Demand for processed foods is rising significantly in Pakistan, which is encouraging investment in the food processing and packaging material sectors.
The total investment made by National Foods in its three manufacturing facilities now stands at Rs13.5bn. National Foods invested Rs7 billion to build its largest, most advanced production plant in Faisalabad, and International Packaging Films, a subsidiary of International Packaging Films Ltd (IPAK), increased its capacity to produce flexible packaging films in Lahore. Additionally, both businesses intend to actively pursue product export markets.
“We intend to export $15–20 million worth of flexible packaging films this year, or about 20 percent of our 152,000-ton total manufacturing capacity,” states Naveed Godil, CEO of IPAK.
Food packaging is a significant growth engine because it gives customers the ability to research products and evaluate value offered before making a purchase. He states that packaging “also helps enhance the portability of products, preserves taste, and increases shelf life,” adding that his company’s market share in the nation for flexible film packaging is 38 percent.
“The local food industry is estimated to be worth between Rs80 and Rs100 billion, and we anticipate a 7-8% annual growth in flexible packaging films.”
Approximately 200,000 tonnes of flexible packaging films are needed in Pakistan, compared to a 300,000 tonne capacity for manufacture; this leaves 100,000 tonne in excess for export.
Over the past three years, the company’s revenues have increased at a compound annual rate of 41 percent. The company’s increased manufacturing capacity has resulted to a sharp increase in sales, which has prompted it to book up for its IPO on May 8–9. The IPO will involve the sale of 70.1 million shares, or 10% of the company’s post-IPO capital, in a new stock issuance.
Retail investors will purchase a fourth of the shares that are up for sale. It will collect Rs1.47bn through the IPO, the 14th in the previous five years, at a floor price of Rs21 per share, helping to partially pay off the Rs4bn in long-term debt it obtained recently for capacity growth.
Mr. Godil clarified, saying, “We anticipate an annual growth of 7-8pc in the usage of flexible packaging films by food companies in the country. The total size of the local market is Rs80-100bn, depending on the dollar value.” We aim to assist Pakistan’s downstream industry, which can easily be produced domestically and save about $25 million yearly, in our efforts to fully replace imports.
Producing films made of cast polypropylene, biaxially oriented polypropylene, and biaxially oriented poly-ethylene terephthalate, the company provides a wide range of packaging options. This group is the first in Pakistan to offer flexible packaging solutions with a single window.
He claims that his company, along with the flexible film packaging industry as a whole, is making great efforts to promote investment in flexible packaging films.
Similarly, National Foods’ new manufacturing facility will help it serve the domestic market, significantly increase its export volume, and create over 600 jobs. It is a part of the company’s plan to lessen the nation’s reliance on imported raw materials through its “Seed To Table” initiative, launched in partnership with progressive farm-managing companies.
“We have started our ‘Seed to Table’ project to lessen the nation’s reliance on imported raw materials, especially the $10 million worth of tomato paste that is imported annually.” According to him, the tomato project’s outcomes have above his projections, and his business plans to increase the acreage to 1,000 acres the next year.
He claims that in order to further support homegrown agriculture and lessen dependency on imports, the same strategy will now be repeated with additional essential elements like red chilies. Although Pakistan produces over 144,000 tonnes of red chilies a year, more than 20,000 tonnes must be imported annually to meet industry standards.
The company’s global CEO, Abrar Hasan, told this correspondent at the Pakistan Agriculture Connection Expo & Conference in Lahore, “The new production facility is equipped with cutting-edge technology and production capacity of 6000 tonnes/month for production of spices, recipe mixes, ketchup, mayonnaise, Chinese sauces, seasonings, and Kasuri Methi.”
The food industry currently exports to forty nations on five continents. It has subsidiaries in North America, the United Kingdom, and the United Arab Emirates. Most recently, it extended its supply chain to include Canada.
Abrar Hasan discusses the obstacles to growing processed food exports by pointing out that Pakistani businesses faced a number of challenges, such as limitations on their foreign investment, which prevented them from becoming more established in the global export markets.
“We are dealing with the same problem that the nation is: the money crunch. To guarantee their presence in overseas markets and increase their exports, businesses must make foreign investments. However, the State Bank forbids you from making foreign investments since we lack the necessary funds.
Surprisingly, people have more unrestricted access to foreign exchange than corporations do. Only current exporters are eligible to use this facility to open stores abroad. Exporters are permitted to keep 10% of their export earnings and invest the remaining 10%.
“This sum is insufficient to establish your brand in international markets. Additionally, since they lack foreign exchange, a novice investor wishing to enter the export industry is unable to do so, the speaker adds.
He feels that unless businesses have unrestricted access to foreign exchange, the nation’s exports will not rise.
Our products are exported by means of distributors situated in overseas markets. However, this model doesn’t work very well. Hasan contends that fulfillment centers and warehouses are necessary in such countries if we hope to increase exports and get our products on the shelves of big-box stores.
According to him, the effort to raise exports requires companies like this to invest in raw material supply and the forward distribution chain in foreign markets. “That is the only way of guaranteeing the quality of products according to international standards and ensuring a continuous, uninterrupted supply to the international buyers,” he urges.
