor understanding of technical processes.

No supervision or credible support by the government.

Proposed Solutions Integrating the individual food factories with backwards

and forwards linkages

Strengthening links with science-based organizations and technology resources

Improving post-harvest and process efficiency and minimizing waste.

Improving the standards of safety both within the workplace and most particularly of the food products themselves with regard to ingredients and overall hygiene

Cont… (Remedies)

Invest heavily in infrastructure and technology – will lead to efficiency and employment.

Health and education- Strengthening consumer awareness of the nutritional and health benefits of good food

Natural resource stocks- Water and irrigation facilities.

Strengthen Institutional capacity- via government support.

Cont…Finally, there needs to be a strong information base in the food industry•To spread awareness•To support farmers•To be more competitive•To grow and meet the needs within Pakistan and abroad.

Eg:

References Economic Survey of Pakistan 2005-06  Pakistan Agricultural Statistics 2004/05 Pakistan Country Overview 2006, the World Bank “Competition Policy and Law in Pakistan”, The World

Bank, December 2006 “The State of Pakistan’s Competitiveness 2007”,

Competitiveness Support Fund/Ministry of Finance, Islamabad.

Policy analysis on the Competitive Advantage of the Food Processing Sector in Pakistan