Printer Friendly

Food industry in Pakistan.


According to the Census of Manufacturing Industries there were 822 units engaged in the manufacture of Food and Beverages. According to the UNIDO it is the largest manufacturing industries of the country. Value of production stood at Rs.46.170 billion and manufacturing value added (MVA) stood at Rs.12.187 billion. Food processing is a relatively capital intensive industry. The share of food in the manufacturing industry is declining. It was 22.66 per cent in 1981-82 declined to 15.95 per cent in 1987-88. Figures for 1993-94 are not available.

The growth rate in the food industry has been estimated at 7.46 per cent per annum. The most rapidly growing items are dairy products fish processed, bakery items, sugar, biscuits and confectioneries, fruit juices and other soft beverages. Rapid export growth has characterized fish preparation, fruit preserves, dry fruits, some beverages and sugar, and honey preparation. Food products (except rice) do not however, make up a significant proportion of Pakistani exports and there is a considerable potential for expanding such exports, specially to Europe and the Gulf region.

As many as 79 food manufacturing companies are on the list of Karachi Stock Exchange out of total 707 companies (end November 1994). The paid-up capital of these companies stood at Rs.6.054 billion as end October 1994. They include, some of the biggest groups in the market such as Bawany, Crescent, Habib, Fecto, Premier, Lakson, Burma Oil (producing vegetable oils), Brooke Bond, Clover Foods, Lever Brothers and National Foods. The food manufacturing firms have generally performed well on the stock exchange in 1993-94 with capitalisation registering an above average increase. Net profit as percentage of share holder's equity has averaged at about 22 percent during 1990-1993 for the sugar and allied group, and about 25 per cent for the vegetable oil groups. The net profit ratio for the tobacco sub-sector has been 30 per cent. This compares well with the overall net profit ratio for KSE companies during this period, and averages to about 19 per cent.

Thus, there is a significant scope for investment expansion in the food manufacturing sectors. Domestic demand is buoyant and export prospects are bright - although they are yet to be adequately explored. Several major companies including well known multinationals have substantial investment commitments and there are also a large number of middle sized upward mobile domestic firms. Scope, thus exists both for the establishment of wholly owned subsidiaries. There is also a need for technology transfer agreements which can facilitate the access of Pakistani companies, to modern technology and know-how in the areas of processing, preservation and packaging of food manufactures. Several Pakistani firms have developed ambitious modernization programmes.


At present there are 23 companies on the list of Karachi Stock Exchange in Food & Allied section. These companies are engaged in various food items as given below:-
 No. of
Items Cos.

Milk and Milk Products 5
Fruit Processing & Juices 7
Wheat & Rice Mills 2
Confectionery 2
Edible Oil 2
Spices Tea 2
Others 3

Total: 23

The list of companies includes two multinational companies like Brooke Bond and Lever Brothers belonging to Unilever of England. About 70 per cent of tea sales are controlled by two brands Lipton and Brooke Bond both are owned by a single multinational Unilever.

Total sales of 23 companies amounted to Rs. 18.827 billion. Sales of Brooke Bond (Rs.3.730 billion) and Lever Brothers (Rs. 10.132 billion) worked out to 73 per cent of the total sales of all the companies in the food and allied section. Lever Brothers are in the business of Margarine, Cooking Oil, Soap and Detergents, Personal products, Dates and Ice Cream.

The Company financed capita expenditure of Rs.211 million in 1993 through bank borrowing in line with the policy of enhancing production profitability. The company entered into the ice cream business in current year for which it has acquired land near Lahore. Additionally the company is actively pursuing expansion opportunities financed through retained earnings as well as fresh lines of credit presently under negotiations.

Lever Brothers sell their cooking oil under the brand names of Dalda and Planta. Famous brand of Lever Brothers are Blue Band (Margarine), Pearl Dust, Ruby Dust, Yellow Label, Taaza, Top Star are different brand names of tea, Tree Tops (Dates), Lux, Life Buoy and Sunlight (Soap).

Companies in milk sector are prospering. Pak Dairies and Mubarak Dairies are incurring losses. Nestle Milkpak which has a technical tie-up with Nestle of Switzerland has shown profit Rs.117.51 million in 1994 as compared to profit of Rs.38.67 million in 1993. Famous brands of Milkpak are Nido, Naslac, Cerelac, Milo and Milk Pak.

