Low end consumers

Mansoor Ahmad
Sunday, Apr 24, 2022

LAHORE: The consuming class that spends more than $11 a day is limited in Pakistan and makes only 5-10 percent of the country's population. People aged 14-35 happen to be major consumers of goods and services and they secure lion’s share of our population. Thus, they need more investment.

We need investment in sectors that are consumed by people in the center or bottom of the pyramid, and investment must come from domestic investors.

Pakistan has car and bike assemblers, but there are hardly any bicycle manufacturers in the country. Bicycles imported from China turns expensive and eventually out of reach of the poor. That’s one of the reasons we see less bicycles on the roads.

It’s good that the state is focusing on having more locally assembled cars, but it should also offer special concessions and exemptions to those willing to establish or reviving a local bicycle plant, which will go in favour of low end consumers.

The high-end consumers go for high tech and high-priced products for which the market is limited. This is the reason that no global investor is interested in establishing units for producing high end iPhone or top Samsung models in Pakistan.

Pakistan imports these gadgets increasingly despite heavy taxes imposed on their import. Similarly, we do not expect Mercedes or Porsche to establish their manufacturing facility in the country. These automobiles are only used by the elite or rich families, which are not in large quantity.

Around 95 percent of processed milk is supplied in tetra pack packaging, which proves to be expensive for low end consumers. Most multinational companies established milk processing plants supplying ultra-heat-treated milk in tetra pack boxes. The prices are high and only 5 percent of the total milk produced in Pakistan, which the affluent consume.

This is commercially viable for processors as they cumulatively produce (local processors included) around one-million-liter pack per day catering to around 4 million population (assuming 250ml is consumed by one person daily). This accounts for about 2 percent of the country's population.

There is a cheaper alternative that is pasteurised milk that could be packed in cellophane bags costing less than Rs1.

The one-liter tetra pack box costs over Rs25. The shelf life of pasteurised milk is three days.

Around 95 percent of households in the country buy loose milk and boil it to kill bacteria.

Boiling also prolongs the shelf life of the milk. There used to be a state-owned enterprise in Punjab that would produce pasteurised milk in cellophane bags at a price much lower than UHT packed milk. It perhaps has closed.

In neighboring India, bulk of the milk is supplied by cooperatives after pasteurisation. The UHT milk market is negligible.

It is very unfortunate that there are few processors that sell milk after pasteurization, but at a cost higher than even the UHT milk. One processor even uses the same tetra pack box used by UHT milk processors.