1. MCG Sector of Pakistan
Trends, Issues & OpportunitiConsumer Goods Industry of Pakistan
Products which have a quick turnover and relatively low cost are known as Fast Moving
consumer Goods (FMCG). FMCG products are those that get replaced within a year or less and
the purchase cycle is relatively small as compared to other products and consumer durables.
Examples of FMCG products include a wide range of frequently purchased products such as
toiletries, soaps, cosmetics, tooth cleaning, shaving detergents as well as some non durables
such as glass ware, bulbs, batteries, paper products and plastic goods. 1
In Pakistan the industry has evolved to a great extent even in the face of strict completion both
in terms of generic unbranded products and in terms of acceptance level among consumers.
Such examples are widespread and can be seen across different FMCG categories. Loose Tea
vs. Packaged Tea, unbranded bakery items vs. branded confectionery products e.g. biscuits,
chips and other snack foods, local milk vendors vs. tetrapak milk brands are just a few
examples of categories where FMCG’s have made great in roads in Pakistan. The progress has
been slow as compared to regional markets such as India mainly due to macroeconomic
environment and the fact that India has a growing middle class which accounts for the large
increase in adoption rates for branded packaged products especially in the FMCG category.
However the most successful FMCG category in Pakistan to date has been food and beverages
as the per Capita spending on food in Pakistan and in other South East Asian countries is
relatively higher as compared to other parts of the world. Encouraging demand drivers in
Pakistan include growing young population, rapid urbanization and increased penetration of
organized retail. The robust profitability of the corporate sector in the year 2010 bears witness to
the fact that demand drivers have in fact acted out as perceived initially.
______________________________________________________________________
_________: Yawar Uz Zaman, Invest Capital Markets Ltd.
Highlights
• Profitability continue to ride North
• FMCGs return at par with KSE-100 on QoQ
• Outlook and Recommendations

2. In today’s Value Seeker, we present a profitability review of the listed FMCGs of Pakistan,
which shows a massive growth in 1QCY12 (Jan-Mar12), along with its outlook.
FMCG Sector: Profitability continue to ride North
Despite of certain challenges faced by the country, FMCG sector looks immune to any thing
in this regard and profitability of the companies are moving forward with a decent pace. Our
sample of the consumer goods companies (Nestle, UniLever Pak, UniLever Foods, Engro
Foods, Rafhan Maize and National Foods) continues to shine, posting a healthy revenue
growth of 21% YoY during 1QCY12. This trickled down to the bottomline which grew with
the same pace . On consolidated basis, bottomline of the companies posted 21% YoY growth
in earnings during the same period. On QoQ basis, consumer industry witnessed revenue
growth of 10% to Rs54bn. However, due to sharp increase in energy cost during the quarter
(Gas, electricity, petrol and diesel up on average 9% QoQ) gross margin remain under strain
down by 52bps QoQ to 28.1% in 1QCY12. At the same time, aggressive marketing and sales
expenditure by the companies resulted in 28% QoQ increase in distribution and marketing
expense to Rs6.8bn.
As far as individual companies are concerned, Engro Foods showed impressive profit after
tax, posting a massive 309% YoY growth in 1QCY12, followed by National foods 180% YoY,
Unilever Pakistan foods 26% YoY, Unilever Pakistan 9% YoY and Nestle 8% YoY.
FMCGs return at par with KSE-100 on QoQ
On the back of improving fundamentals and blessing of solid corporate results, KSE-100
index performed well during the 1QCY12. On QoQ basis, our sample companies return and
the benchmark returns progressed in the same direction by posting 21% return during the
1QCY12. in our sample, FMCG scrip’s EFOODS leads the ship as the scrip provides solid
108%QoQ return, which than followed by National Foods 64% and Nestle 24% QoQ in
1QCY12. However on YoY basis, FMCGs outperform the bench mark index by posting 36%
YoY return during the first quarter of CY12, as compared to bench-mark returns of only 17%
YoY.
FMCG Sector:Outlook and Recommendations
Regardless of certain economic, political and external challenges, there are still many
rationalize to stay ‘Optimistic’ on FMCG sector of the country. The increasing urbanization
(enhancing demand of packaged products), double digit inflation, (resulting in high prices
pass on to the consumer), increased in employed labor force, higher per capita income, and
notably more than 50% of the population lies under 20yrs of age (who are the main target
market of these companies) provides a sustainable future growth in volumes. Therefore, we
continue with our likeness towards FMCG sector. As far as valuations are concerned, we are
in the process of making EFOODS financial model, and we will initiate our coverage on the
company soon, while at current levels we have ‘Sell’ call on ULEVER with Dec-12 TP of
Rs4,887/sh.
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3. The typical chain for a grocer store FMCG product will be:
Manufacturing plant -> Company Ware House -> Regional Ware House -> Regional Stockist -> Super
Stockist -> Stockist -> Distributor -> Retailer
Main Godown -> C&F Agents/Super Stockists -> Distributors as per the territories ->
Wholesalers/Retailers
So, the retailers either buy from the distributor or they buy from the local wholesaler. Each has its
own advantages and disadvantages. Distributor provides you with better servicing, replacement of
spoilt products, credit facility of 2 weeks, etc. On the other hand, the wholesaler will give you more
margins, but no credit facilities, and you don’t have compulsion of storing a set of SKUs, etc.
The inventory is under the ownership of the company only until it reaches the distributors by the C&F
agents. The stockists are responsible to distribute to the retailers. Each stockist may serve around
500-1000 retailers in a proximity. Also, all the stockists are not the same in their storage. Every
stockist may have his own set of categories which he can store the best, like a stockist can store rice,
sugar, teapowder, biscuits, and snacks. Some may be specialists in handling premium products, and
some in frozen foods. The company generally categorizes the stockists based on their specialty and
allocates different super-stockists. For example, HUL categorizes them as U1 and U2 stockists, where
U1 is general products and U2 stockists handle only premium products. The distribution network for
premium products is different from that of discount and popular as they require much deeper
distribution penetration unlike the premium products. Company categorizes based on their storage
capacities where company has some standards that every stockist and distributor should have 2
months and 3 weeks of stock.

4. The stockists appoint salesman who take the orders from the retailers, and the delivery is made on a
van. Each stockist may have 6-10 vans, and 10-12 people for the delivery process. The link between
the manufacturer and the stockist is maintained by the manufacturer’s employees Area Sales
Manager, Territory Sales Manager, Activation Manager, and the Re-Stockist Salesman (RSSM)
manages all the distribution, purchases, labor management, and supervises the delivery process.Every
month the sales targets are set by the company to all its salesforce – TSM, ASM, Sales InCharge, etc.
and they handle all the relations with the distributor and sometimes push the stock onto the
distributor to meet their sales targets.
Companies try to motivate the channel partners with workshops about business & marketing, good
warehouse practices, and a lot of other incentives. They follow a strict rating mechanism with all its
channel partners and evaluate them continuously on a set of parameters.
Though each company has its own distribution strategy and flow, most of the companies follow the
above distribution framework.
FMCGG is involved in trading (wholesale and retail) merchandising and redistribution of products using our vast network of
over 17 branches spread across 21 states of Nigeria and still expanding.
We are strategically located in all major commercial cities and towns in Nigeria to help our partners achieve even distribution
of products to deliver quality services to our clients.
Improving the quality of social and community life is an integral part of our corporate mission. We are actively involved in
improving the larger society in which we operate. We are supporting the community by promoting cultural activities and
supporting peaceful and safe co-existence, as well as strengthen national unity and community bond.
Report and Updates
FMCG distribution places an enphasis on training and more centres are being set up for all full and part time
staff.
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Manish Sethi runs the Kanshi Ram Group, a sales distributor in Delhi for
leading fastmoving consumer goods (FMCG) companies, which his family started in

5. 1961. As a teenager, Sethi learned the ropes by spending time with his father. He formally
joined the business in 1992. By 1993, it was one of the largest distributors in the region,
working with companies such as Hindustan Unilever (then Hindustan Lever), Gillette India,
Dabur, and Johnson & Johnson. In 2000, Sethi decided to widen his distribution portfolio,
but the rising cost of operations and the surge of modern trade - the growing trend of
wholesalers buying from cash-and-carry stores - began to hurt growth. By 2008, he had to
let go of some accounts, as low margins made business unviable.
Today, Sethi has had to go beyond FMCGs. For the last two years, his distribution portfolio
has included mobile phones and batteries. He is now the distributor for Sony's Recording
Media and Energy Division for North India, and for Nokia in West Delhi. Not only do
electronics offer higher returns on investment than FMCGs, but they also require less labour
and space. "The cost of operations, which primarily includes labour and logistics, rises
around 10 per cent every year," he says. About 60 per cent of his total revenues of Rs 210
crore still comes from FMCG distribution for companies such as Dabur, SC Johnson, and
Reebok Personal Care.
Specialisation has increased sales volume, store shelf space, and product availability:
Jai Prakash Tallam
Sethi's story reflects changes in the distribution business. As
FMCG companies get more directly involved at the front end of the
value chain, the role of distributors is shifting from selling goods in a
particular territory to being mere financial investors. In India,
companies have long relied on distributors because they understand
the local market. But with improved data availability, companies are
getting closer to customers. They have started to reduce the number
of small distributors in favour of big ones to cut costs. FMCG
companies typically give distributors a margin of four to six per cent
of secondary sales, and reducing the number of distributors helps cut
costs. "Large distributors are well equipped to handle some key
functions of small ones - lending to retailers, environment
management and demand management," says Vikash Agarwalla,
Engagement Manager, Booz & Co. He notes that in some areas, companies have taken on
a greater role. "Earlier, distributors appointed salesmen directly, and the companies had
little or no say. Increasingly, companies are outsourcing this entire process to temp staffing
outfits."
Agarwalla says that in western countries, there is no concept of distributor, and that
companies go directly to the consumer. "In the next 15 years in India, this entity called
distributor may disappear," he says.
Whether or not that comes to pass, it is true that change has been happening quietly for
some time, as demand grows and product portfolios become more complex.
mosimageConsider the example of Italian candy maker Perfetti Van Melle, which entered
the Indian market in 1994. As Perfetti Van Melle India (PVMI) launched brands and variants,

6. it found that distributors did not give each one equal attention. In 2004, it divided its eight
brands across three sets of distributors so that, in a particular region, for example, each
flavour of a chewing gum brand was sold by a different distributor.
"This results in better concentration on all brands," says Chironmoy Chatterjee, Director
(Sales), PVMI. Rising aspiration levels and spending power in rural areas have spurred
FMCG companies to widen their reach in villages. According to a December 2011 Nielsen
report titled Managing the Middle India Gold Rush, growth in demand in small towns is
outpacing the national average. Demand for FMCGs in 400 towns with a population of up to
a million is projected at $20 billion by 2018 and $80 billion by 2026, up from $6 billion in
2010.
Some companies, such as Emami Ltd, are adjusting
WHAT'S CHANGING
their strategies to meet rural demand. Two years ago,
Increasing vertical specialisation the Kolkata-based cosmetics manufacturer adopted a
hub-andspoke distribution model, with super-stockists
to ensure equal emphasis to all
in towns with a population of up to 50,000, and several
products, and to plan focused
subdistributors under them.
activation and promotions
Reluctance of younger generation
"That saves time for retailers and wholesalers in small
to join family-owned distribution
towns, who previously had to travel to a nearby city to
businesses, especially in big
buy goods," says CEO Krishna Mohan. Today, Emami
cities, leading to lack of long-term
covers almost 50,000 villages directly and indirectly,
thinking by promoters up from some 30,000 villages two years ago.
Emergence of hub-and-spoke
model to expand reach of fast- Specialisation is key
moving consumer goods in As product portfolios become more complex, George
villages Angelo, Executive Director (Sales) at Dabur India,
Large-scale use of technology by says channel specialisation is increasingly important
manufacturers to analyse to service customers effectively. The nature of
consumption patterns, and react engagement with wholesalers and retailers for each of
accordingly Dabur's nine verticals varies. The verticals broadly fall
Talent crunch, rising costs and under health care, personal care and foods. When a
evolution of modern retail company ties up with a distributor for modern retail
prompting distributors to rework chains such as Big Bazaar or Spencer's, it prefers
their business models specialised distributors who can make large
investments and handle big volumes. "The frequency
and size of purchases made by modern retail are
typically larger than traditional retail, so we require distributors with large set-ups," he says.
Dabur, which bought Fem Care Pharma in 2009, has inducted stockists who cater only to
salons to distribute its personal care products.
Dabur also uses technology to improve sales. Half of its 2,000-strong sales team has

7. Samsung handsets with a built-in app that facilitates daily reports that help gauge spending
patterns and plan product-focused schemes. Marico Ltd also finds specialisation effective.
Until a few years ago, a single distributor managed its entire product range for all channels -
wholesale, retail and chemists. "Companies are moving away from a one-size-fits-all
approach," says B. Sridhar, Executive Vice President, Sales & Supply Chain, Marico. "At
Marico, the profile of a distributor handling chemists would vary significantly from that of a
person handling wholesalers. In the chemist channel, the person should understand the
product's relevance and concept selling, while the wholesale channel is about managing
relationships and making deals."
Specialisation has helped distributors, too. Jai Prakash Tallam is Dabur's South Bangalore
distributor for kirana, wholesale and some modern retail channels. Until recently, Tallam
had 13 salespeople, who booked orders for all products. In September 2011, he decided to
expand and restructure the team so he could give equal emphasis to the entire product
range. "I cover nearly 2,600 outlets and sell some 400 SKUs," he says. SKU stands for
stockkeeping unit, the trade term for a product - whether single or bulk - identified by a
particular code. "It was not possible for a salesperson to remember all SKUs." But because
of specialised verticals, he says, sales jumped from Rs 80 lakh a month in September 2011
to Rs 1.05 crore a month in December 2011 - the highest growth in his 25 years of trade
experience. "Specialisation has also resulted in more store shelf space and higher product
availability," says Tallam. "Earlier, we could concentrate on just 100-odd SKUs, but that
number has increased."
All in the family
Emami's Mohan says that a recent addition to the many challenges distributors face is
succession planning. "Distribution is not a glamorous business," he says. "Every year, we
hear of cases, especially from large cities, where the next generation is not interested in
joining the family business."
This is not always the case, of course. After getting his MBA from Delhi, Amit Gupta worked
for three and a half years with Religare Enterprises, Monster.com and Puma India before
moving back to his hometown, Kanpur, in late 2009. He sees great potential to expand his
family's distribution business, and is planning to add big accounts such as Reckitt Benckiser
and Procter & Gamble to the existing portfolio of Emami, ayurvedic oil manufacturer
Himgange, and beauty and personal care products maker VI-John. "I always wanted to join
the family business," he says. "The reason I took up jobs earlier was to learn management
and communication skills." He says he hopes to raise the turnover to Rs 60 crore a year by
2012/13, from Rs 48 crore in 2010/11.
FMCG Companies Profit From Rural Consumption Boom in Pakistan

8. Away from the violence and the troubles of the big cities, the economy of rural Pakistan is
booming. Flush with cash from bumper crops at record commodity prices, the farmers are
spending on tractors, cars, motorcycles, mobile phones, personal grooming items,
packaged foods and beverages and other consumer products like never before.
Higher crop prices have increased farmers’ incomes in Pakistan by Rs. 342 billion in the 12
months through June, according to a government economic survey. That was higher than
the gain of Rs. 329 billion in the preceding eight years, according to a report by Bloomberg
News. Companies like Millat tractors, Honda Atlas Motorcycles, Pak Suzuki Motors, Engro
Foods, Telnor, Nestle, Colgate-Palmolive, Proctor and Gamble and Unilever have been big
beneficiaries of the current rural consumption boom.
Nestle Pakistan's chief Ian Donald has summed up the rising demand for his company's
products as follows: “It’s a common perception that China and India are much bigger in
terms of growth than Pakistan. But for Nestle, the per capita consumption of our products in
Pakistan is twice as much as we have in China and India.” It should be noted that Nestle is
the world's largest packaged food company, and Pakistanis' per capita consumption of milk
and dairy products is about 2.5 times higher than in India. According to the FAO, the
average dairy consumption of the developing countries is still very low (45 kg of all dairy
products in liquid milk equivalent), compared with the average of 220 kg in the industrial
countries. Few developing countries have per capita consumption exceeding 150 kg
(Argentina, Uruguay and some pastoral countries in the Sudano-Sahelian zone of Africa).
Among the most populous countries, only Pakistan, at 153 kg per capita, has such a level.
In South Asia, where milk and dairy products are preferred foods, India has only 64 kg and
Bangladesh 14 kg. East Asia has only 10 kg.
Here are a few key points excerpted from a recent Businessweek story on rise of the rural

9. consumer in Pakistan:
1. Unilever and Colgate-Palmolive Co. are sending salespeople into rural areas of the
world’s sixth most-populous nation, where demand for consumer goods such as Sunsilk
shampoo, Pond’s moisturizers and Colgate toothpaste has boosted local units’ revenue at
least 15 percent.
2. “The rural push is aimed at the boisterous youth in these areas, who have bountiful cash
and resources to increase purchases,” Shazia Syed, vice president for customer
development at Unilever Pakistan Ltd., said in an interview. “Rural growth is more than
double that of national sales.”
3. Consumer-goods companies forecast growth in Pakistan even as an increase in ethnic
violence in Karachi has made 2011 the deadliest in 16 years for the country’s biggest city
and financial center.
4. Nestle Pakistan Ltd. is spending 300 million Swiss francs ($326 million) to double dairy
output in four years, boosted sales 29 percent to 33 billion rupees ($378 million) in the six
months through June. “We have been focusing on rural areas very strongly,” Ian Donald,
managing director of Nestle’s Pakistan unit, said in an interview in Lahore. “Our observation
is that Pakistan’s rural economy is doing better than urban areas.”
5. Haji Mirbar, who grows cotton on a 5-acre farm with his four brothers, said his family’s
income grew fivefold in the year through June, allowing him to buy branded products. He
uses Unilever’s Lifebuoy for his open-air baths under a hand pump, instead of the
handmade soap he used before. “We had a great year because of cotton prices,” said
Mirbar, 28, who lives in a village outside south Pakistan’s Matiari town. “As our income has
risen, we want to buy nice things and live like kings.”
6. Sales for the Pakistan unit of Unilever rose 15 percent to 24.8 billion rupees in the first
half. Colgate-Palmolive Pakistan Ltd.’s sales increased 29 percent in the six months
through June to 7.6 billion rupees, according to data compiled by Bloomberg. “In a generally
faltering economy, the double-digit growth in revenue for companies servicing the consumer
sector has come almost entirely from the rural areas,” said Sakib Sherani, chief executive
officer at Macroeconomic Insights Pvt. in Islamabad and a former economic adviser to
Pakistan’s finance ministry.
7. Unilever is pushing beauty products in the countryside through a program called “Guddi
Baji,” an Urdu phrase that literally means “doll sister.” It employs “beauty specialists who
understand rural women,” providing them with vans filled with samples and equipment,
Syed said. Women in villages are also employed as sales representatives, because “rural is
the growth engine” for Unilever in Pakistan, she said in an interview in Karachi. While the

10. bulk of spending for rural families goes to food, about 20 percent “is spent on looking
beautiful and buying expensive clothes,” Syed said.
8. Colgate-Palmolive, the world’s largest toothpaste maker, aims to address a “huge gap” in
sales outside Pakistan’s cities by more than tripling the number of villages where its
products, such as Palmolive soap, are sold, from the current 5,000, said Syed Wasif Ali,
rural operations manager at the local unit.
9. Its detergents Bonus Tristar and Brite are packed in sachets of 20 grams or less and
priced as low as five rupees (6 cents), to boost sales among low-income consumers hurt by
the fastest pace of inflation in Asia after Vietnam. Unilever plans to increase the number of
villages where its products are sold to almost half of the total 34,000 within three years. Its
merchandise, including Dove shampoo, Surf detergent and Brooke Bond Supreme tea, is
available in about 11,000 villages now.
10. Pakistan, Asia’s third-largest wheat grower, in 2008 increased wheat prices by more
than 50 percent as Prime Minister Yousuf Raza Gilani sought to boost production of the
staple.“The injection of purchasing power in the rural sector has been unprecedented,” said
Sherani, who added that local prices for rice and sugarcane have also risen.
11. Telenor Pakistan Pvt. is also expanding in Pakistan’s rural areas, which already
contribute 60 percent of sales, said Anjum Nida Rahman, corporate communications
director for the local unit of the Nordic region’s largest phone company.
While the presence of multinational consumer product giants like Nestle and Unilever
receive more coverage in the western media, the Euromonitor report finds that Pakistani
FMGC companies like Engro Foods, Haleeb Foods, Shezan, Tapal, Shan and others
dominate the packaged food business in Pakistan. Here's an excerpt from a
recentEuromonitor report on Pakistan:
Although multinationals are paving the way for innovations and taking into account
consumers’ demands by launching new products and advertising them heavily, it is usually
the domestic companies which win the competitive battle in volume terms as they focus less
on expensive and more conventional items which already have a consumer base.
Nevertheless, multinationals carry strong brand names and target the higher class with
premium products, thus taking their reasonable share in value terms.

11. Supermarkets/hypermarkets is the most steadily growing distribution channel with a new
player Hyperstar. As urbanization is increasing, people tend to leave their families and live
separately and therefore there is sometimes no housewife at home to be responsible for the
purchase of fresh items close to home. Supermarkets/hypermarkets became more popular
over the review period, being gradually considered more convenient as this channel can
offer a wide selection of products in one place. Pakistanis are becoming more used to
planning their meals for several days and supermarkets/hypermarkets work on offering as
wide an assortment as possible. Nevertheless, traditional retail outlets such as independent
and small grocery retailers continue to have a good name not just because of the lower unit
prices offered but also because of their selection as most of them are specialized.
Pakistan continues to face major problems as it deals with the violent Taliban insurgency
and multiple internal and external threats and crises of stagnant economy, scarcity of
energy and the lack of sense of security. However, it is clear from the consumer spending
data that Pakistanis are a resilient people, and they continue to defy the persistent
prophecies of doom and gloom.
Pakistan is just too big to fail. I fully expect Pakistan to survive the current crises, and then
begin to thrive again in the near future.
FMCG sector registers handsome profits in 2011
Staff Report
KARACHI: The fast moving consumer goods companies (FMCG), listed on the Karachi Stock Exchange
made handsome profits during 2011. FMCG’s profitability was well supported by the two conventional

12. giants, Nestle and Unilever Pakistan, who shared 71 percent combined growth in the earnings.
Engro Foods emerged as the supercharged FMCG as it grew over 400 percent in bottom line in the
sector, remarkably grabbing the fourth position after Nestle, Unilever and Rafhan, outpacing Unilever
Foods National Foods.
Engro Foods’ contribution to the overall sector’s profitability took a quantum leap of 6 percent from 1
percent in 2011
Despite massive growth in profitability, escalating financial cost of Nestle was up by 105 percent on
yearly basis to Rs 1.1 billion and Engro Foods’ was up by 59 percent to Rs 1.04 billion.
Analysts said that the sector’s profits would have expanded to 35 percent had financial charges been
at normal levels.
As far as individual companies’ profitability are concerned, Nestle’s profit after tax stood at Rs 4.67
billion, up 14 percent; Unilever Pakistan posted Rs 4.1 billon, up 25 percent, Rafhan Maize earned Rs
2.03 billion, up 11 percent, while Engro Foods, Unilever Foods and National Foods (in 1HFY12) made
Rs 891 million, up 407 percent, Rs 617 million, up 41 percent and Rs 290 million, up 145 percent in
2011.
As far as market returns are concerned, following such healthy growth in profits, our FMCG’s sample
companies provided a solid return of 49 percent during 2011 as compared to the KSE 100-share
index’s return of minus 6 percent.
The tough economic conditions and instability on political front along with acute energy shortages
would continue to cascade their impacts on business activities in the country. On the other hand, high
inflation may keep FMCG revenues at elevated levels during 2012, said analyst Yawaruz Zaman.
Textile sector: Nishat Mills Limited (NML) posted profit of Rs 1.9 billion, a decline of 8 percent on
yearly basis.
The net sales of the company rose by 1 percent to Rs 21.6 billion as the gross margins came down by
110 basis points due to increased cost of sales on account of disposing off the expensive carry forward
inventory from last year.
Moreover, the administration and distribution expenses witnessed an increase of 17 percent to Rs 1.5
billion. However, other operating income surged by 34 percent thanks to dividend received from MCB
and its power subsidiaries.
Cement sector: DGK Cement posted a massive growth of 566 percent in earnings on the back of
higher average retention prices and a lower effective tax rate.
The soaring net retention prices that surged up 37 percent countered the lacklustre volumes as the
company’s top line grew by 31 percent.
Although higher energy and fuel cost led to cost of sales increasing by 11 percent, rise in cement
prices defied the cost rise as gross margins improved to 32 percent from 21 percent last year.
Moreover, increased contribution of export sales in the overall sales mix contributed to 61 percent rise
in distribution costs because of higher freight charges.
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FMCG industry, alternatively called as CPG (Consumer packaged goods)
industry primarily deals with the production, distribution and marketing of
consumer packaged goods. The Fast Moving Consumer Goods (FMCG) are
those consumables which are normally consumed by the consumers at a
regular interval. Some of the prime activities of FMCG industry are selling,
marketing, financing, purchasing, etc. The industry also engaged in
operations, supply chain, production and general management.
FMCG industry economy

13. FMCG industry provides a wide range of consumables and accordingly the amount of money
circulated against FMCG products is also very high. The competition among FMCG manufacturers is
also growing and as a result of this, investment in FMCG industry is also increasing, specifically in
India, where FMCG industry is regarded as the fourth largest sector with total market size of US$13.1
billion. FMCG Sector in India is estimated to grow 60% by 2010. FMCG industry is regarded as the
largest sector in New Zealand which accounts for 5% of Gross Domestic Product (GDP).
Common FMCG products
Some common FMCG product categories include food and dairy products, glassware, paper products,
pharmaceuticals, consumer electronics, packaged food products, plastic goods, printing and
stationery, household products, photography, drinks etc. and some of the examples of FMCG products
are coffee, tea, dry cells, greeting cards, gifts, detergents, tobacco and cigarettes, watches, soaps etc.
Market potentiality of FMCG industry
Some of the merits of FMCG industry, which made this industry as a potential one are low operational
cost, strong distribution networks, presence of renowned FMCG companies. Population growth is
another factor which is responsible behind the success of this industry.
Leading FMCG companies
Some of the well known FMCG companies are Sara Lee, Nestlé, Reckitt Benckiser, Unilever, Procter &
Gamble, Coca-Cola, Carlsberg, Kleenex, General Mills, Pepsi and Mars etc.
Job opportunities in FMCG industry
FMCG industry creates a wide range of job opportunities. This industry is a stable, diverse,
challenging and high profile industry providing a wide range of job categories like sales, supply chain,
finance, marketing, operations, purchasing, human resources, product development, general
management.
Though KSE 100 has showed an impressive return of 36% since the start of the year, consumer stocks
have outshined the benchmark by 12%. Limited float is often cited, but we believe consumer stock out
performance is also on account of phenomenal earning growth of the last few years. Our sample that
consists of 23 companies (as illustrated by accompanying table) has depicted a strong sales and
earning growth of 20% and 19% in last 4-years (2009-2012). Further, extrapolating 2012 earnings
are expected to grow by 35%, which we believe have culminated into recent upsurge in stock prices.
Evidence from the strong consumer dynamics also comes from performance of wholesale and retail
sector. Where Pakistan went through one of the lowest growth periods in last 5-years (FY08-09), the
sector has grown by an average 3.1%.
Consumerism: behind consumer stocks jubilee
The growth story comes from increased consumerism that stems from i) demographic changes, ii)
growing middle class and iii) rising health awareness. With above regional average population growth
of 2%, and sixth largest population (179mn), increasing urbanization and improving

14. communication/distribution means, Pakistan is always been a heaven for consumer goods.
Further, decreasing family size, improving literacy rate and women inclination to work are further
augmenting households to shop more and increasing middle class base. Hygiene awareness due to
increasing literacy is bringing food sector turn over as people are shifting from unregulated unpacked
food products.
Mid-cap lifted consumers to 48% return
Contrary to the general perception of large cap stock driving the sector, analysis revealed that mid
and small cap stocks are major gainers. During the period, Mitchell led the way by 331% return
followed by National Food (269%), Noon Pakistan (228%) and EFOODS (221%). Our analysis reveals
that in variant order these are the same companies that have depicted highest 4 year earning CAGR.
Therefore, we believe that though these companies are marked by low free float (12% against KSE
average of 25%) profitability growth was also the major factor.
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15. Wednesday, August 3, 2011
Message from CEO of FMCG Distributors in Pakistan
In retrospect, I am overwhelmed to have inherited a fine business entity. Very few people are provided
with such opportunities, and for this I am eternally indebted to my elders.
In our organization, we have managed to cultivate a cordial relationship with our clients and business
associates, their good opinion about us for the services we provide, are a priceless asset.
Our company has withstood the vagaries of time for exactly 110 years. This is not a small achievement
for a company that did not enter politics yet remained close to the general public by participating in their
social welfare and religious wellbeing.
The last 110 years were eventful, and will go down in history as such.
SMI / AML got into distribution business by early 20th century. With SMI therefore there have been many
firsts. Some of these were that it was the first distribution setup in this part of the world!
The first Private Limited Company to be registered with the Joint Stock Company after partition!
The distinction of being Pakistan’s first income tax assessee.
Yesterday, it was a family business. Today, it is the family in business. Tomorrow, it will be the business
of the family to ensure that there is a future for both the business and the family. We are proud of our
institution. For us, it symbolizes courage, common sense, energy, enterprise, aspiration and hope. An
important finding through research conducted in the US by the Life Insurance Company Mass Mutual has
thrown light on the longevity of entrepreneurial organizations. This has shown that 67% of family business
houses fail to survive after the second generation takes over, with the odds rising to 90% by the 3rd
generation. By the Grace of Allah we are the fourth generation.
At Allied Marketing (Pvt) Ltd. we are committed to providing brands and services of outstanding quality
and value that improve the lives of the region’s consumers.

16. The Company stood by the principle – of meeting its professional obligations and establish a sustainable
linkage between its principals and its clients. This conviction has won us the appreciation of our principals
and respect and confidence of our clients.
We serve more than 15,000 customers ranging from hypermarkets, wholesalers, departmental stores,
hotel chains and restaurants, as well as the thousands of convenience and grocery stores. Each is
regarded as a valued customer and 24 hours delivery is guaranteed for the majority of our customers.
These 110 years gave us different challenges. We are no more competing with few companies rather, we
are up against global competition. We will have to create opportunities for this business. The number of
our principals and our clients are on increase. Business conditions are becoming more stringent with ISO
– 9000 (Quality Consistence) and ISO – 14000 (Environmental compliance).
Our outstanding success in the recent past has been a result of our strong talent base and leading edge
processes.
I would like to share my future vision with you. This company will be the leading supply chain
management company in Pakistan and a leading example of a high performance organization, role model
for other corporate ventures in the region.
I commend the untiring efforts of my colleagues who worked throughout the year with absolute
commitment and diligence. They are the main drivers behind our success. All of us are proud to be part of
the “AML family” and resolve to take the company to ever-greater heights in the years to come.
Despite a challenging global economic and local environment, AML has applied the same standards of
quality, attention to service and detail and a singular focus on delivering to our customers – corporate or
consumer.
It is this focus, combined with prudent financial management, transparency and our knowledge of market
dynamics that continues to drive the company forward.
People are not made of numbers. They are made of hopes and dreams, passions and partnerships, talent
and tenacity. We strive to see beyond the numbers and understand what success means to our clients, to
deliver what really matters.

17. The year 2009 was a real testing ground for business all over the world. Recessions in many key global
economics had far reaching effects on our deeply inter-connected world. Along with financial models,
business models; the human spirit took a real test of resilience.
Our business results are a testament to the combined decisions, attitudes and determination of our
people. We have a commitment to the company which is absolute. This commitment ensured that even in
adverse times, we have been able to deliver results that exceed expectations.
The pride we carry in our results is because of the teams. Their efforts, collective and individual, allow us
to enter 2010 with a confidence that we will continue to face challenges with the best of our best.
May God bless you!