Rafhan Maize has a technical tie-up with CPC Knor Holding AG of Switzerland subsidiary of CPC International Inc. of USA. The foreign company has 51 percent equity holding in the company. Rafhan is in the business of corn oil and food products. Their famous brands are Rafhan Corn Oil, Knorr Instant Noodles, Rafhan Custard Powder, Knorr Chicken and Ginger Soup, and Rafhan Quick set Jelly crystals. Project to increase capacity of corn wet milling has been completed at Faisalabad in time and two standby generators to make up power shortage due to loadshedding are under installation. With a view to meet growing need for storage facilities due to expanded business activities of corn wet milling operations, the company purchased 27.5 acres of land at Makkooana, a suburb of Faisalabad city. The total capital expenditure during the year amounted to Rs. 173 million.

Mitchells Farms are in the business of fruit processing and confectionery. The company has its own farms of 427 canals where lemons, grape fruits and oranges are cultivated, which is totally for the company's consumption. Similarly tomato and garlic produced by the company could fulfil only 30 per cent of the requirement. The rest is procured through the local markets. The main raw materials, citrus, coca, butter, hydrogenated Kernal Palm oil, skimmed milk and butter oil are imported, all these items are on the free list. Of the three product groups - groceries, chocolate confectionery and sugar confectionary - higher revenue and profit was generated from the first two while profit and revenues derived - from the sugar confectionary was much reduced as compared to the previous year.

Bakers Food are making bubble gum, toffees and chocolate in collaboration with a Swiss firm Givadan. Annual capacity of the plant has been increased to 3,205 tonnes per annum. The company has been marketing its products under the brand name of Turbo. The company could not fully utilize the capacity due to law and order situation in Karachi. Capacity utilization was 66 per cent in 1992, 75 per cent in 1993 and 54 per cent in 1994.

Candyland (Ismail Industries Limited) was initially established as a private limited company on June 21, 1988 and converted into public limited on November 1, 1989 and got listed on stock exchanges in 1990 with a Paid-up capital of Rs.72.60 million. The construction of civil works and installation of plant and machinery was substantially completed in July 1990 and the company started production of bubble gum, munch candy and toffee from August 1990 but the production of their premier product jelly and chew candy commenced from January 1991. The company is now in full production and manufacturing quality confectionery on one of the finest and fully automatic plant. The project was completed at a total cost of Rs.178.00 million including foreign exchange cost of Rs.92.87 million. Due to timely and efficient completion, the project has been set up at an economical cost otherwise it would have cost more than Rs.300 million at the current price. For setting up this plant, the company obtained suppliers' credit of Rs.92.87 million (DM 8.82 million) from Nisho Iwai Corporation.
Export of Food & Food Products

 ($ million)
 1994-95 1993-94 1992-93

Rice 454.244 242.167 317.110
Fish & Fish Preparation 154.331 154.673 181.740
Fruits & Vegetables 54.570 58.148 55.764
Molasses 90.090 82.563 53.158
Spices 9.208 10.942 12.236
Cereal Pre. & Confec. 12.350 11.184 13.250
Sugar, cane Refined 122.143 39.886 -
Tea 7.491 2.806 0.169
Feeding Stuff for Animals 3.445 540 3.357
Other Food Items 10.140 8.212 7.716

TOTAL: 918.012 1150.581 644.500

Source: Export Promotion Bureau

Capacity of the plant stood at 6,600 tonnes capacity utilization has increased from 72.7 per cent in 1993 to 79.5 per cent in 1994. The company launched several new products like (Powder bubble gum, Jungle Jollies and Candy balls). The company has made a shift in the product mix towards products of higher margins. The company hoped to make significant profit during 1994-95.

Sunflo Cit-Russ Limited is located at Sargodha. The plant is capable of processing 36 metric tons per hour (MTPH) of oranges/kinnos into high quality Frozen Concentrated orange/kinno Juice. The estimated cost of the project is Rs.382.352 million. The installed capacity of the project is 102,060 metric tons of fruit throughput which yields 8,450 metric tons of FCOJ/JCKH of International Standard, on 135 days per annum basis. After expansion, the company will produce 100 per cent pure orange juice in one litre tetra packs. This will enable the project to operate for 330 days per year.

As by-products, the Company is obtaining high quality Orange/kinno Oil Phase and Water Phase aromas at the rate of 5 kg. per ton of fruit which are used as natural flavouring agents for fruit juices, dairy, pharmaceutical and cosmetic products. During the commercial production from January 20, 1994 to April 14, 1994 (82 days operation), the company consumed 46,981 tonnes of fruit and produced 3,722 tonnes of Frozen Concentrated Kinno/Orange Juices (FCKJ/FCOJ) and the production efficiency achieved comes to around 72.5 per cent.

Indus Fruit Products Limited is an industrial undertaking for processing fruits, fruit concentrates and pulp and filling of juice bottles. The capacity intake ranges from 6 tons per hour to 2.5 tonnes per hour depending upon different varieties of fruit. The commercial production has commenced on January 15, 1993 and the company has started marketing of bottled juice under name of "SUN" with effect from March 1, 1991. The items produced by the company can broadly be grouped under the heads:-

* Fruit Pulp

* Fruit concentrate

* Fruit juices in Bottles

* Tomato pastes,

* Tomato ketchups

* Beverage bases

* Sludges

The market of these products lies all over Pakistan as well as abroad. The company has already prepared samples of pulps and concentrates of different fruits according to the tastes and requirements of the various countries in the world, which have received positive response. The company filled 13.87 million bottles of mango juice upto June, 1992 which have successfully been marketed. Similarly, the company has a marketing arrangement of its products to whom trial shipments have already been made. The new plant is also installed with the object of developing export products as a major activity.


This dairy plant is located near Sheikhupura. Nestle Milkpak has agreement with Nestle S.A, Switzerland to manufacture milk powder (Nido), Infant milkfood and cereal based foods (Cerelac). Nestle milkpak is a subsidiary of Nestle S.A., Switzerland. Local production of powders and cereals started in 1990. Fruit juices were introduced under "Frost" brand in 1986 "Everyday Tea Whitener" and "Maggi" Noodles were launched in 1992. Kabirwala Dairy, a sick unit, was taken over by the company in 1990.
Three-Years at a Glance of Nestle Milkpak Ltd.

 (Rs. in million)
 1994 1993 1992

Sales 2,000.7 1,326.3 1,105.3
Paid-up Capital 261.8 261.8 221.8
Shareholders' Equity 504.8 387.3 194.8
Pretax Profit 153.7 38.7 -5.0
Pretax Earning per Share 5.9 1.5 -
Cash Dividend (%) - - -
Stock Dividend (%) - - -


Liquid Product (000 Litres) 34,579 31,740 -
Powder & Noodles (000 Kgs.) 7,772 6,221 -

Capacity Utilization (%):

Liquid Product 64.0 58.7 -
Powder & Noodles 59.3 51.4 -

Sales during the year ending December 31, 1994 stood Rs.2,000.7 million as compared to Rs.1,326.3 million showing a rise of 50.8 per cent. Pretax Profit during the same period increased by 297.1 per cent up from Rs.38.7 million in 1993 to Rs.153.7 million in 1994. During the year two products were introduced namely "Milo" Chocolate malt energy drink, and children's growing-up milk "Nestle". Company produced 34,579,000 litres of liquid products and 7,772,000 kgs. of non-liquid products. Capacity utilization substantially improved from 58.7 per cent to 64.0 per cent in case of liquid products and from 51.4% to 59.3% in case of non-liquid products.


The company was first established as Sadiq Vegetable Oils and Allied Industries Bahawalpur as a subsidiary of Unilever Co. of England. This was planned before August 1947 by Lever Brothers, Bombay. The company was incorporated on February 10, 1948 as a public limited company to manufacture vegetable ghee, margarine cooking oils, soap toilet preparations, animal feeds etc. at Rahimyar Khan. This factory was inaugurated by the then Governor General Pakistan Khawaa Nazimuddin and it came into commercial production in 1952. In 1955, the company acquired business of Sadiq Soap Limited, trading operation of Lever Bros. and H.M.V. Company Limited.

All these companies were subsidiaries of Unilever Company of England and were merged under the name of Lever Brothers Limited. In 1966, their registered office was shifted from Rahimyar Khan to Karachi. in the same year, Lever Bros. purchased in edible oil factory from A&B Food Industries Limited. Lipton which was also a subsidiary of Unilever was the largest tea company in Pakistan and working separately. In addition to marketing tea, Lipton also set up a date processing plant with a capacity of 2500 tonnes per year in Khairpur, Sindh in 1982.
Three Years at a Glance of Lever Brothers pakistan Limited

 (Rs. in million)
 1994 1993 1992

Sales 10,132.6 7,855.4 7,855.4
Paid-up Capital 504.2 439.1 418.4
Shareholder's Equity 844.1 818.5 580.6
Pretax Profit 365.1 794.6 683.1
Earning Per Share 36.2 90.4 81.6
Cash Dividend (%) 40.0 54.0 90.0
Stock Dividend (%) .0 15.0 5.0

Production (000 tonnes)

Fats and Oils 63,757 56,012 50,529
Detergent and personal products 43,843 47,785 42,445

Capacity Utilisation (%)

Fats and Oil 79.6 70.0 63.1
Detergents and personal products 74.2 80.9 71.8

Source: Company's Annual Report

This unit was set up basically for export purpose but their dates have also good sales in local market. However, about 95 per cent of its output is exported and till the end of 1990, the company earned foreign exchange amounting to $16.5 million through date exports. In order to earn additional foreign exchange, Lipton also set up a prawn farm at Thatta but it was somehow not successful and finally closed. This tea company was finally merged with Lever Bros. in February 1989.

Lever Brothers Pakistan now consists of a large manufacturing complex, producing diversified product range and is one of the biggest consumer goods companies operating in Pakistan. Its total range comprises of 29 consumer products (4 House cleaning products, 6 soaps, 5 personal products, 5 edible fats, 8 blends of tea, one ice cream, one date and one cotton seed) and 7 industrial products. It runs five factories located in Karachi, Rahimyar Khan and Karamabad Khairpur. A new ice cream factory has been set up at Lahore.

The range of its products covers some of the known brands of food and beverages, detergents and personal products. The name of Vanaspati ghee was synonymous with Dalda, similarly detergents were known as Surf. The company has recently entered into ice cream business under brand name of WALLS. It has also started exporting toothpaste from Pakistan. The company also made good headway in promoting sunflower and Maize hybrid seeds which are badly needed to augment edible oils, the import of which is the greatest burden in the country's economy. It has introduced multi-cut Sorghum (Sada Bahar) Hybrid Fodder seeds in the country their tea clones grown at Mansehra have developed into healthy bushes. Harvesting of tea leaves from these bushes has been encouraging. Government help is sought to extend the experiment to a large area in Pakistan.

During the year 1991 the company established a wholly owned subsidiary Lever Chemicals to manufacture sulphonic acid at Rahimyar Khan. This year an ice cream plant has been set-up. The company manufactures a number of consumers products but capacity of only two products namely edible fat and oils and detergents and personal products are given in the table:

The production capacity of the company's edible fat and oil plants was expanded from 34,000 tonnes in 1990 to 45,000 tonnes in 1991 and to 80,000 in 1994 capacity capacity of detergents and personal products increased from 36,542 tonnes in 1990 to 45,950 tonnes in 1991 and to 53,040 tonnes in 1994.

The production of items under these two classifications have been increasing. Edible Oil plants infect were working more than their installed capacity. Against the capacity of 80,000 tonnes/year, edible oils output was as high as 63,747 tonnes in 1994. Capacity utilisation is about 80 per cent. In the case of detergent and personal products, production has been continuously rising and went up from 36,892 tonnes in 1991 to 43,848. But capacity utilisation of plants for these products has been less than the installed capacity.

Although installed capacity and production are grouped under the above two headings, operating results of edible oils are given different heading and merged with "food and beverages". In the absence of separate capacity, production and operating results, it is not possible to examine or analyse the performance of each product particularly when in some products the company is the market leader.

COPYRIGHT 1996 Economic and Industrial Publications
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Haidari, Iqbal
Publication:Economic Review
Article Type:Cover Story
Date:Jan 1, 1996
Previous Article:Economic forecast 1997-98.
Next Article:Shezan International Limited.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters