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Chillies, dairy and mangoes

THE FOOD PROCESSING


SECTOR IN PAKISTAN

OFFICIAL PROGRAM

PARTNER

MARKET STUDY OF FOOD PROCESSING


SECTOR IN PAKISTAN ON CHILLIES, DAIRY
AND MANGOES
This report provides a comprehensive reference for Swiss
companies wanting to expand and/or develop in the
Pakistani Food Processing industry. It contains market
insights on the never-paid-attention-to but high potential food
processing sector with special emphasis on three sectors
namely Chillies, Dairy and Mangoes.

Date: June 2014


Language: English
Number of pages: 74
Authors: Dr. Huma Amir, Jami Moiz, and Farah Naz Baig:
Institute of Business Administration (IBA) Karachi, Pakistan
Other Reports: Are you interested in other reports for other
sectors and countries? Please find more Reports here:
www.s-ge.com/reports

DISCLAIMER
The information in this report was gathered and researched from sources believed to be reliable
and are written in good faith. S-GE and its network partners cannot be held liable for data,
which might not be complete, accurate or up-to-date; nor for data which are from internet
pages/sources on which S-GE or its network partners do not have any influence.
The information in this report does not have a legal or juridical character, unless specifically
noted.

Executive Summary
The sectors covered in the report on food processing industry of Pakistan include red chillies, dairy and mangoes.
Pakistan, with a population of 190 million people, presents a huge opportunity in terms of consumer demand.
Agriculture is the main sector and by overcoming the challenges in each sector Pakistan will be able to achieve
higher yields and improve the overall exports. It is a win-win situation for the Pakistani exports and the Swiss
SMEs and could be attained by collaborative efforts.
The first sector is that of chilli. Chilli crop is mainly based in the province of Sindh. The core challenge in chilli
sector is to achieve higher yields by producing a healthier crop. It was observed that by providing training,
materials, and/or raw materials to the farmers the quality of the crop was improved significantly when Engro
Foods, one of the largest local food processing companies, collaborated with Muslim Commercial Bank to provide
loans and assistance to the farmers. National Foods, another large local food processing company, receives better
crop by providing farmers with geo-textile sheets and DuPont covering sheets to ensure better and faster drying
cycle. Other multinational companies such as Bayer, Novartis and ICI Chemicals provide training to the farmers
regarding fungicides and pesticides. The opportunities for the Swiss companies lay in working with
farmers to improve crop health and free it from infestation. In this way, food processing mill investors
would be assured of a healthy stock for their product and will find acceptability in the European and North
American markets. The Swiss corporations may also assist food processing mills by providing links between the
mills and the global commodity buying houses. If the Pakistani mills are able to meet a set level of aflatoxins (this
could be set at 3-5 parts per billion) then they would be assured of an export market at a competitive price. Good
quality product would fetch a higher price. Much of the market for chillies is domestic because at present export
into EU has been banned due to high levels of aflatoxins. A nationwide campaign to create awareness of the
harmful effects of aflatoxins in our diets would result in increasing consumer knowledge about what is present in
the market and how it affects them. Benefits to a Swiss firm would be that they could promote their
machinery as the one providing clean, toxin-free products.
The second most important sector is the dairy sector which has a huge opportunity because the demand locally is
far greater than the supply. Pakistan being the fourth largest producer of milk in the world has the
potential to export milk as well. Overall there has been increase in demand for dairy products such as cheese,
butter and ghee. As an example, the sales of cheese in terms of value increased in 2013 to 4.2 million tons from
3.9 million tonnes in 2012. The processed milk sector is only 30% of the market and 70% is occupied by loose
milk. In terms of processed milk and value added dairy products, the market is dominated by giants like Nestl,
Engro Foods etc. to an extent of approximately 80%. In value added products sector such as yogurt, butter, and
cheese etc., the small and medium sector has a share of only 12%. . However, in order to tap opportunity at
various stages certain challenges have to be tackled with. The initial stage which is the yield per animal could be
dealt with by improving the quality of the animals through cross breeding, artificial insemination, provision of
right quality of fodder and vaccines. At this stage an opportunity exists for the international exporters
in terms of export of silos, mixing wagons, maize cutters etc. to Pakistan. They are being used by big
dairy farms and are currently being imported mostly from Turkey and Italy respectively. These opportunities
were tapped because of the efforts made by Pakistan Dairy Development Corporation (PDDC) and Small &
Medium Enterprise Development Authority (SMEDA) in educating farmers regarding proper farming practices. If
these types of trainings continue not only will the demand supply gap be minimized but these programs will also
help the investors to provide feeding and breeding solutions to the farmers. The second stage which is the milking
stage presents opportunities in terms of milking parlours. The right way forward is to pitch this product category
to the dairy associations of various areas of Pakistan who act as opinion leaders and educators and will
recommend the importance of it to the farm owners. The third stage is the storage stage which requires the
farmers to install chillers. Due to lack of proper storage facilities at the farm level there is milk wastage. Here
again educational programs by the dairy associations would help because the concept of branding and packaging
is almost negligible. Joint ventures with the dairy associations, local giants such as the Mansha Group, Dawood
Group, Lakson Group etc. would be a way forward in this regard.
The other important sector covered by this report is the mango sector. Mango is considered to be the king of
fruits and Pakistani mango varieties such as Sindhri, Chaunsa and Langra are considered to be of superior
quality. Currently approximately 3% of mangoes are processed into value added products such as pulp for use in
drinks and ice cream, canned mangoes and dried mangoes. Pakistani exports can attain an enormous jump if

FOOD PROCESSING SECTOR IN PAKISTAN

locally produced mango meets certain international export conditions. Fruits are not acceptable for exports
unless they are treated with a combination of hot water and vapour heat. Potential investment opportunities in
mango sector exist in mango pulp, chutneys, jams, dried mangoes and pickles. Unlike citrus, grading and packing
facilities do not exist for mango in the mango growing areas. There are very few mechanized grading and packing
facilities and most of those are located in Karachi. There is a potential for investment in mango grading and
packing facilities in mango growing areas of Sindh. To meet those requirements, it is important to have hot water
treatment facilities for mango; for taking care of the issue of fruit flies. There are some existing facilities in
Karachi; however, ample opportunities exist for the Swiss SMEs in this sector.

FOOD PROCESSING SECTOR IN PAKISTAN

Contents
Executive Summary ....................................................................................................................................................... 3
List of Tables .................................................................................................................................................................. 8
List of Figures ................................................................................................................................................................. 9
1. An Introduction to Pakistan ..................................................................................................................................... 10
1.1. Basic Information about Pakistan .................................................................................................................... 10
1.1.1. Population: ................................................................................................................................................ 10
1.1.2. GDP of Pakistan ........................................................................................................................................ 10
1.1.3. GNP of Pakistan ......................................................................................................................................... 11
1.1.4. Economic Indicators .................................................................................................................................. 12
1.1.5. Economy and Agriculture .......................................................................................................................... 12
1.2. Retailing Landscape In Pakistan ......................................................................................................................14
1.2.1. Retail in Pakistan An Overview .............................................................................................................. 15
1.2.2. Types of Pakistani Retailers ...................................................................................................................... 15
1.2.3. Retail Ownership Formats in Pakistan ..................................................................................................... 17
1.3. Foreign and Local Companies Present in Food Processing .............................................................................18
1.3.1. Nestl Pakistan Limited .............................................................................................................................19
1.3.2. Unilever Pakistan Foods Limited ............................................................................................................ 20
1.3.3. National Foods Limited ............................................................................................................................ 20
1.3.4. Shan Foods (Pvt) Ltd ................................................................................................................................ 20
1.4. Recommendation of Chillies, Dairy, and Mangoes ......................................................................................... 20
2. Chilli Processing and Packaging ............................................................................................................................... 21
2.1. Overview of the Chilli Sector in Pakistan ......................................................................................................... 21
2.1.1. International Demand .............................................................................................................................. 22
2.1.2. Classification of Chilli Products Produced in the Country ..................................................................... 23
2.1.3. Geographical Mapping ............................................................................................................................. 25
2.1.4. Growing Conditions and Seasons ............................................................................................................ 26
2.1.5. Estimating the Market Size ...................................................................................................................... 27
2.1.6. Chilli Trade Cycle ..................................................................................................................................... 28
2.1.7. Understanding the Supply Mechanics ..................................................................................................... 29
2.2. State of Infrastructure Prevalent in the Industry ........................................................................................... 33
2.3. Technological Up-Gradation Recommended in the Report ........................................................................... 34
2.3.1. Uses of Chillies.......................................................................................................................................... 34
2.3.2. Details of Red Chilli Producing Area and Total Production................................................................... 35
2.3.3. Possible Reasons for Declining Yield ...................................................................................................... 36
2.4. Suggested Courses of Action and Recommendations .................................................................................... 36
2.4.1. Issue one: Supply-Side Assistance Assistance to Farmers .................................................................. 36
2.4.2. Issue Two: International Demand Global Commodity Buying Houses ............................................. 37

FOOD PROCESSING SECTOR IN PAKISTAN

2.4.3. Issue Three: Domestic Demand Consumer Awareness ...................................................................... 37


2.4.4. Conclusion: Chilli Processing and Investment Opportunities for SMEs ............................................... 37
3. Dairy Industry of Pakistan ....................................................................................................................................... 38
3.1. Overview of the Dairy Sector in Pakistan ........................................................................................................ 38
3.1.1. Geographical Mapping.............................................................................................................................. 38
3.1.2. Milk Collection Pockets ............................................................................................................................ 38
3.1.3. Estimating the Market Size ...................................................................................................................... 39
3.1.4. Overview of Pakistans Milk Economy Present Scenario .................................................................... 39
3.1.5. Structure of Dairy Farming in Pakistan (Comparative to other Countries)........................................... 40
3.1.6. Milk Collection and Distribution System ................................................................................................ 42
3.1.7. Processed Milk Industry (Business Environment and Constraints) ...................................................... 44
3.1.8. Season-ability ........................................................................................................................................... 44
3.1.9. Milk Pricing & Profitability in a Competitive World ............................................................................... 44
3.2. An Overview to Potential for Processing Following Items: ............................................................................ 52
3.2.1. Milk in Powder ......................................................................................................................................... 52
3.2.2. Yogurt ....................................................................................................................................................... 53
3.2.3. Butter ........................................................................................................................................................ 53
3.2.4. Cheese ....................................................................................................................................................... 54
3.3. Availability of UHT and Pasteurized Milk ...................................................................................................... 56
3.4. Quality of Shelf Life of Milk ..............................................................................................................................57
3.5. Suggested Courses of Action and Recommendation .......................................................................................57
4. Mango Industry in Pakistan .................................................................................................................................... 59
4.1. Overview of the Mango Farming Sector in Pakistan ....................................................................................... 59
4.1.1. Global Mango Map (Geography) .............................................................................................................. 59
4.1.2. Global Mango Production (Area and Volume) ........................................................................................ 60
4.1.3. Mango in Pakistan .................................................................................................................................... 62
4.1.4. Mango Varieties in Pakistan .................................................................................................................... 62
4.1.5. Cultivation Conditions ............................................................................................................................. 62
4.1.6. Total Area Cultivated, Production and Yield per Hectre ........................................................................ 63
4.1.7. Mango Distribution Channel.................................................................................................................... 64
4.1.8. Mango Value Chain System ..................................................................................................................... 66
4.2. Mango Export Requirements .......................................................................................................................... 66
4.3. Potential Investment Projects in Mango Sector of Pakistan .......................................................................... 66
4.3.1. Mango Pulping Facility ............................................................................................................................ 67
4.3.2. Dried Mango Products ............................................................................................................................. 68
4.3.3. Fresh Mango Grading and Packing Facility ............................................................................................ 68
4.3.4. Mango Chutney & Pickles ........................................................................................................................ 68
4.3.5. Bottled Mango Juice ................................................................................................................................ 68
4.3.6. Mango Hot Water Treatment .................................................................................................................. 68
4.3.7. Mango Vapour Heat Treatment............................................................................................................... 69
4.3.8. Irradiation ................................................................................................................................................ 69
4.4. Suggested Courses of Actions and Recommendations ................................................................................... 69

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5. Quotes from the Experts .......................................................................................................................................... 70


5.1. Chilli .................................................................................................................................................................. 70
5.2. Dairy ................................................................................................................................................................. 70
5.3. Mangoes ............................................................................................................................................................. 71
Bibliography ................................................................................................................................................................. 72

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List of Tables
Table 1: Key Economic Indicators ................................................................................................................................ 12
Table 2: Top Agricultural Products of Pakistan in 2012 .............................................................................................. 13
Table 3: Top Agricultural Exports of Pakistan in 2011 ................................................................................................14
Table 4: Company Shares of Packaged Food: % Value 2009-2013 .............................................................................18
Table 5: Brand Shares of Meal Solutions: % Value 2010-2013 ...................................................................................19
Table 6: Top 8 supplying markets for the product: 0904 Pepper, peppers and capsicum, imported by Pakistan in
2012 .............................................................................................................................................................................. 22
Table 7: Global Increase in Export of Pepper: Top 10 Exporting Countries ............................................................. 22
Table 8: Top 10 importing markets for the product: red chilli (whole) exported by Pakistan, in US$ .................... 23
Table 9: Top 10 importing markets for a product: red chilli (powder) exported by Pakistan, in US$ ..................... 23
Table 10: Varieties of Pepper ....................................................................................................................................... 24
Table 11: Various forms of pepper used ...................................................................................................................... 24
Table 12: Food Items that Include Chilli as Ingredient: 2008 - 2013 volume sales .................................................. 25
Table 13: Area-wise Cultivation of Pepper .................................................................................................................. 25
Table 14: Yearly Cultivated Area and Yield ................................................................................................................. 26
Table 15: International Market: Five-Year World Exports of Pepper and its Product Forms, and a Comparison of
Pakistan Exports; US $ ................................................................................................................................................ 27
Table 16: Domestic Market: Estimation of Domestic Demand up to 2020 ............................................................... 28
Table 17: Milk Manufacturers in Pakistan .................................................................................................................. 47
Table 18: List of Supplying Markets for a Product Imported by Pakistan: Product: 843420 Dairy Machinery ...... 49
Table 19: List of Supplying Markets for a Product Imported by Pakistan: Product: 84342000 Milking Machines
and Dairy Machinery Dairy Machinery ................................................................................................................... 49
Table 20: List of Supplying Markets for a Product Imported by Pakistan: Product: 84349000 Milking Machines
and Dairy Machinery Parts....................................................................................................................................... 50
Table 21: Livestock Semen in Pakistan - Market and Demand Sizing ........................................................................ 51
Table 22: Cow Vaccination Routine ............................................................................................................................ 52
Table 23: Company Shares of Major Yoghurt Producers ........................................................................................... 53
Table 24: Production of Butter and Fat during 2008 - 2013 ..................................................................................... 53
Table 25: Sales of Cheese by Category: 2008 - 2013 .................................................................................................. 54
Table 26: Dairy Processing Company Shares: 2008 - 2013 ....................................................................................... 55
Table 27: Dairy Brand Shares: 2008 - 2013 ................................................................................................................ 56
Table 28: Top Mango Producers ................................................................................................................................. 60
Table 29: Top Mango Exporters in 2011 ..................................................................................................................... 62
Table 30: Mango Varieties Cultivated in Pakistan...................................................................................................... 62
Table 31: Area and Production of Mangoes ................................................................................................................ 63
Table 32: Quarantine Requirement per Importing Country ...................................................................................... 66
Table 33: List of Mango Pulping Manufacturers ........................................................................................................ 68

FOOD PROCESSING SECTOR IN PAKISTAN

List of Figures
Figure 1: Population Pyramid of Pakistan ................................................................................................................... 10
Figure 2: GDP of Pakistan from 2004 to 2013 ........................................................................................................... 11
Figure 3: GNP of Pakistan from Jan 2004 to Jan 2014 ............................................................................................... 11
Figure 4: Retail Ownership Formats of Pakistan ................................................................................................... 17
Figure 5: Volume of, and Growth in, Retail Sales ..................................................................................................18
Figure 6: World Chilli Production ................................................................................................................................ 21
Figure 7: Chilli Growing by Region ............................................................................................................................. 26
Figure 8: The Process of Cultivation ........................................................................................................................... 29
Figure 9: Value Chain Progression of Chilli ................................................................................................................ 30
Figure 10: Total Chilli (Dry) Production per Year ...................................................................................................... 36
Figure 11: Livestock Population ................................................................................................................................... 38
Figure 12: Milk Collection Pockets .............................................................................................................................. 39
Figure 13: Provincial Share in National Milk Production ....................................................................................41
Figure 14: The Indian Dairy Industry...........................................................................................................................41
Figure 15: The Producer-Processor Gap and Source Volumetric Sharing ................................................................. 42
Figure 16: Milk Collection and Distribution System .................................................................................................. 43
Figure 17: Milk Processing ........................................................................................................................................... 45
Figure 18: Milk Forms Available in Pakistan ...............................................................................................................57
Figure 19: World Mango Production ........................................................................................................................... 59
Figure 20: Mango Production per Hectre ................................................................................................................... 60
Figure 21: World Mango Exports, US $, 2002 - 2011 ..................................................................................................61
Figure 22: Pakistan's Mango Exports, US $, 2002 - 2011 ...........................................................................................61
Figure 23: Mango Production in tonnes: 2002 - 2012 ............................................................................................... 63
Figure 24: A Typical Mango Distribution Channel ..................................................................................................... 64
Figure 25: Domestic and Export Flowchart for Mangoes .......................................................................................... 65
Figure 26: Value Chain Analysis of Mangoes .............................................................................................................. 66
Figure 27: Mango Pulping Process Flowchart ............................................................................................................ 67

FOOD PROCESSING SECTOR IN PAKISTAN

1. An Introduction to Pakistan
The Indus Valley civilization, one of the oldest in the world and dating back at least 5,000 years, was spread over much of what
is presently Pakistan. Being the 36th largest country1, Pakistans geographical location and natural resources have always kept
the world interested in this country of 196 million2. It is bordered by India in the east, China in the northeast, and Afghanistan
in the north and northwest, the Islamic Republic of Iran in the southwest and the Arabian Sea to the south. Pakistan is divided
into four provinces, namely the Punjab, Sindh, Khyber Pakhtunkhwa and Balochistan.

1.1. BASIC INFORMATION ABOUT PAKISTAN


1.1.1. Population:
Population of Pakistan is estimated at 196,174,380 3 (July 2014, Est, CIA), which makes it the seventh most populated country
of the world. The median age is 22.6 years, which makes a strong case of development potential due to high proportion of
youth in the population pyramid illustrated below:
Figure 1: Population Pyramid of Pakistan

Source: CIA

1.1.2. GDP of Pakistan


The Gross Domestic Product (GDP) of Pakistan was worth 231 billion US dollars in 2012 (2013 236.6billion US$)4. This GDP
value amounts to 0.37% of the world economy. GDP in Pakistan averaged 52.29 USD Billion from 1960 until 2012, reaching an
all-time high of 231 USD Billion in 2012 and a record low of 3.70 USD Billion in 1960. GDP in Pakistan is reported by the
World Bank Group and it has not yet been updated for 2013.
1 Source: The World Factbook, CIA
2

Ibid
Ibid
4 Source: World Bank Group
3

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10

Figure 2: GDP of Pakistan from 2004 to 2013

Source: www.tradingeconomics.com | World Bank Group

1.1.3. GNP of Pakistan


The Gross National Product in Pakistan experienced a rise from 9,785,335 PKR Million (97,853.35 US $ Million) in 2012 5 to
10,379,262 PKR Million (103,792.62 US $ Millions in 2013. The average Gross National Product in Pakistan from 2000 until
2013 was 6,068,748.47 PKR Million (60,687.48 US $ Million), and it reached an all-time high of 10,379,262 PKR Million
(103,792.62 US $ Million) in 2013 and a record low of 3,778,155 PKR Million (37,781.55 US $ Million) in 2000.
Figure 3: GNP of Pakistan from Jan 2004 to Jan 2014

Source: www.tradingeconomics.com | State Bank of Pakistan

Source: State Bank of Pakistan

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1.1.4. Economic Indicators


For Fiscal Year 2013-14, key economic indicators are:

Table 1: Key Economic Indicators

National Accounts
Gross Domestic Product (Current
Prices)
Agriculture

(Rs. Million)
25,401,895
6,051,015

National Accounts
Gross Domestic Product (Constant
\-1
Prices)
Agriculture

Crops

2,640,485

Crops

Livestock

3,184,843

Livestock

(Rs.
Million)
10,713,053
2,152,313
861,151
1,203,451

Fishing

79,185

Fishing

43,758

Forestry

146,502

Forestry

43,953

Industry
Manufacturing
Mining and Quarrying
Construction
Electricity generation & distribution
and Gas Distribution
Services

5,126,288
3,387,188
766,407
494,316
478,377
12,907,802

Industry
Manufacturing
Mining and Quarrying
Construction
Electricity generation & distribution and
Gas Distribution
Services

2,129,075
1,382,106
307,646
244,506
194,817
5,945,276

Wholesale & Retail Trade

4,875,708

Wholesale & Retail Trade

1,899,067

Transport Storage & Communication

2,415,576

Transport Storage & Communication

1,328,754

Finance and Insurance

606,280

Finance and Insurance

319,968

Housing Services (OD)

1,228,126

Housing Services (OD)

691,149

General Government Services

1,651,080

General Government Services

719,109

Other Private Services

2,131,032

Other Private Services

987,229

Employment
Labour Force Participation Rate
Labour Force Unemployment Rate
Per Capita Income

32.1
6
143,808

1.1.5. Economy and Agriculture


In 2013, the total population economically active in agriculture was an estimated 24.0 million, which was 45% of the
economically active population. GDP was US$ 236.5 billion, of which agriculture accounted for 25.3%.
Men and women play distinct and separate roles in agriculture and women are actively involved in farming. They are largely
responsible for taking care of livestock production and maintenance, picking cotton, chillies and other vegetables,
transplanting rice, harvesting and threshing other crops. Top agricultural products in Pakistan (2012) are:

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Table 2: Top Agricultural Products of Pakistan in 2012

Source: FAO

Food exports account for 13.2% of total exports, or US$2 050 million, contributing 26.1% to overall export growth. Rice,
accounting for 60% of food exports, has registered an impressive growth of 28.5%. Pakistan clearly benefited from the
unprecedented rise in the international price of rice. Since Pakistan is a net exporter of rice, it is likely to benefit from the
elevated international price of rice in coming years. This will encourage farmers in Pakistan to grow more rice and benefit from
the higher prices on the international market. The top export goods (agricultural, 2011) are:

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Table 3: Top Agricultural Exports of Pakistan in 2011

Source: FAO

1.2. RETAILING LANDSCAPE IN PAKISTAN6


Retailing is the set of business activities that adds value to the products and services sold to consumers for their personal or
family use. Often people think of retailing only as the sale of products in stores, but retailing also involves the sale of services
such as overnight lodging in a motel, a doctors exam, a haircut, a DVD rental, or a home-delivered pizza. Not all retailing is
done in stores. Examples of non-store retailing in Pakistan include Internet sales of clothing on Daraz.pk, the direct sales of
cosmetics by Color Studio at malls, DVD rentals at neighbourhood stores.

6 Taken from various sources


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1.2.1. Retail in Pakistan An Overview


The Retail landscape in Pakistan, with a population of 196 million, is constantly evolving and transforming in its dynamism, as
consumer lifestyles keep changing with growing consumerism in the country. The change is more apparent in the urban
centres where the hypermarkets or supercenters are heavily concentrated in metropolitan cities: Lahore and Karachi. The retail
sector has an immense contribution in the overall economic activity of the country. According to statistics from the Pakistan
Bureau of Statistics for the years 2011-12, the retail sector is worth $4.2 Billion, which represents around 18% of GDP. There
are approximately 2 million retail outlets in the country. Out of these retail outlets, nearly 800,000 outlets represent FMCG
channels including 'kiryana' stores (mom & pop), 'pan' shops (kiosks selling betel leaves and cigarettes), department stores,
medical-cum-general stores and the like. There has been a massive growth of 130 per cent in private consumption in the last
five years (2007-12), even though the GDP growth rate during this period was sluggish.
Pakistans retail sector has embarked on a growth trajectory that can predict the industry becoming a major hub for growing
businesses. Though retailers have existed in Pakistan for a long time, the induction of global brands and outlets has really kickstarted the sector, forcing local retailers to expand their boundaries to compete with their larger international competitors.
With a rise in disposable income, especially in the middle class, this sector is now flourishing even outside of Pakistans mega
cities. Pakistan is an emerging market where the size of the retail market is estimated around $42 billion, growing faster than
the economy at a rate of 5.3%. The sector could possibly be a huge job creator, and attracting foreign investment into Pakistan,
attracting global brands to the local market. All that is needed is skilled labour, education, training and a retail body to
promote the sector and engage the government - joining hands with stakeholders to create a platform to address local issues
and to present Pakistan at global platforms in future.
A report by Deloitte and PlanetRetail included Pakistan in one of the top ten emerging economies with huge potential for
growth of retail sector on the basis of first mover advantage by one or few retail players in the market, product offer &
availability, financial credit, regional expansion and multi-format strategy7. Another report by the Express Tribune suggests
that the retail sector in Pakistan is booming because of women whose participation in the formal labour force has gone up from
16.3% in fiscal year 2000 to just over 24.4% in 2011.
1.2.2. Types of Pakistani Retailers
The sector in Pakistan can be broadly classified as;
a.

Local trade such as Aghas, Naheed, Imtiaz, Best way, HKB, EBCO etc. Further it is to point out here that Imtiaz store
has started delivery to households.

b.

Traditional trade such as Kiryana stores, neighbourhood stores, Jodia Bazaar etc. The traditional segment is largest in
terms of trade.

c.

International Modern Trade (IMT) such as Makro, Metro, Carrefour (Hyperstar).

Further classification of local trade, traditional trade, and international modern trade is given below:

Departmental Stores: offer a wide range of products to the end-users under one roof. Consumers can get almost all the
products they aspire to shop at one place only. Departmental stores provide a wide range of options to the consumers and
thus fulfill all their shopping needs. Their merchandise may include: Electronic Appliances, Apparel, Jewellery, Toiletries,
Cosmetics, Footwear, Sportswear, Toys, Books, CDs, DVDs. Example: Chase & ChenOne.

Discount Stores: offer a huge range of products to the end-users but at a discounted rate. They generally offer a limited
range and the quality in certain cases might be a little inferior as compared to that of department stores. Example: Chase
Up.

Supermarkets: A retail store, which generally sells food products and household items, properly placed and arranged in
specific departments. It is an advanced form of the small grocery stores and caters to the household needs of the
consumer. It serves as a one-stop shopping destination for customers to buy merchandise like bakery products, cereals,

'Hidden Heroes - The Next Generation of Retail Markets' (2011) published jointly by Deloitte and PlanetRetail

FOOD PROCESSING SECTOR IN PAKISTAN

15

meat, fish, medicines, bread, vegetables, fruits, soft drinks, frozen food and canned food/juices. Example: Imtiaz, Naheed,
Farids, Aghas, & EBCO.

Warehouse Stores: A retail format which sells limited stock in bulk at a discounted rate. These stores do not bother
much about the interiors of the store and the products are not properly displayed. Example: Factory Outlets of Levi, Fifth
Avenue.

Mom and Pop Store (Kiryana Stores): These are the small stores run by individuals in the nearby
locality/neighbourhood to cater to daily needs of the consumers staying in the vicinity. They offer selected items and are
not at all organized. The size of the store would not be very big and depends on the land available to the owner. They do
not offer high-end products and they would carry merchandise like: eggs, bread, stationery, toys, cigarettes, cereals,
pulses, milk and medicines. About two third of FMCG outlets consist of neighbourhood 'kiryana' stores, commonly called
general stores, which sell multiple brand grocery items of daily use. Such outlets are generally owned by a single individual
and managed by him alone or with some help from his family members. The bulk of FMCG business comes from these
'kiryana' stores due to large numbers, location (proximity to shoppers), convenience and long business hours.

Specialty Stores: These specialize in a particular product and would not sell anything else apart from the specific range.
Specialty stores sell only selective items of one particular brand to the consumers and primarily focus on high customer
satisfaction. Example: Khaadi, Junaid Jamshed.

Convenience stores: Examples include Shell Select and stores at Pakistan State Oil (PSO) stations that offer customers
easy access and convenience an easy stop-and-shop solution while you wait to get fuel for your car.

E Retailers: Customers can now enjoy shopping while sitting at home. They can place their order through internet, pay
with the help of debit or credit cards/or avail the Cash-On-Delivery service and the products are delivered at their homes
only. This kind of shopping is convenient for those who have a hectic schedule and are reluctant to go to retail outlets.
Examples: Daraz, Kaymu, Homeshopping, Ishopping, Shophive, Symbios, Azmalo, TCS Connect, VMart, e4u, ShopnShop,
OLX and ShopDaily

Other retail channels: include 'pan (Beatle Leaves) shops, petro marts, department stores, medical-cum-general
stores, book shops, road side eateries and other specialty shops. Grocery stores include Meat One and K & N (specializing
in meat and chicken respectively) and other neighbourhood stores that offer convenience and availability of grocery and
dairy items.

Multi format retailing: With consumer business taking a more important role in driving economic growth, in the
next five years the retail industry will come into an era which opportunities and challenges coexist. Several changes
will take place, while industry players are trying to establish their core competence in the market with diverse
consumer tastes and intense competition. This will give rise to an era of multi-format retailing an inevitable future
trend of the industry. Consumer needs are becoming more individualized and diverse along with the rising middle
class in Pakistan, driven by the notable increase in household income. Consumers are less price sensitive compared to
previous times, while they have become more aware of the brands and cost-effectiveness of the products. Reasons for
implementing multi-format retailing strategy would include: meeting the diversified needs of consumers, reducing
competition pressure and diversifying operating risks and achieving differentiated competition.

Private label development: Retailers have an advantage over national brands. They own the canvas where
consumers shop. If they listen, they can lead the shoppers to a better experience and lay the foundation to build a true
store brand! Price is key: it is the fundamental reason why consumers buy and choose a private brand. Otherwise,
they would probably go with their usual, favourite brand. Originally, private brands packaging designs were poor,
which rather than reflecting lower prices actually made consumers suspicious about product quality.

The economic downturn prompted many consumers to try private label goods for the first time, and once they did so, they
discovered that not only was the pricing right, but the quality of the goods met or exceeded expectations. Regardless of the pace
of economic recovery, retailers continue to have a tremendous opportunity to convert shoppers to private label for the long

FOOD PROCESSING SECTOR IN PAKISTAN

16

term. Customers no longer view private label/store label as a trade-down and, more often, see private label as just another
branded option8. Example: Poonam Rice of Imtiaz and Metros Own Brands.
Traditional grocery retailers continue to dominate retailing: This is due to the extremely high number of retail
outlets in the country, with hundreds of thousands of small independent grocery retailers in operation. These traditional
grocery retailers performed well during the review period in spite of their old-fashioned facilities and basic approach to
business, which is in fact strength for traditional grocery retailers due the deep roots of these retailers in the social fabric and
financial mind-set of Pakistani people. Modern grocery retailers, meanwhile, also experienced healthy growth during the
forecast period as the channel moved into less densely populated areas. Modern grocery retailers offer a wide range of brands
at competitive prices in order to attract both affluent and middle-class Pakistani consumers.
Independent retailers aggressively compete with modern grocery retailers: Pakistans modern grocery retailers
such as Hyperstar, Makro, Metro and Imtiaz represent a potential threat to independent players as due to their wide ranges of
grocery and non-grocery products at attractive prices. In order to compete with these increasingly popular outlets, local rivals
have begun to engage in aggressive advertising campaigns using both electronic and print media. Retailers such as Gul Ahmed,
Junaid Jamshed and Sana Safinaz, among others, also use billboards in major cities such as Karachi, Lahore and Islamabad,
also extending their marketing campaigns to smaller cities such as Gujranwala, Faisalabad, Multan and Rahim yar Khan.
Hypermarkets value sales growth rate outgrow traditional grocery retailers: In terms of actual sales, traditional
grocery retailers continued to dominate grocery retailing in 2013. However, value growth in modern grocery retailers outpaced
growth in traditional grocery retailers over the entire review period due to rising income levels, a sense of modernization, the
need for greater convenience in terms of one-stop shopping and heavy marketing campaigns by Pakistans leading
hypermarkets.

1.2.3. Retail Ownership Formats in Pakistan


The choice of type of retail business depends on the nature of the retailers as well as his preferred mode of operation. Some of
the popular retail ownership formats in Pakistan are shown in the following figures along with the projected growth trends in
the retail sector:
Figure 4: Retail Ownership Formats of Pakistan

Source: The Nielsen Company, Global Online Survey

FOOD PROCESSING SECTOR IN PAKISTAN

17

Figure 5: Volume of, and Growth in, Retail Sales

Source: Central Bank of Pakistan

1.3. FOREIGN AND LOCAL COMPANIES PRESENT IN FOOD PROCESSING


Table 4: Company Shares of Packaged Food: % Value 2009-2013

Company Names
Nestl SA
Engro Foods (Pvt) Ltd
Westbury Group
FS Rice Ltd
Mondelez International Inc
English Biscuit Manufacturers (Pvt) Ltd
Wazir Ali Industries Ltd
Haleeb Foods (Pvt) Ltd
Habib Oil Mills (Pvt) Ltd
Ismail Industries Ltd
Unilever Group
Kohinoor Foods Ltd
Reem Rice Mills (Pvt) Ltd
Zahoor Industries (Pvt) Ltd
KS Sulemanji Esmailji & Sons (Pvt) Ltd
Agro Processors & Atmospheric Gases (Pvt) Ltd
Hilal Confectionery (Pvt) Ltd
Millac Foods (Pvt) Ltd
Sultan JSC
Shakarganj Food Products Ltd
Golden Harvest Health Foods Co
Noon Pakistan Ltd
Asian Food Industries (Pvt) Ltd
Wali Oil Mills (Pvt) Ltd
Agro Industries (Pvt) Ltd
PepsiCo Inc
Mars Inc
Kidco Manufacturers
Guard Agricultural Research & Services (Pvt) Ltd
Tripple-Em (Pvt) Ltd
Artisanal
Others
Total
Source: Euromonitor (2014)
FOOD PROCESSING SECTOR IN PAKISTAN

18

2009
10.49
5.66
5.26
4.89
3.72
3.00
3.07
3.54
1.99
2.61
1.51
1.60
1.49
1.66
1.66
1.20
2.02
1.26
0.39
0.66
0.32
0.58
0.76
0.74
0.28
0.63
0.50
0.32
0.65
7.18
30.37
100.00

% Retail Value rsp


2010
2011
2012
11.14
11.16
10.99
6.51
7.79
8.62
5.34
5.37
5.41
4.72
4.60
4.88
4.65
4.10
4.28
4.31
3.51
4.01
4.21
3.65
3.96
4.05
3.51
3.41
3.30
2.04
1.99
2.14
2.40
2.21
2.12
1.48
1.47
1.59
1.52
1.45
1.52
1.58
1.60
1.63
1.54
1.40
1.33
1.53
1.43
1.33
1.20
1.18
1.17
1.82
1.53
1.26
1.10
0.95
0.89
0.52
0.63
0.83
0.69
0.74
0.81
0.41
0.58
0.74
0.64
0.63
0.65
0.72
0.67
0.63
0.71
0.66
0.61
0.29
0.40
0.52
0.60
0.57
0.55
0.50
0.52
0.54
0.34
0.37
0.48
0.60
0.56
0.52
7.46
7.58
7.66
27.82
26.28
20.07
100.00 100.00 100.00

2013
11.28
9.14
5.30
4.87
4.76
4.31
4.29
4.03
3.23
2.06
1.98
1.61
1.61
1.52
1.38
1.22
1.20
1.17
0.95
0.87
0.85
0.77
0.62
0.61
0.59
0.55
0.54
0.52
0.51
0.51
7.65
19.51
100.00

With a growing population and rapidly developing middle class, Pakistan is an ideal target market for both multinational and
local food companies. The major international players are Nestl and Unilever and they have been operating here for decades,
enjoying sizable market share in the sector. Across the last three decades, local national food companies have emerged. The
largest ones are National Foods and Shan Foods in spices and condiments. Engro Foods in dairy.

Table 5: Brand Shares of Meal Solutions: % Value 2010-2013

Brand
National Foods
Shan
Mitchell's
Knorr
K&N's
Maggi
Euro Food
English Mayonnaise
Heinz
Young's
Pak Food
Mon Salwa
Menu
Del Monte
Dawn
PK Meat's
Seasons
Del Monte
JFC
English Mustard
Luna
Khanam
Maling
American Garden
Ahmed
Campbell's
Fish Patty
Syma's
King's
Tulip
Others
Total

Company
National Foods Ltd
Shahi Foods Pvt Ltd
Mitchell's Fruit Farms Ltd
Unilever Pakistan Ltd
K&N's Foods (Pvt) Ltd
Nestl Pakistan Ltd
Euro Food Industries (Pvt) Ltd
Premium Foods Industries
Heinz Co, HJ
Young's Food Products Ltd
Pak Food Processors
Quick Food Industries (Pvt) Ltd
Seasons Foods Pvt Ltd
Campbell Soup Co
Golden Harvest Foods Pvt Ltd
PK Meat & Food Co Pvt Ltd
Quantum Foods Inc
Del Monte Pacific Ltd
Jfc Enterprise Co Ltd
Premium Foods Industries
National Food Industries Co Ltd
Khanam Foods
Shanghai Maling Food Co Ltd
American Garden Products Inc
Ahmed Food Products (Pvt) Ltd
Campbell Soup Co
Gaba Seafood
Syma Food Products
Premium Foods Industries
Tulip Food Co
Others
Total

% retail value rsp


2010
2011
2012
2013
17.23 17.32 18.31 18.68
8.88 10.23 10.75 11.25
11.91 11.36 10.24
9.79
8.33
8.37
8.12
7.97
6.50
6.67
6.84
6.76
6.16
6.18
6.53
6.65
3.87
3.41
2.87
2.61
1.91
1.75
2.22
2.45
1.88
1.92
2.02
2.09
2.04
2.04
2.05
2.07
2.58
2.41
1.55
1.60
1.86
1.71
1.42
1.39
0.70
0.87
1.27
1.32
1.47
1.40
1.30
1.22
0.27
0.48
0.71
0.75
0.34
0.69
0.38
0.41
0.46
0.53
0.42
0.39
0.36
0.35
0.28
0.29
0.31
0.32
0.51
0.55
0.40
0.31
0.29
0.28
0.27
0.26
0.42
0.34
0.27
0.23
0.17
0.16
0.16
0.15
0.18
0.16
0.15
0.14
0.07
0.09
0.10
0.14
0.19
0.17
0.15
0.13
0.02
0.02
0.13
0.13
0.15
0.13
0.11
0.07
0.20
0.14
0.11
0.07
0.13
0.12
0.07
0.02
20.98 20.63 20.40 19.83
100.00 100.00 100.00 100.00

Source: Euromonitor (2014)

1.3.1. Nestl Pakistan Limited


Nestl Pakistan has a strong commitment to excellence in product safety and quality and to providing value to Pakistani
consumers. It is the leading Nutrition, Health and Wellness Company in Pakistan. Being socially responsible, they have always
focused on environment friendly operations and ethical business practices, and show their responsibility towards the
communities.
Nestl in Pakistan started operating in 1988 under a joint venture with Milk Pak ltd and took over management in 1992. Nestl
Pakistan today has become a leading Food & Beverages Company in Pakistan with key focus on Nutrition, Health and
Wellness. Its distribution network reaches the remotest of locations throughout Pakistan to serve consumers.

FOOD PROCESSING SECTOR IN PAKISTAN

19

1.3.2. Unilever Pakistan Foods Limited


In Pakistan, Unilever made its debut in 1948, and today it is one of the most prominent multinationals in the country,
operating though two affiliated companies viz. Unilever Pakistan and Unilever Pakistan Foods. The two public listed limited
companies have 5 wholly owned and 7 third party manufacturing sites across Pakistan and employ around 1,500 people on
their payroll and many thousands indirectly.
Committed to meet the growing aspirations of the consumers, Unilever Pakistan Foods Ltd. has consistently provided high
quality, branded products such as Energile, Knorr and Rafhan. On 24th April, 2007 Rafhan Best Foods Limited was renamed
Unilever Pakistan Foods Limited, with world class food products for everyday needs. Unilever has a wide reach and its
distribution network reaches remote regions within the country. With a wide range of offerings, including low unit priced
packs, Unilever is able to address all segments of the socio-economic pyramid.
1.3.3. National Foods Limited
National Foods Limited is a Pakistani company founded in 1970, which started out as a spice company. In 1988, National
Foods became the certified vendor of McCormick, USA. In the same year, National Foods, then a Private Limited Company,
was converted into a Public Limited, listed in all the three stock exchanges of Pakistan. With a range of over 110 products in 13
major categories, National Foods is one of the largest food companies in Pakistan with a global presence catering to the ethnic
needs of foreign markets.
1.3.4. Shan Foods (Pvt) Ltd
Shan Foods (Pvt) Ltd. is a Pakistani producer of spice mixes used in Pakistani cuisine and other dishes of South Asia. The
company's products are exported to many nations, and the popularity of such products is due to the reduction in the time
required to make traditional meals. Shan Foods began as a cottage industry in 1981 by Sikandar Sultan, the managing director.
A few years later it started exporting to Europe, United Kingdom, United States and the Middle East. Within a decade, Shan
was exporting to 25 countries. In 2000, Shan increased its penetration in the central and northern regions of Pakistan, and
officially launched in India in 2004. Shan exports to 65 countries making it Pakistan's largest exporter of packaged spice, food,
and rice mixes.

1.4. RECOMMENDATION OF CHILLIES, DAIRY, AND MANGOES


Pakistan is one of the top five dairy producers of the world, with an export value of US$ 55 million, it remains to be the largest
opportunity for Swiss businesses to explore. Mangoes of the country are famous all over the world for its taste and aroma. The
annual production of 2 million tons does not justify the meagre export value of US$ 44 million; hence it renders opportunity
for fresh fruit processing and pulping. Chilli is concentrated in cultivating clusters mainly located in Sindh province and has
the highest profitability potential. At present, Pakistani Chilli is banned in EU and other countries due to higher percentage of
Aflatoxin, which can be reduced to acceptable export values by hygienic picking, processing and packaging, all possible through
automation.

FOOD PROCESSING SECTOR IN PAKISTAN

20

2. Chilli Processing and Packaging


Chillies may be called by various names such as capsicum, pepper, and chillie, chile, and constitute an important
spice of the eastern meal. Not only do they add flavour to food and have nutritional value but they also contain
medicinal properties that enable them to be used in antibiotics, ayurvedic medicines and other alternative forms
of treatments.

2.1. OVERVIEW OF THE CHILLI SECTOR IN PAKISTAN


The Pakistani red chillies belong to the species Capsicum Annum L and Capsicum Frutescene L. Pakistan is one
of the top five producers of red chilli peppers in the world (SBI, 2012). As such, its potential for meeting local and
international demand for chillies is high.

Figure 6: World Chilli Production

Source: FAO

However, Pakistan does not make it to the top 10 chilli exporting countries of the world and imports some of the
chilli (see Table 4) that is processed and packaged in Pakistan for both local consumption as well as exports.
Additionally, although Pakistan is one of the top five producers, its level of production is much below that of the
leading producer, India. This is disappointing, considering the fact that India and Pakistan share similar terrains
and climatic conditions that make it possible for the two countries to cultivate certain similar products such as
cotton and chillies. The difference in production levels is attributed not only to the difference in area of
cultivation due to Indias larger geographic spread, but also to the fact that India has realized the potential in
cultivation of this cash crop and is taking measures to ensure a more efficient yield. A clear opportunity exists for
Pakistan to expand its production of chillies and ensure systems of cultivating, nurturing, harvesting, processing,
and packing of the product that will result in higher per capita yield and eventual benefits to the farmers.

FOOD PROCESSING SECTOR IN PAKISTAN

21

Table 6: Top 8 supplying markets for the product: 0904 Pepper, peppers and capsicum, imported by Pakistan in 2012

Trade Indicators
Imported
value 2012
(USD
thousand)

Exporters

World

Trade
balance
2012 (USD
thousand)

16,755 -19,199,586

Imported
Share in
growth in
Pakistan's
value
imports
between
(%)
2008-2012
(%, p.a.)

Imported
growth in
value
between
2011-2012
(%, p.a.)

100

Ranking of
partner
countries
in world
exports

Share of
partner
countries in
world
exports (%)
100

India

8,285

-4,337,926

16.5

22

25

1.1

Viet Nam

4,887

-4,067,622

15.3

13

11.3

Sri Lanka

1,618

-3,827,891

9.8

-4

-8

16

Brazil

966

-4,126,207

9.6

12

37

0.6

Indonesia

420

-1,898,505

4.9

10

-22

23

1.3

Malaysia

221

-1,684,092

4.3

4.4

United
Republic of
Tanzania

121

-1,224,591

3.6

-2

18

1.6

73

2,158,867

3.4

-6

-14

8.6

China
Source: Trade Map (2013)

2.1.1. International Demand


Chilli demand includes both direct demand and derived demand. As such, world demand for chilli is expected to
grow at 30% annually, with usage of chilli as part of other food processing. Table 5 shows a rise in world exports
of pepper over a period of five years.
Table 7: Global Increase in Export of Pepper: Top 10 Exporting Countries

Exporters

Exported value in 2008

World

2009

2010

2011

2012

2,146,580

1,941,084

2,291,079

3,285,920

3,403,018

India

349,914

329,364

426,639

676,881

676,572

Viet Nam

312,117

349,368

422,626

733,918

624,353

Indonesia

186,672

142,126

252,085

223,405

435,257

China

273,804

222,050

215,093

317,729

287,210

Brazil

128,142

117,903

114,098

198,921

199,478

Spain

88,383

109,361

93,941

122,734

140,645

Netherlands

59,574

51,468

54,985

102,181

136,348

Germany

97,543

71,743

81,561

118,842

118,301

136,229

102,891

96,956

131,886

111,610

56,095

54,679

72,413

101,247

85,863

Peru
Malaysia
Source: Trade Map (2013)

The annual exports of countries shown above exhibit a flat to upward trend, making chilli a promising venture.
India is the largest exporter of chillies while the United States of America is the largest importer. The largest
producers of red chillies are India, China, and Mexico.
Although Pakistan is the 5th largest producer of chillies in the world, it ranks 31st in pepper exporting countries
and its exports amount to 0.17% of world exports (Trade Map, 2013). Below are the top 10 markets for Pakistans
red chillies, whole (Table 6) and ground (Table 7), for the years 2008-2012 (Trade Map, 2013).

FOOD PROCESSING SECTOR IN PAKISTAN

22

Table 8: Top 10 importing markets for the product: red chilli (whole) exported by Pakistan, in US$

Importers
World

Exported
Exported
Exported
Exported
Exported
value in 2008 value in 2009 value in 2010 value in 2011 value in 2012
2,805

3,798

3,439

1,934

713

United Arab Emirates

704

993

1,447

821

305

Saudi Arabia

799

835

719

659

213

Mexico

324

483

649

87

73

Pakistan

147

56

52

111

70

10

17

Canada

33

32

16

Kuwait

57

96

23

38

20

United States of America

26

133

40

33

Qatar

41

42

29

55

Taipei, Chinese

Australia

Source: Trade Map (2013)

This low trend in export and Pakistans standing as the 31st exporter is disappointing, given its production
capacity. The shortfall in exports is a result of inefficiencies in harvesting and processing. Additionally, a decline
in export figures, as depicted in Tables 6 above and 7 below, may be attributed to contamination by aflatoxin in
red chillies, which is a fungal disease resulting from the presence of moisture due to ineffective drying, processing
and storing facilities. These factors are discussed in more detail in later sections.

Table 9: Top 10 importing markets for a product: red chilli (powder) exported by Pakistan, in US$

Importers

Exported
Exported
Exported
Exported
Exported
value in 2008 value in 2009 value in 2010 value in 2011 value in 2012

World

2,085

1,647

1,695

2,155

1,006

Saudi Arabia

1,321

968

980

1,258

606

170

146

136

236

198

Canada

86

60

65

113

75

Kuwait

97

69

79

83

62

Hong Kong, China

23

44

19

136

105

134

194

15

19

10

Singapore

Qatar

15

104

121

58

150

United States of America

United Arab Emirates


Australia

Bahrain
Source: Trade Map (2013)

2.1.2. Classification of Chilli Products Produced in the Country


There are many varieties of chillies including capsicum annum, capsicum frutescens, capsicum chinense,
capsicum pubescens, and capsicum baccatum.

FOOD PROCESSING SECTOR IN PAKISTAN

23

Table 10: Varieties of Pepper

Chilli type
Capsicum annum
Capsicum
frutescens
Capsicum chinense
Capsicum
pubescens
Capsicum baccatum

Description
Perennials; highest diversity of shapes and sizes; include varieties such as jalapeno, bell
pepper, cayenne, paprika, pimento; most commonly cultivated; widespread use
Small bushy plants with small but prolific pods; most common variety is tabasco pepper;
also included is piri piri; commonly used in South Asian, Ethiopian, and Egyptian
cuisines
yellow lantern chilli; hottest kind as well as mild aromatic; fruity flavour; includes
Habanero varieties as well as Congo pepper, Jamaican hot, red Dominica etc.
Least cultivated; with hairy leaves; with distinctive flavour due to capsaicinoid content;
able to grow in lower temperatures; varieties include Mexican manzanos, Bolivian
locotos, and Peruvian locotos
berry like; known as Ajis; smoky-flavoured; range from very mild to very hot; one of the
primary ingredients in Bolivian and Peruvian cuisines; varieties include Brazilian Starfish,
Peppadew, Bishops Crown, Wild Baccatum, and Lemon Drop

The two main varieties of pepper grown in Pakistan are capsicum annum and capsicum frutescens. Variations in
these varieties are found according to the climatic conditions of different provinces. For example, Nagina and
Kunri 1 varieties are grown in Sindh whereas Talahari, a sweet pepper, is grown in Badin (elaborated further in
next section).
There are various uses of red chillies in the domestic market. Demand for chillies is based not only on its direct
consumption but also as a derived demand from the increase in demand of food items that use chillies as
ingredients.

Table 11: Various forms of pepper used

Product Forms
Fresh pepper
Dried/ground chillies
Spices
Sauces
Frozen processed food
Pickles
Ready meals
Canned/preserved food
Overall meal solutions

Production (1000 kg)


145,100
90,000
9
6,731,910
10
2,003,370
11
4,198,400
5,000
12
17,370
13
3,259,870
14
24,263,770

Although cooking from scratch remains to be the dominant form of food preparation, demand for processed and
semi-processed food, as well as meal solutions, has gone up considerably because of more households seeking the
convenience of prepared meal as an alternative to cooking from scratch. This is also spurred on by the advent of
more women entering the job market and finding themselves hard-pressed for time. Home-cooking is mostly the
responsibility of female members of the household, even in dual income families. These females may be assisted
by hired help to continue the tradition of home cooking to some extent.

Separate figures for chilli in spices are not available. Category shows a volume increase from 2008 figure of 5,740,040 kg (Euromonitor, 2014).
Separate figures for chilli sauce are not available. Category shows a volume increase from 2008 figure of 1,522,010 kg (Euromonitor, 2014).
11
Separate figures for chilli in frozen processed food are not available. Category shows a volume increase from 2008 figure of 2,126,160 kg
(Euromonitor, 2014).
12
Separate figures for chilli in ready meals are not available. Category shows a volume increase from 2008 figures of 15,280 Kg (Euromonitor,
2014).
13
Separate figures for chilli in canned/preserved foods are not available. Category shows a volume increase from 2008 figures of 2,450,320 Kg
(Euromonitor, 2014).
14
Separate figures for chilli in meal solutions are not available. Category shows a volume increase from 2008 figures of 19,574,460 kg
(Euromonitor, 2014).
10

FOOD PROCESSING SECTOR IN PAKISTAN

24

Table 12: Food Items that Include Chilli as Ingredient: 2008 - 2013 volume sales

Tonnes (1000 kg)


Ready Meals

2008

2009

2010

2011

2012

2013

15.28

15.53

15.86

16.27

16.79

17.37

Canned/Preserved Food

2,450.32

2,589.69

2,721.81

2,891.68

3,083.04

3,259.87

Frozen Processed Food

3,066.25

3,103.45

3,190.27

3,290.10

3,410.80

3,560.51

Sauces, Dressings and Condiments


15

Meal Solutions

13,575.94 13,956.05 14,495.46 15,206.73 15,938.23 16,825.67


19,574.46 20,138.49 20,919.56 21,927.33 23,006.52 24,263.77

Source: Euromonitor (2014)

2.1.3. Geographical Mapping


Chilli cultivation takes place in the provinces of Sindh and Punjab. On an average, Sindh produces around 85% of
all pepper grown in Pakistan. The major location of chilli production in Sindh is in District Umerkot where a
small town by the name of Kunri is the major producer. In 2010-2011, out of around 85,000 acres of land used for
pepper cultivation, 75,000 acres was from Umerkot.

Table 13: Area-wise Cultivation of Pepper

Location
Sindh:
District Umerkot Kunri Town
Badin
Mirpur Khas
Ghotki; Khairpur
Karachi outskirts; Thatta; Hyderabad;
Larkana; Dadu; Shikarpur; Sanghar;
Sukkur; Nawabshah; Jaocobabad; Halla
Punjab:
Attock; Rawalpindi; Jehlum; Chakwal;
Talagang; Gujranwala; Lahore; Okara;
Sargodah; Mianwali; Sahiwal; Faisalabad;
Jhang; Cheniot; Vehari; Sailkot; Narowal;
Bhurewala;
Khanewal;
Multan;
Bahawapur; D.G. Khan; Muzafargarh;
Rahim Yar Khan; Lodhran
Baluchistan:
Quetta; Sibbi; Kalat; Mastung; Kachi;
Loralai
Khyber Pakhtunkhwa:
Malakand Agency; Swat; Charsadda;
Mardan; Peshawar; Shinkyari; Haripur;
Mansehra; Kohat; Karak; Bannu; Lakki
Marwat; Hangue; D.I. Khan
Total Production (2013 2014)
Total Production (2012 2013)
2
Total Area (km ; 2013 2014)
2
Total Area (km ; 2012 2013)

Important Varieties

Percentage
of Total
%
82.0

Production
(000 kg)
2013 2014 P*
118,980

10.6

15,380

6.1

8,850

1.3

1,890

100.0

145,100
147,200
625
636

Kunri 1; Nagina; Desi; Maxi


Talhari
Dundicut or Loungi
Ghotki
Sanam

Source: PES (2014); *P: Provisional (July 2013 March 2014)

The climate of Sindh is most suitable for chilli growing of the varieties Capsicum Annum and Capsicum
Frutescens which require warm temperatures of around 30 degrees Celsius. This is why chilli grows naturally in
Sindh. In places nearer the sea, such as Karachi, the atmosphere is too humid for proper cultivation of chillies
which require dry atmosphere for growth. However, most of Sindh fulfils this condition and is, therefore, suitable
for cultivation of chillies.

15

Includes other items as well that do not use red chillies, such as soups.

FOOD PROCESSING SECTOR IN PAKISTAN

25

Table 14: Yearly Cultivated Area and Yield

Year

Area (000 Ha)

Production (000 tons)

Yield (Tons/Ha)

2004 2005

48.7

90.5

1.86

2005 2006

64.6

122.9

1.90

2006 2007

47.3

69.5

1.47

2007 2008

64.2

116.1

1.81

2008 2009

73.8

187.7

2.54

2009 2010

74.7

188.8

2.53

2010 2011

63.6

171.8

2.70

2011 2012

27.4

54.1

1.97

2012 2013

63.6

147.2

2.31

2013 - 2014(P*)

62.5

145.1

2.32

Source: PBS (2014); * P: Provisional (July - March)

Figure 7: Chilli Growing by Region

The small town of Kunri in Umerkot District of Sindh has become specialized as the chilli growing area. Its
specialties are Kunri 1 and Nagina, which are two hybrids of chillies grown in this area. Chillies grown in Sindh
are acclaimed by experts, and commonly known to be, of superior quality in the region in terms of flavour and
aroma. Kunri is an agriculture based town and its other important crops are cotton and mangoes. However, red
chilli production remains to be the backbone of Kunris structure.
2.1.4. Growing Conditions and Seasons
The province of Sindh produces the highest amount of red chillies in Pakistan and amounts to 80% of the total
production in the country. There are at least seven varieties of chillies grown in various regions of Pakistan.
Domestic demand for red chilli both whole and in powdered form - is high because the South Asian palate
favours spicy flavours.

FOOD PROCESSING SECTOR IN PAKISTAN

26

Chilli production requires warm climatic conditions, with optimal temperature ranging between 240C to 320C
(SBI, 2010). Red chilli is grown mainly in the provinces of Sindh and Punjab, with Sindh accounting for around
80-85% of total production due to its favourable climate. Kunri, a small town in Sindh, was once considered to be
the Chilli Capital of Asia and produces around 55% of Sindhs produce (SBI, 2012). At least three main varieties
of chilli are grown in Kunri. Punjab faces an early monsoon season and does not provide the necessary dry
conditions as available in the interior parts of Sindh. Chilli production in Punjab, therefore, is low and it is
important to protect the crop from moisture to safeguard against destruction of crop and contamination by
aflatoxins. Planting of seeds in Punjab begins in early spring and harvesting is done around three to six weeks
after flowering. Green peppers are picked after one week interval, while orange peppers are picked later, and fully
ripe red peppers at the end of the season. Harvesting continues well into August. Monsoon season begins in
summer and plants need to be protected against moisture and rains.
2.1.5. Estimating the Market Size
Table 15: International Market: Five-Year World Exports of Pepper and its Product Forms, and a Comparison of Pakistan Exports; US $

Exported value
Product
2009

2010

2011

2012

2013

Product: 0904 Pepper,


peppers and capsicum
World

2,292,719

3,274,337

3,570,142

3,428,638

6,939

5,722

4,413

5,800

9,326

808,142

1,073,552

1,607,630

1,871,491

1,859,554

(Ranked 38 ):

34

18

28

249

511

Product: 090412 Pepper of


the genus Piper, except
cubed pepper, crushed or
ground
World

205,276

240,313

354,794

403,034

432,882

45

57

83

153

205

932,505

978,851

1,311,915

549,307

8,357

6,861

5,648

4,302

339,143

479,211

5,076

6,355

407,169

645,054

321

2,254

Pakistan

1,945,918
th

(Ranked 26 ):

Product: 090411 Pepper of


the genus Piper, ex cubed
pepper, neither crushed nor
ground
World
Pakistan

Pakistan

th

rd

(Ranked 53 ):

Product: 090420 Fruits of the


genus Capsicum or Pimenta,
dried, crushed or ground
World
Pakistan

th

(Ranked 78 ):

Product: 090421 Fruits of the


genus Capsicum or of the
genus Pimenta: Dried, neither
crushed
nor
ground
World
Pakistan

th

Ranked 9 ):

Product: 090422 Fruits of the


genus Capsicum or of the
genus Pimenta: Crushed or
ground
World
Pakistan

nd

Ranked 22 ):

Source: Trade Map (2013)

FOOD PROCESSING SECTOR IN PAKISTAN

27

Chilli is an important ingredient of the South Asian cuisine and is used extensively in many forms. The most
commonly used form of chilli is in its ground state, while dry whole red chillies and fresh green peppers are also
used frequently for aroma and flavour.
1. International Market
The world demand for pepper and its variants is on the rise. This is apparent from the increase in export of
pepper and capsicum varieties over a period of 5 years (Table 8). One reason attributed to an increase in demand
for pepper is globalisation and a palate for international cuisine. Growing middle classes, with rising
discretionary income are willing to experiment with exotic cuisines. This is deriving a demand internationally and
creating new markets.
The largest exporter of pepper of Capsicum genus similar to Pakistans product is India. Both countries have a
vast domestic market for their product due to strong demand and similar cuisines. A large portion of the produce
in Pakistan, around 85-90% according to industry experts, is consumed locally.
2. Domestic Market
Given that the population of Pakistan is 196 million, it is estimated that the urban population is around 37% of
the total population (Data, 2014). There is a constant influx of population from the rural areas to the urban areas.
Additionally, there is a slow but steady increase in the urban middle class. This uprising class is more
consumption-conscious, more demanding, and able to afford better standard of living. An estimate of per capita
consumption of chilli by the urban population has been quoted as 2.1 kg by industry experts based on
consumption patterns around the region. This is an accepted figure for South Asia which has a higher
requirement for spices. A simple calculation of increase in domestic demand based on an estimated 2% increase
per annum in population is given below. Calculation takes 2013 as base year and therefore uses 190m as the
population statistic. Domestic demand for chilli is considered constant by industry experts given that its general
uses are known. This demand would be higher if changing consumer preferences towards sauces and processed
condiments are taken into account.

Table 16: Domestic Market: Estimation of Domestic Demand up to 2020

2013 base year Population taken at 190 million as 2013 population estimate (currently around 196 million):
Total population: 190 million (2013)
Total production of chillies: 147,200,000 kg (2013)
85% consumed domestically: 125,120,000 tonnes (out of 2013 production)
Estimated yearly increase in population: 2% per annum
Estimated increase in domestic consumption*:
2013
2014
2015
2016
2017
2018
2019
2020
Population
190
193.8
197.68
201.63
205.66
209.77
213.97
218.25
millions
Domestic
chilli
125,120
127,622
130,177
132,778
135,432
138,140
140,906
143,725
Consumption
1000 kg
*Assuming a constant increase in population of 2%

2.1.6. Chilli Trade Cycle


The spread of Pakistans cultivated land from sea level to Mount Everest gives it an agro-ecological diversity that
makes it possible to cultivate chillies all year round. Crop seasons in Pakistan are classified into two cycles: Kharif
and Rabi, based on the monsoon rains in the country. Kharif season is the summer autumn season between July
and October whereas Rabi is winter crop season from October to March. In Punjab and Balochistan, only Kharif
crop is grown while in Sindh, both Rabi and Kharif crops are cultivated. The trade cycle of various provinces is as
follows:
Punjab:
Balochistan:
Sindh (Kharif):
Sindh (Rabi):

May August
July October
September November
February April

FOOD PROCESSING SECTOR IN PAKISTAN

28

2.1.7. Understanding the Supply Mechanics


2.1.7.1. The Value Chain
The quality of red chilli is based on its pungency and the colour of the produce. The brighter the red colour, the
better is the quality expectation. Chilli processing involves cultivation/harvesting, drying, de-hydration, milling,
and packaging. Figure 2 is a value chain progression of chilli processing (based on a report by Sajjad Haider
Consultants, 2010, in SBI, 2010).
2.1.7.1.1. Cultivation
Chillies are summer vegetables and the process of cultivation starts in February so that the harvest would be
ready in time for picking in summer. Pakistan does not use sophisticated cultivation processes to protect against
adverse weather and contamination. The use of protected cultivation is on the rise where vegetables are grown in
poly/plastic tunnels to maintain the temperature and weather conditions suitable for healthy growth. Although in
use in Pakistan, this technique has not fully caught on and red chilli is still cultivated in open fields in many areas.
The unheated poly/plastic tunnel technology is especially suitable for the climate conditions of Punjab with its
high likelihood of rain (Iqbal, 2009).

Figure 8: The Process of Cultivation

Nursery preparation

Transplantation

Watering

Harvesting

Post-harvest handling

Packaging

Delivery to markets

Plastic mulches spread over soil reduce crop time, control root temperature, and increase yield by up to 2 to 3
times while at the same time decreasing soil water evaporation (Iqbal, 2009). There is potential for use of this
process in red chilli cultivation in Punjab to increase yield and to ensure healthier crop.

FOOD PROCESSING SECTOR IN PAKISTAN

29

Figure 9: Value Chain Progression of Chilli

Source: SBI (2010)

2.1.7.1.2. Harvesting
Chilli picking is labour-intensive and the harvest is picked by hand. Machines may be used for harvesting but they
tend to destroy the crop, while better quality is possible by hand-picking. On the other hand, hand-picking is
expensive since labour costs are involved and it is more time-consuming than machine harvesting. The labourintensive process of harvesting takes around 2 to 3 months.
In Pakistan, chilli picking is done by hand. Village women usually contribute to this process to earn daily wages
and support their families. Family members who seek employment outside their villages usually go back to help
their families during the harvesting season. Large mill owners of spice mixes buy dry crop from the farmers and
then hand pick dry chillies according to grading in order to ensure quality products.
It is very important to care for the crop once it is harvested. Pre-harvesting preparations would ensure proper
handling of the produce and protection against microbial organisms. Chillies need to be placed in dry
environment immediately upon harvesting. Contact with soil and moisture may contaminate the crop with
bacterial and fungal diseases such as various forms of aflatoxins. Aflatoxins are harmful for consumption and
their varieties are known to cause cancer.
Small farmers do not have the means to properly store their produce. Chillies require moisture for growth but
need dry climate after harvesting in order to prevent development of fungal bacteria and microbes. Storage is
discussed later.
2.1.7.1.3. Drying
Once harvested, chillies are dried by one of two methods used: traditional sun drying and machine drying. In
Pakistan, traditional methods of drying are used more frequently, where chillies are spread out on sheets in open
field to dry under the sun. This results in the crop being subjected to the elements such as dust, and
contamination by bacteria. Additionally, the process takes longer than a week during which time the moisture in
the chillies develops mould and micro-bacteria such as aflatoxins. In 2006, the European Union found quantities
of aflatoxins at levels higher than acceptable by Phytosanitary Standards and banned imports of Pakistani chillies.
Acceptable amounts of aflatoxins are 5 PPB16 according to European standards and may go up to 20 PPB in the
USA.
16

PPB: Parts per billion

FOOD PROCESSING SECTOR IN PAKISTAN

30

Harvested chillies have about 65 to 80% moisture content which needs to be reduced to 8 to 10% to avoid fungal
growth of aflatoxins. Drying substantially reduces the weight of the chillies. While the yield of fresh chilli may
vary from 30-40 q/acre depending on variety and growing conditions, the yield of dry chillies would range from
7.5 to 10 q/acre. After drying, 100 kg of fresh peppers would yield 25-35 kg of dried chillies.
Currently, investors of grinding and processing mills do not carry out the task of drying of chillies but leave it to
the farmers to provide them with dry chillies ready for grinding. Big brands such as National Foods ensure a
better quality product by providing farmers with support. Their practice is to supply farmers with Geo-Textile
sheets so that farmers would dry chillies on these, thereby preventing contact with the soil. The geo-textile sheets
also help in expediting the drying process because moisture from soil is prevented from entering the crop. The
chillies are covered at night by DuPont sheets, also provided by the mill owners, to prevent dew from moistening
the chillies. Private sector investment in machine-drying plants is still a lucrative venture for investors who will
reap the benefits of larger volumes due to reduced wastage.
2.1.7.1.4 Bacteria Control
Fumigation using chemicals such as ethylene oxide and methyl bromide was the old technique for bacteria
control. However, the practice has stopped because these chemicals are found to be dangerous for humans as well
as the environment. Food irradiation is researched to be a safer process of contamination control and the WHO
decided in 1994 that it was safe process of contamination removal (Dwyer, Picciano, & Raiten, 2003). This
technology is insufficiently available in Pakistan, although much research has been directed towards it after the
ban in 2006, and the gap provides an opportunity for private sector investment in contamination control
equipment.
2.1.7.1.5. Mixing and Grinding
Grinding results in conversion to chilli powder. At present the Pakistani domestic market for ground chillies is
dominated by two major global brands followed by smaller, domestically known brands, and there is ample room
for quality brands to enter. A lot of chilli powder is sold loose and unbranded as well. There are two types of
grinders available, manual grinders and mechanical grinders. Manual grinders may be found in small-scale spice
processing factories whereas larger spice brands use mechanical grinders. Grinding mills are plentiful and are
available in various sizes. Large mill owners buy dry chilli directly from the farmers, hand pick chillies to ensure
grading, and use quality chillies for grinding to chilli powder in their mills.
2.1.7.1.6. Storage
Not only do chillies require immediate drying but they also need adequate storage and transportation facilities.
This is a requirement for grinding mills as well who do not possess adequate storage and warehousing facilities
that cater to the requirements of this sensitive product. Chillies need to be stored in a dry place with temperatures
between 0 to 300C. Fresh chillies need immediate transportation through cold chains whereas dried chillies and
chilli powder may be held for longer duration. Setting up of storage and transportation facilities by investors is
another area of consideration.
2.1.7.1.7. Packaging
Chillies should preferably be packaged in polypropylene since flavour may be lost in polythene packaging. Many
small scale mills sell loose chilli powder since packaging makes the product expensive for the consumer. Packaged
product is considered of better quality and thus priced higher. Cheap polythene packaged unbranded chilli
powder is also available in the domestic market and is considered to be of lower quality. Sealing of this packaging
is achieved through small sealing machines that do not have timers and may over heat the
polythene/polypropylene. These small machines are sometimes available in stores where the store keeper seals
the package after the consumer purchases his desired quantity by weight.
2.1.7.2. Farm Classification
As a cash crop, chilli is seen as a lucrative venture by farmers and few prefer it to the cultivation of cotton.
However, due to viral infections and lack of support in terms of value addition, large farmers do not opt for
allocating a sufficient portion of their farmland for chilli growing and have only taken up the venture as
experimentation. Broadly speaking, chilli growers in the country can be categorized as:

Small Growers
Medium-sized commercial growers
Commercial farmers
Community gardens and developmental project

FOOD PROCESSING SECTOR IN PAKISTAN

31

While it is difficult to develop an accurate assessment of the number of chilli growers, it is estimated that the
number of small chilli growers is increasing and may be in the order of thousands. The vast majority of these
growers are growing on land of less than 10 acres and very few commercial growers cultivate more than 50 acres.
There is a Red Chilli Growers Association of Pakistan that acts as a spokes-body for Pakistans chilli growers and
negotiates with the government for betterment of chilli cultivation. The Red Chilli Grocers Association caters to
the grocers dealing in chillies and maintains records of domestic and export sales. However, farmers, especially
small scale farmers, state that these associations are not supportive to their needs. There is no system of farmers
cooperatives in Pakistan.
2.1.7.3. Current Challenges
Farmers of chilli growing areas have identified some challenges that are unique to them and cause a hindrance in
extracting the full potential of climate and terrain that Pakistan has to offer. These problems are explained below.
2.1.7.3.1. The Issue of Middlemen
Most of the private extension services in Pakistan are provided by Input Supply Firms. These are the middlemen
who buy the produce from the farmers and carry out various marketing functions that transfer the produce from
producers to consumers. They are classified as commission agents, brokers, wholesalers and retailers.
The role of the middlemen is crucial to farmers because they provide farmers with finance to cultivate the crop
and provide access to markets. Farmers acquire interest-free loans from the middlemen which the middlemen
recover when they purchase the farmers produce. Thus the farmers are committed to sell their products to the
middlemen at the middlemens quoted prices. Farmers may be at a disadvantage when prices are quoted below
market. Many farmers do not take loans from banks on the understanding that interest rates are high. The major
issue here is lack of knowledge of farmers due to illiteracy. Middlemen may also help farmers by providing
support with procurement of raw materials for sowing and cultivation. They also act as advisors on issues with
the crop. These roles demand that the middlemen be knowledgeable enough to provide farmers with the support
they seek. Often though, the middlemen do not possess sufficient expertise to provide proper guidance to the
farmers because their knowledge is not based on professional training but on years of experience in the field.
Small-scale farmers are far removed from the markets because of their location in villages and lack of means of
transportation. Another reason why farmers sell their produce to middlemen at cheaper rates is because they do
not have direct access to markets whereas the middlemen have the means to provide the link between the farmers
and the consumers. If farmers were to form cooperatives then they would be able to consolidate their produce
and offer one place for consumers to access them. As it is, farmers are scattered and it is problematic for
consumers to approach them. Inadequate and under-developed road infrastructure also makes it inconvenient for
consumers to have direct access to farmers, thus promoting the need for middlemen. This results in middlemen
having a strong position of power in the supply chain at the expense of benefits to farmers, and subsequently to
the crop.
2.1.7.3.2. The Issue of Aflatoxins
Drying of crop is done mostly through traditional method of sun-drying in open air. This results in production of
high levels of aflatoxins that contaminate the crop. Recently, in an experiment by the ASF (Agribusiness Support
Fund) groups of 12 to 15 farmers with farm sizes of 3 to 15 acres were selected to form Farmer Enterprise Groups
(called FEGs). About 7 FEGs formed a cluster and 7 clusters together were needed to form an association, which
was a formally registered body. An association would have around 700 farmers. This set-up resembled a
cooperative where farmers could combine resources and combat issues in a concerted manner. Platform of the
association was used to train farmers in chilli cultivation. After providing adequate training and advice to the
farmers, they were given around 588 small units of solar dryers for chilli drying on an experimental basis and at
an approximate cost of Rs. 6.4 million. The chilli growers who took part in the experiment recorded reduced
aflatoxins levels up to 3-5 PPB. This is well within the SPS measures set by both Europe and the USA.
The farmers also reported an increase in price of their product from Rs. 45/kg to Rs. 70/kg in the open market,
and a reduction in drying time from 5 days from an initial 12 day drying time with the traditional open air sun
drying method. ASFs aim was to acquaint farmers with the technology and show them the benefits accrued so
that they would see incentive in its adoption.
Chilli growers are cultivating two varieties Nagina and Kunri-I and they feel that there is a need to come up
with more varieties including a hybrid one.

FOOD PROCESSING SECTOR IN PAKISTAN

32

2.1.7.3.3. Competition from India


Farmers in Sindh also face a challenge from the open market with the neighbouring country, India. Sindh is in the
extreme South of Pakistan and produce from Sindh needs to be transported to the rest of the country. India
shares the Wagah border with Pakistan in Punjab and agricultural produce from India is transported into
Pakistan through this border. Once trucks with agricultural produce arrive at Wagah, they are off-loaded from
Indian trucks and loaded onto Pakistani trucks for transportation to various parts of Pakistan. Thus Punjab is
able to get vegetables like chillies from India faster than from Sindh.
Farmers quote that India offers heavy subsidies to their farmers due to which their product is cheaper in Pakistan
than Sindhs product. Furthermore, Sindhs farmers face additional costs of transportation into Punjab and
N.W.F.P. which are farther from Sindh than from India. With price differences and substantially higher costs of
transportation compared with India, Sindh farmers find that they do not have a level playing field if their product
is not able to reach the intended markets before Indias product. Experts contacted quoted the following costs of
transportation for India and Pakistan:

Sindh farmers cost of transportation from Sindh to Punjab and N.W.F.P. - Rs. 80,000-100,000

Indian farmers cost of transportation to Punjab and N.W.F.P. through Wagah border - Rs. 4,000-20,000

These experts feel confident that given the perishable nature of their produce, if their product reaches the
markets before Indian farmers then they would be able to compete well. This clearly identifies a potential for
better and more efficient transportation services that ensure faster delivery with minimal waste.
2.1.7.3.4. Wastage and Spoilage
Sun drying in open field not only causes aflatoxins to develop but also results in uneven colouring and lower
grading of chillies. This reduces the quality of produce which then fetches a lower in the open market. Big brands
of spices select better quality produce and the lower graded product is sold in the domestic market at a lower
price. Unattractive prices result in many farmers shifting production to more lucrative crops such as cotton.
Floods spoil the crop as well. The chilli crop grows better in dry environment and floods make soils water-logged,
causing damage to the roots and plants.

2.2. STATE OF INFRASTRUCTURE PREVALENT IN THE INDUSTRY


Chilli harvesting and processing is done very simply and through non-complex processes in Pakistan. This is one
reason for low yield in the region. Farms usually tend to be small in size and farmers do not possess the means or
the knowledge to use sophisticated processes.
1. Land for planting seeds is prepared by thorough ploughing or digging. There may be as many as 3 ploughings
to ensure that the soil has become fine-combed. Tractors are used more commonly in ploughing.
2.

Drip irrigation technology is employed sparingly and by very few farmers. Irrigation is done mostly through
tube wells supplying water to the farms.

3.

Use of mulches during nursery and planting has been shown to result in larger plant size and better yield
(Iqbal, 2009) and some farms have adopted the technology. However, these are very few in numbers and use
of straws spread over land to protect the seeds and assist germination is more common.

4.

Chillies are hand-picked during harvesting. Machine picking destroys the crop by breaking it and spilling the
seeds contained in the chilli pod.

5.

Upon harvesting, a pre-cleaner is used to blow air and remove dust and dirt from the crop. Pre-cleaner is a
simple device that comprises of fans blowing air through grids to remove particles that can be blown away. A
simple version of pre-cleaners is manufactured locally.

6.

A drier may be used to remove moisture from ripe crop. A simple form of drier is manufactured locally.
However, this is not commonly used and the more common methodology is to use sun-drying by laying out
the ripe red chillies on open fields and allowing to dry under the sun. The use of geo-textile sheets is on the
rise but not yet fully adopted by the farmers. The sheet is spread on the ground and ripe red chillies are laid
out on it in thin layers. This way the chillies are prevented from coming into direct contact with sand and

FOOD PROCESSING SECTOR IN PAKISTAN

33

dust on ground. A simple procedure to raise the sheets above ground is being experimented. Sheets may be
tied to bamboo sticks on all sides and the frame thus prepared may be placed on a stack of bricks on the four
corners. This would allow air to circulate and dry the chillies from below as well, thereby decreasing drying
time further. At night the chillies are covered by DuPont sheets to safeguard against dew. Such methods are
more easily adopted because they are simple, economical, and cost effective.
7.

A Sortex machine is used to remove any impurities, sort the various qualities of chillies, and separate them
for grading. Large-scale farmers have their own Sortex machines whereas small scale farmers sell the dried
product to the middlemen or grinding mill owners who may do the grading. The price of Sortex machines
ranges from 7,500,000 to 20,000,000 Pakistani rupees. The perception regarding these machines is that
they provide the desired quality required by the farmer/mill owner. The more expensive a Sortex machine is,
the better the quality of product it sorts.

8.

Packaging of the produce is done in clean dry gunny bags. This is not an expensive process and may be done
by any actor of the process chain. Packaging into gunny bags is done in order to store the product. Chilli
processing factories employ more sophisticated machinery for packaging depending on the process and
product. Ground red paper has a primary polypropylene packaging that ensures longer shelf life, and a
secondary box packaging which carries information regarding the brand, label, weight etc. Mixed spices use a
similar kind of packaging. Tertiary packaging consists of cardboard boxes or cartons used for transportation
and storage.

9.

Chillies may be processed into ground chilli powder, mixed spices, chilli paste, and sauces. The process used
for mixed spices involves three steps. Whole spices are procured and sent for grinding. The ground spices are
mixed in pre-determined proportions based on the type of spice to be produced. Some whole spices, such as
cardamoms and cloves are also mixed with ground spices depending on the recipe for which the spices are
being prepared. These mixed spices are stored in tanks or tumblers, ready for packaging. They are then
packaged into their primary and tertiary packaging in the desired quantities. Packaging of 50g - 100g are
common for preparation of one single dish. Machinery used in the process includes the grinding mills and
packaging machines.

10. When chillies are made into a paste, the additional processes involved, besides grinding, include concoction
where chillies are cooked with water and vinegar and/or lemon juice to make the paste of desired consistency
and then bottled into glass bottles or cans and pasteurized to increase shelf life.
11. Chillies are also processed into chilli sauce. Chilli garlic sauce is a favourite among domestic consumers, and
trails close behind ketchup and tomato sauce. Chilli garlic sauce is present at all places, restaurants, and fast
food outlets where tomato ketchup is the usual condiment. The technology involved in the production of
chilli sauce includes a plant which allows to mixing, heating, and packaging similar to the chilli sauces.
12. Chilli pickle production does not require heavy mechanical equipment and many brands of pickles are
produced in households. Drums for mixing and adding preservatives are the major equipment needed for
chilli pickle preparation. The process involves keeping the mixture of ingredients in well-ventilated jars in
order to allow the vegetables to mature and acquire the flavour of spices.

2.3. TECHNOLOGICAL UP-GRADATION RECOMMENDED IN THE REPORT


The entire value-chain of chilli products is based on simple technology. Currently it does not involve hi-tech
procedures for sowing, cultivation, and processing of chillies for value-addition. The report suggests that there
are various opportunities for up-gradation and improvement in crop and its products.
2.3.1. Uses of Chillies
Chillies are extensively used in production of consumable products because they are an essential ingredient in
many cuisines. Besides their use as an ingredient, the following uses add to the value of the crop and would result
in market opportunities for the producers, and higher economic benefits to the economy.
2.3.1.1. Chilli Powder Processing Plant
Since most of the chilli powder sold domestically is in loose form, there is an opportunity to set up chilli
processing and grinding plants. There are many mills that are small scale and run manually. There are also mills
that process the grinding mechanically. The key to making a mark is to promote hygiene and health related
aspects of the processing plant. Creating awareness of the harmful effects of aflatoxins and unclean chilli powder

FOOD PROCESSING SECTOR IN PAKISTAN

34

as well as promoting health benefits of hygienically processed chillies would create, and increase, demand for
processed chilli powder.
Rationale: consumers will pay acceptable premium and switch to processed chilli powder when they are clearly
able to see the benefits associate with clean and hygienic processing. Thus the plant should ensure that most
hygienic processes are in place to set the packaged brand apart from the loose, unbranded chilli powder. There is
a growing middle class that has become conscious of health related consumption habits. For example, consumers
are unaware that they consume high levels of aflatoxins that are unacceptable by most developed countries. They
need to be made aware of the fact so that they can make a conscious choice towards safer production methods
that may be costly but that may protect them from harm.
Tetra Pak has successfully done this in the dairy industry. Fresh milk, that is perceived to taste better than
tetrapak, has been replaced by packaged milk in most of the middle class houses because of the large-scale
campaign by Tetra Pak on creating awareness about the harmful germs in, and unhygienic handling of, loose
milk. As the dairy report shows, the market for safe and germ-free milk is on the rise and there are various
opportunities for investment in the processing of milk and dairy products.
2.3.1.2. Pickled Pepper
Consumption of pepper preserved in vinegar or brine is low in Pakistan but there is a large market for it in the
export market. Negligible domestic consumption makes it non-profitable for production for local market only.
Therefore, the promise of a clear export market needs to be present if investors are to be attracted to the
production this product.
Rationale: global demand is high and Pakistan has the raw material required to produce the finished product
for export.
2.3.1.3. Chilli Paste Processing Plant
There is some production of chilli paste but it is not very pronounced domestically. Pakistani families like to cook
their meals at home and use of chilli powder is perceived as more natural than chilli paste. Very few Pakistani
recipes require chilli paste as an ingredient. But as more and more families convert to dual income households,
time becomes a more precious commodity and faster and more efficient means of concocting food become
desirable.
Rationale: The most obvious rationale for investing in chilli processing technology is that Pakistan has a
superior quality of hybrid chillies that offer a good advantage to Pakistan over its neighbouring countries. But
Pakistan is unable to achieve a competitive advantage and its yield per hectre is lower. Pakistan has a product,
and as shown earlier, the world has a growing market for that product. It would be logical to fit the two together,
but this is not the outcome we observe. If the product was tailored to meet the requirements of the market then it
would be naturally acceptable.
As mentioned above, a lot of chilli powder sold domestically is in loose form and perceived to be of a lower quality
whereas packaged branded chillies are considered to be more hygienic and healthy. Most of the chillies sold
contain levels of aflatoxins that are unacceptable by the developed countries. Using chilli paste that is processed
hygienically and considered free from aflatoxins will be one reason to buy chilli paste. Another reason is that
during cooking, while ground chillies need to be cooked and take some time to acquire the right flavour, chilli
paste is pre-processed and does not require extra cooking time. This also makes it possible to apply chilli paste
directly on to food for immediate consumption, much like the chilli sauce.
2.3.1.4. Chilli Sauce Processing Plant:
Chilli sauces in Pakistan hold the same colour and consistency as ketchups but have a distinct hot taste that is
suitable to South Asian palate.
Rationale: Very few brands are currently producing these sauces and there is ample opportunity to enter this
segment. Chilli garlic sauce is a hot favourite of Pakistanis and is consumed with most foods and as a replacement
for ketchup.
2.3.2. Details of Red Chilli Producing Area and Total Production
Sindh grows around 85% of the countrys chillies and therefore this is also the area for possible investment in
chilli processing plants. The reason behind this is the cost efficiency in terms of transportation and logistics. Raw
chillies, both fresh and dry, require careful handling and controlled temperatures. This means that transporting

FOOD PROCESSING SECTOR IN PAKISTAN

35

the raw material would require the use of cold chains over longer distances whereas location of chilli processing
units closer to the farms will substantially reduce transportation costs.
Processed food that is packaged is easier to handle and loss due to transportation is minimized. Since
preservatives in processed food increase shelf life, the cargo is able to withstand higher temperatures than chillies
in their raw state.
2.3.3. Possible Reasons for Declining Yield
Chilli production in Pakistan faces fluctuations which may be depicted in the graph below. These fluctuations may
be attributed to inefficiencies in production methods and climatic uncertainties. Floods and cyclones destroy the
crop which grows best under dry to humid conditions and does not thrive well in very extreme weathers.
The second reason for decline in yield is the presence of various bacteria and microbes that destroy crop and
affect the quality of the remaining plants.
The third reason is loss due to inappropriate drying and processing. If not dried evenly, the chillies tend to get
blisters and uneven colouring associated with low quality/bad crop. If moisture is not reduced up to the levels of
8-10% then harmful mould, aflatoxins, form on the produce. High levels of aflatoxins render the product unfit for
human consumption. While selecting chillies for grading, a lot of the produce is rejected due to very high levels of
aflatoxins.

Figure 10: Total Chilli (Dry) Production per Year

Source: FAO

2.4. SUGGESTED COURSES OF ACTION AND RECOMMENDATIONS


The report lays out various opportunities and issues for investment in the chilli processing industry in Pakistan.
During the data collection phase of this study certain case studies showed how small projects had resulted in
achieving higher yields and faster growth in chilli cultivation. Therefore, recommendations should be made based
on the country context and the industry under consideration.
2.4.1. Issue one: Supply-Side Assistance Assistance to Farmers
The key to achieving higher yield is to produce a healthier crop. Where a project targeted the crop the end results
were substantially improved. It was seen that chilli processing companies provided farmers training, materials,
and/or raw materials to improve the quality of the crop. Engro Foods, a large domestic brand, followed a similar
model in order to procure better quality rice from small independent farmers.
Engro Foods collaborated with Muslim Commercial Bank (MCB), a local bank, to provide loans to the farmers. A
farmer would open an account with bank and receive the loan. This loan would be repaid when Engro purchased
the crop from the farmer and made payment directly into the farmers account at MCB. Engro also provided
farmers with incentives to deliver a better quality. A fixed price was determined for a level of quality. If farmers
performed better than that, Engro would pay them a higher rate than that fixed. Thus, farmers benefitted

FOOD PROCESSING SECTOR IN PAKISTAN

36

substantially if they performed well. The model also assisted farmers to break the vicious circle of borrowing loan
and facilities from middlemen and watching their profits taken away on various expense heads that they had not
anticipated initially.
National Foods receives better crop by providing farmers with geo-textile sheets and DuPont covering sheets to
ensure better and faster drying cycle. Large firms also engage in vocational training of farmers to increase
technological knowhow and spread the use of pesticides that are not harmful to humans. Companies such as
Bayer, Novartis, and ICI Chemicals work with farmers to promote knowledge of fungicides and pesticides.
Following on this model, in order to promote Swiss machinery and establish a market for it, some collaborative
work and assistance is expected to improve acceptance of more costly methods of food processing. The investors
need to see a clear benefit to setting up expensive processing plants. They have the means to invest but must be
assured of returns not too far into the future. Pakistanis are known to have high risk aversion (Hofstede) and
want quick returns. Working with farmers would improve infestation conditions of the crop. Food processing mill
investors would be assured a healthy stock for their product and will find acceptability in the European and North
American markets.
Another form of assistance would come from providing training on how to improve crop productivity and size.
Knowledge about the kind of practices and pesticides that are considered harmful and the means to improve
performance effectively and efficiently would be beneficial for crop improvement. Training on global standards of
quality and compliance practices would create awareness and increase an understanding of what is required in
the international markets.
2.4.2. Issue Two: International Demand Global Commodity Buying Houses
The Swiss corporations may assist food processing mills by providing links between the mills and the global
commodity buying houses. If the Pakistani mills are able to meet a set level of aflatoxins (this could be set at 3-5
parts per billion) then they would be assured of an export market at a competitive price. Good quality product
would fetch a higher price.
Global commodity buying houses could assist in setting up of labs for testing of micro and fungal bacteria. These
labs should be able to provide credible certificates accepted for export of various perishable products such as
chillies, rice, pulses, maize etc.
2.4.3. Issue Three: Domestic Demand Consumer Awareness
Much of the market for chillies is domestic because at present export into EU has been banned due to high levels
of aflatoxins. The quality of chilli consumed in Pakistan contains higher levels of aflatoxins than are
recommended for human consumption. A nationwide campaign to create awareness of the harmful effects of
aflatoxins in our diets would result in increasing consumer knowledge about what is present in the market and
how it affects them. Consumer demand for better product will increase incentive for investment in processing
units. Consumers will be more accepting of higher prices for processed chillies because they would be expected to
be of better quality. Benefits to a Swiss firm would be that they could promote their machinery as the one
providing clean, toxin-free products. Nestl has followed the same strategy for milk and introduced tetrapak
packaging as an alternative to unhealthy, infested open milk.
2.4.4. Conclusion: Chilli Processing and Investment Opportunities for SMEs
The report suggests that there are various opportunities in chilli processing that can be availed by investors in
Pakistan and that would increase the market for food processing machinery from Switzerland. In a capitalist
environment, the investor needs to be assured not only of an opportunity but also of a positive return on
investment and a steady stream of profits that will make the business self-sustaining and lucrative. With a clear
and present foreign market, investors would be happy to invest if their product was compatible and able to pass
the quality measures.
Investors would find opportunities in chilli powder processing, pickled pepper processing, chilli paste processing,
and chilli sauce processing plants. In order to make these attractive for investors, it is suggested that assistance be
provided in terms of collaboration with investors to improve cultivation conditions for farmers and to create
awareness among domestic consumers of the harmful effects of contaminated chillies. Another venue for
investors interest is to make the prospect of export market attractive by providing assistance through linkages to
large commodity houses and other export means.

FOOD PROCESSING SECTOR IN PAKISTAN

37

3. Dairy Industry of Pakistan


3.1. OVERVIEW OF THE DAIRY SECTOR IN PAKISTAN
Pakistan is the fourth largest milk producing country in the world with 50 million animals managed by
approximately 8 million dairying households.
3.1.1. Geographical Mapping
Figure 11: Livestock Population

Source: Economic Survey of Pakistan (2010)

3.1.2. Milk Collection Pockets


Figure 12 below shows the milk collection pockets in Punjab which contribute approximately 64% of the Pakistani
milk supply.

FOOD PROCESSING SECTOR IN PAKISTAN

38

Figure 12: Milk Collection Pockets

Source: Tetra Pack

3.1.3. Estimating the Market Size

33 billion litres of annual milk production

Milk economy in terms of value is over 27% of the total agriculture sector.

Buffaloes = 30.8 million ( 18 million in Punjab)

Cattle = 34.3 million (14.41 million in Punjab)

Goats = 59.9 million (37.1 million in Punjab)

Sheep= 27.8 million ( 24.3 million in Punjab)


3.1.4. Overview of Pakistans Milk Economy Present Scenario
1. In Pakistan about 30% of household budget spent on food is attributed to milk and other dairy products
(ACR, 2006). Pakistans culture has a huge market for the nutritionally rich food items which include high fat
milk and other milk products. The various products include whole milk, flavoured milk, condensed milk,
ghee, butter, yogurt, and cheese, cream, chocolate, cakes, biscuits, ice-cream etc. and all these are referred to
as dairy products. Pakistans dairy industry, ranked as one of the largest in the world, is also the third largest
producer and consumer of liquid dairy products (LDPs) globally. 17 In 2009, Pakistan produced over 34
million tons of milk.18 And in 2010-2011, the milk production increases to approximately 46.44 billion litres
of milk. . At an average, 33 billion litres of milk are produced each year from about 50 million animals in
Pakistan. The dairy sector is an important driver of our economy, with more than 10 million farming
households contributing more than 11% to the GDP. The overall contribution of Pakistans livestock industry
to GDP and to agricultural value is 11.4% and 53.2% respectively. The value of milk in particular is greater
than the combined value of rice, wheat, maize and sugarcane in the Pakistan. Other industries such as
leather, confectionery, fodder etc. are greatly dependent on livestock and the dairy industry.
2.

As far as the formal dairy sector is concerned, there are five product categories which operate in the LDP
(Liquid Dairy Product) market. In the year 2009, there was a volume of 808 million litres of LDP out of
which 72.8% was accounted for white milk, 22.3% out of the total was tea creamers, and flavoured milk
constituted 2.4%, liquid creams share was 1.7% whereas the remaining 0.8% was of low fat milk products.

3. Loose milk constitutes approximately 62% of the total dairy supply which is sold directly to consumers.
Based on a study conducted in 200919, about 38% of the total milk supply obtained by milk collection
centres/milk purchasers was utilized to manufacture by-products of milk like cheese, yogurt, ghee, butter
(milk shortening), khoya (dried milk cream), and flavoured milk.

17

Tetra Pak Dairy Index, Issue 5


Food and Agriculture Organization (FAO) Statistical Yearbook 2010. Table B.12 Production of milk and eggs
Hamid Jalil, Hafeez-ur-Rehman, Maqbool H. Sial and Syed Shahid Hussain, Analysis of milk production system in peri-urban areas of Lahore
(Pakistan), 2009
18
19

FOOD PROCESSING SECTOR IN PAKISTAN

39

3.1.4.1. Rural Milk Production System


Pakistans rural areas have both subsistence and market oriented milk production systems. A communal practice
for families living in the rural areas was to milk cattle to meet familys milk/ milk product needs. The extra milk
was transformed in to butter / ghee for household usage. The demand for commercial milk production within the
rural community was very limited. However, the subsistence and market oriented dairy farms were motivated to
venture into commercial farming (distribution of milk and ghee) due escalating rates of urbanization in Pakistan.
The small dairying households in Pakistan have buffaloes and cows in small herd size on the other hand market
oriented households keep larger herd sizes for commercial milk production. Approximately 43% of the dairying
households of Pakistan operate at the subsistence level which means that they maintain herd size ranging from
one-two. The 27 to 28% of dairying households operate under near-subsistence level condition which means
that their herd size ranges from three to four animals. The others maintain larger herd sizes of cattle for
commercial purposes.
The subsistence and near subsistence dairying households usually comprise of small-scale farmers, renters or
labourers who do not own any land. The risks in dairy production are high because dairy income adds-on to their
other income from farming/agricultural income. Dairying, therefore, is considered as an instrument for raising
their income levels. Interferences/interventions in dairy sector can benefit the impoverished classes by providing
them with high returns from a policy standpoint.
3.1.4.2. City and Peri-urban Milk Production
Milk supply in the cities was traditionally done through Dodhis (milkmen). The milk for the cities was obtained
through cattle which were kept in city outskirts. In other cities, small-scale milkmen transfer fresh milk from
peri-urban to urban consumers on foot/bicycles. The local municipal bodies have developed cattle colonies
authorities around urban areas such as Karachi, Lahore and Islamabad in order to remove the animals from the
city limits. Some cities have stables of buffalo and cow herds which have been gathered over the urban area.
There are also some households in the urban areas which ensure their daily supply of fresh milk by keeping cattle
in their backyards/ garages.
The population density of cities like Karachi, Lahore and Rawalpindi is the driving force or the key motivator for
the small and peri-urban milk producers. The high demands from households and sweetshops (called Halwais) in
these cities enable these farmers to fetch higher prices. They face lower transportation costs due to the availability
of these farms in the adjoining areas of the cities. The feeding costs for these farmers are high due to the lack of
proper feeding supply throughout the year. Animals which are kept in herd sizes ranging from 6-more than 50 are
fed expensive fodder and concentrates. Milk is sold at the milk shops or even supplied at the door steps of these
households. The animals used in the dairy production system are bought before or after calving with objective of
higher milk output. Non-lactating/dry animals are either returned to rural areas or are retailed to the butcher.
The formation of abundant dairy animal markets near big cities and towns enables this procedure20.
3.1.5. Structure of Dairy Farming in Pakistan (Comparative to other Countries)
It is unfortunate that despite a massive herd size, the average animal holding size per household is less than 3
leading to an extremely fragmented dairy farming structure. (Jassar Farms, 2009). Pakistans dairy industry
lacks proper structure. We can ascribe this fact to the dearth of government support and intervention, the lack of
relevant guidelines and disastrous attitude of not providing any security to the farmers. Additionally, main reason
is that dairy farming has been given the secondary status and not an independent activity because it is considered
to be the by-product of harvesting in Pakistan. With the passage of time the structure has improved, however, the
collection and distribution is still very much fragmented when compared to other countries.
Structuring the industry means:

20

Standardization of animal rearing


Awareness and training programs for farmers
Standardization of milk collection process
Regulation of prices
Subsidization for the industry to give motivations to entrepreneurs that would lead to lowered wastages and
enhanced quality.

Abid A. Burki, Mushtaq A. Khan, and Faisal Bari, A State of Pakistans Dairy Sector: An Assessment, 2004

FOOD PROCESSING SECTOR IN PAKISTAN

40

Figure 13: Provincial Share in National Milk Production

3.1.5.1. Strategic Initiatives by Dairy Pakistan


There were inspiring initiatives such as the white Revolution taken by the Government of Pakistan in
collaboration with Nestle Pakistan. The effects, however, were not trickled down. It was more of paper work. Very
little impact could be attributed to the national or district Government.
3.1.5.2. Opportunities
Pakistan can also develop a new breed of cows within a period of about 4/5 years and thereby increase its
production by over 100 per cent. If attention is paid to the dry and processed milk, Pakistan has the potential to
become a big exporter of dry and processed milk. Currently, Pakistan is only exporting to Afghanistan. Another
opportunity is in the cow milk because worldwide cow milk is preferred over buffalo milk. However, Pakistan
continues to focus on buffalo milk production due to its high fat content and consumer preference for it.
3.1.5.3. Indian Dairy Structure
Figure 14: The Indian Dairy Industry

FOOD PROCESSING SECTOR IN PAKISTAN

41

3.1.5.4. Producer Processor Gap and Source Volumetric Sharing

Figure 15: The Producer-Processor Gap and Source Volumetric Sharing

500,000
lit

500,000
lit
Safe Supply
Threatening Supply

2,000,000Li
t

1,000,000
lit
25%
75%

1,000,000
lit

It is evident from the figures in Figure 15 that the demand for milk is higher compared to its supply. There is a
dearth of skilled and trained human resource. There is little or no awareness about the skilled and trained human
resource.
3.1.6. Milk Collection and Distribution System
Most of the milk produced is collected using out-dated collection methods and majority of the transport is carried
out by Gawalas (milkmen). The current procedure of milk collection from a large number of subsistence
farmers is very time consuming, costly plus there is also threat of adulteration. Most of the rural milkmen are
uneducated hence they add different chemicals and adulterants in order to increase the shelf life of milk because
generally the shelf life of milk is only about 3 to 4 hours after milking. These people add preservatives which
include urea, formaldehyde, borax, salicylic acid, sodium bicarbonate and penicillin which are not fit for
consumption and these milk men hardly know the side effects of these chemicals.
The milk distribution system in Pakistan consists of the following main channels:

Informal sector: traditional channels that market unprocessed milk


The formal sector, which specializes in the distribution of processed milk and involves commercial milk
processing firms.

The informal sector constitutes about 84% of the total distribution network of milk whereas the formal sector is
16% of it. A graphical representation of milk collection and distribution has been given below:

FOOD PROCESSING SECTOR IN PAKISTAN

42

Figure 16: Milk Collection and Distribution System

The category of milk collectors can be divided into the following three segments:

Small: these collect around 200-400 kg of milk per day from various farms which are often in far flung areas.
Medium: these milk collectors collect about 400-800 kg milk per day and conduct door to door delivery of
milk. Apart from that they also market milk in nearby urban markets.
Large: in this category milk collectors collect about 1.5 to 3 tons of milk in a day and serve as middlemen
between milk producers and wholesalers/retailers. Adulteration is widely practiced amongst these collectors.

Other problems in the supply chain include perishability of milk, seasonality of milk production, issues between
middlemen and milk processors etc.
3.1.6.1. Milk Selling to Gawala for Cities

Non committed disposal


Restricted Supplies
Irregular Payments
Short term prospects
Unsafe delivery of product to consumers
Commercial Unawareness
No concept of hygiene

3.1.6.2. Milk Selling to Dairy Industry

Committed Disposal
Un-restricted Supplies
Ensured & Scheduled Payment
Long term prospects
Safe delivery of product to consumer
Commercial Awareness
Hygienic & Quality Focus

FOOD PROCESSING SECTOR IN PAKISTAN

43

3.1.7. Processed Milk Industry (Business Environment and Constraints)


The previous government of PPP had initiated 7 projects in the livestock industry which were worth about Rs. 8.8
billion. The reason why these projects were initiated was to enhance milk and meat production, increase
marketing efforts, and improve the delivery mechanism for livestock farmers, to prevent livestock diseases and to
provide animals with necessary veterinary facilities. Apart from this, a project funded by the European Union
Strengthening of Livestock Services Project (SLSP) has widened the disease reporting plus epidemiology
network from a mere 36 to 64 districts across Pakistan during the years 2009-2010. It has done so by funding IT
equipment to the disease reporting offices and few other veterinary hospitals present in these districts. The
formation of these epidemiological units is done at federal, provincial and district levels. This project has been
part of the National Disease Reporting and Epidemiology System (NDR & ES).
Another project relating to betterment of livestock is Improving Reproduction Efficiency of Cattle and Buffaloes
in Small Holders Production System. Over here Embryo Transfer Technology is carried out at the Centre of
Excellence for Bovine Genetics at Military Dairy Farms, Okara, plus a semen production unit is completed at
Renala, Punjab. This is to promote effective breeding of livestock which would lead to better quality milk, meat
production.
Other future measures for the dairy sector include import of high milk yielding animals, improvement of
laboratory facilities to diagnose and treat livestock diseases, semen and embryos for cross breeding, expanding
animal health service, duty free import of veterinary dairy and livestock machinery/equipment and allowing
import of feed inputs and vaccines at zero rate.
3.1.8. Season-ability
Milk production remains at its highest during the months of January April while it is at its lowest from May
August due to limited availability of fodder. However, milk consumption follows an opposite trend as
consumption is highest during the months of summer. Consumption of milk also receives a boost from increase
in sales of ice creams and yogurt during summer months. Supply of milk, from the rural areas, decreases by
around 50% during the summer months. Peri-urban farms, however, are able to demonstrate better control over
the supply fluctuations. The supply is at its lowest level during id June when it dwindles to only 55% of its
maximum level for the year.21
3.1.9. Milk Pricing & Profitability in a Competitive World
3.1.9.1. The Value Chain
Milk Collection-Plant-Distribution/Retailing-Consumer
3.1.9.2. Current Challenges
Following are the core challenges faced by the dairy sector of Pakistan:

Lack of Level Playing Field between the middlemen and the processors.
High degree of adulteration due to the inefficient distribution system and also due to the demand and supply
gap. Also, the initial stage identified under the value chain head indicates that there exists a lack of proper
milking and storage techniques
Lower tax paying tendencies of middlemen
Seasonality (seasonal production vs. year round production)
Milk is highly perishable in nature and the lack of cooling systems and chillers lead to wastages. Also,
wastages are a result of lack of hygienic practices in raising and milking the animals.
Variability
The uneducated labourers/dairy farmers have limited knowledge of vaccination. They are unable to use
modern technology due to low economic backgrounds and affordability issues. Overall profitability for the
farmers is low because the middlemen/Dhodis take away the major chunk of the profit. The poor farmers
also have lack of contact to the market mechanism. Due to their lack of education they are unaware of the
right breeding, cattle farming and optimal feed practices.
Lack of a cold chain to protect milk quality.
Consumers are unaware of the quality of the milk they are buying, and most cannot afford the higher
cost/higher quality presentations offered by the processing industry. The product range offered to consumers
is not well developed.
Lack of access to well-trained support service staff such as veterinarians.

21

Pre Feasibility Study for Dairy Processing Plant, May 2006, Planning & Development Division, Government of Pakistan.

FOOD PROCESSING SECTOR IN PAKISTAN

44

Despite the huge volume of milk produced in Pakistan, processors find it hard to procure sufficient milk to
meet consumer demand, increasing demand for imported products.
Insufficient research facilities to drive productivity and enhanced farming systems through the industry, and
to drive genetic gain.
Lack of pasteurization law and strict implementation mechanism of milk food safety standards.
There is huge demand and supply gap because the population growth is approximately 3% annually
compared to the milk production which is not growing at the same pace. The overall milk production has
been increasing but the cause is the increase in the number of animals and not the per animal yield. Due to
this huge demand and supply gap the import costs of dry milk and milk related products has been increasing
at fast pace.
Low yield per animal could be attributed to the low level of government support in increasing the genetic
potential of animals through artificial insemination techniques and cross breeding. The low yield could also
be attributed to lack of availability of quality nutrients, feed dearth, unorganized marketing systems and
conventional farming methods.
Inadequate or poor chilling and processing units
Lack of value addition facilities

3.1.9.3. Modus Operandi to Unlock the Potential

Figure 17: Milk Processing

Raw milk
Collection and reception, test for raw
milk quality
Pre-pesteurisation

Storage in tank
Standardisation
Pasteurisation

(730C/850C, 15s)

Homogenisation
Storage in tank
Packing

(Glass bottle, plastic bag,


paper box)

Cold store
Quality of product in laboratory test

To market
To unlock the potential it is imperative that we should look at the overall milk process:

Cattle breeding

FOOD PROCESSING SECTOR IN PAKISTAN

45

Cattle feed
Milking parlours

High yield per animal could be ensured through import of high yielding animals or through semen import for
crossbreeding.
There is lack of proper milking parlours when it comes to the milk collection, lack of chilling systems and lack of
packaging materials.
Currently, aseptic packaging material for UHT milk is $0.02-0.022 / pack. High quality milk powder packaging
material costs $0.01-1/Piece. Tetra pack packaging material costs $0-1/Pack.
The price of one litre packaged milk has gone up by Rs.5 in the retail market to Rs.100 with effect from March
15, a market survey revealed on Friday. (The News, March 22, 2014). This indicates that the demand for local
milk is higher than the supply and if proper processing and packaging machineries are installed than it will be
overall beneficial for the end consumers.
3.1.9.4. Developing the Value Added Market
A Public-Private sector joint initiative to bring about structural long term change in the dairy industry in Pakistan
was initiated in 2005. Other initiatives that have been taken up from 2005 so far are mentioned below:

Model farms - to introduce enhanced farm management and to demonstrate commercially viable dairy farms
Water cooling tanks milk chillers introduced to enhance its quality and farmers feasibility to reach the
market.
The Livestock Wing is taking regulatory measures that included: duty free import of veterinary dairy and
livestock machinery and equipment, allowing import of feed inputs and vaccines at zero rates. In order to
reduce input costs in livestock, poultry feed production, certain feed ingredients, growth promoters and
vitamin premixes have been zero rated. Along with this, allowing the import of high yielding animals is also
considered.
Sales tax exemption has been allowed to uncooked poultry meat.
New milk and meat processing units have been established in the private sector.
Milk Collection Processing and Dairy Production and Development Program formed 207 Milk Producer
Groups (MPG) in all the four provinces, Azad Jammu and Kashmir and Gilgit, Baltistan.
SMEDA (2013-2014 in process): Dairy farming may prove a profitable business for small landholders.
Dairy farming is one of the best projects if professionally done on small land holdings. The farm would start
the operations with 12 animals (10 cows and 2 buffaloes having daily per animal milk production of 13 and 8
litres respectively) to achieve milk production of 34,560 litres by the end of first year, excluding the milk
consumed by suckling calves. The milk will be primarily sold to bulk buyers at the rate of average Rs.60 per
litre. The farm will also offer milk sale to domestic individual consumers. A dairy farm with 12 animals (80%
cows and 20% buffaloes) needs a total investment estimated at Rs. 2.19 million out of which the capital cost
of the project is Rs.2.01 million with working capital of Rs. 0.17 million.

Following are the list of set-ups done by the local companies and joint-ventures between local and foreign
companies:

FOOD PROCESSING SECTOR IN PAKISTAN

46

Table 17: Milk Manufacturers in Pakistan

These are some of the initiatives that have already been undertaken. The foreign investors have a huge potential
in creating joint ventures with organizations such as SMEDA and Dairy Associations for the purpose of providing
the right technical support at the milking, chilling and at the packaging level.

FOOD PROCESSING SECTOR IN PAKISTAN

47

3.1.9.5. Cold Chain and Innovative Protective Materials


Dodhis or intermediaries are seen as being responsible for most adulteration in the marketing chain. This could
be because dodhis transport milk over long distances, often in extreme weather conditions. Farmers in Pakistan
do not have access to the end consumer markets and rely on dodhis to serve as intermediaries to take the milk to
the market. Dodhis charge excessive commissions on the process as there is no substitute method in place to
make the involvement of dodhis redundant. Agents in the marketing chain in Pakistan rarely have access to cold
storage facilities, and a major portion of milk is lost. According to an Asian Development Bank (ADB) report
(Malik and Luijkx, 2004), milk losses due to the lack of cold storage are estimated at about 15 to 20% of total milk
production in some areas. Several private sector companies provide support services, mainly cold chain
equipment (from Unitech), feed (AkzoNobel, formerly ICI), and veterinary drugs (from Ghazi Brothers). 22
Engro Foods, with the help of USAID, committed to putting in $670,000, in 2011, as its contribution for
installation and operation of 60 chillers in the districts of northern Sindh and southern Punjab, namely Larkana,
Shikarpur, Dadu, Khairpur, Naushero Feroze, Ghotki, Muzaffargarh and Layyah.
The primary reason behind the unavailability of cold chain facilities is the operating expense. For instance, the
purchase cost of a 1,000-litre capacity cooling tank is approximately 300,000 rupees ($5,000), a sum well
beyond the reach of a small farmer. Also, cooling tanks are affected by the absence of electricity in rural areas.
Where the Government supplies electric power, it is expensive because dairy farmers do not get subsidies similar
to the ones given to agricultural farmers on equipment (such as tube wells).23
3.1.9.6. Processing Equipment, Plant and Machinery
There is no farm in Karachi having milk processing facilities. Some farms which were registered under Model
farm programme with Pakistan Dairy Development Company (PDDC) have milking machines installed, some rely
on hand milking but chill the milk and pack it in the pouches and supply to the end consumers.
1.
2.

3.
4.
5.
6.
7.

Wali farm situated at Dumloti Road number 8 Malir district, has a Milking machine set up where 10 cattle
at a time can yield milk.
Bukhari Dairy Farm Pipree Steel Town, Karachi, has a 20 animals milking parlour, nowadays not active.
Bukhari Dairy Farm also chills milk, manually packs the fresh milk in pouches and markets it with name of
Leeche and supplies it at the consumers door step.
Aziz Memon Model Dairy Farm Steel Town Filter Plant manually boils the milk, chills and packs it in
bottles and supplies to the door step of consumer with trade name Safe Milk.
Chadder Cheese (PECHS, Karachi) collects cow milk from market and processes it for cheese and Raeta
(traditional flavoured Yogurt).
Malir Cantonment Military Farm yields milk by hands, pasteurizes it, chills the milk and supplies to the
armed forces.
Haji Nizakat Farm Landhi Cattle Colony, Karachi, has a 10 animals milking parlour, but is not active
nowadays.
Dr Dairy Milk, having milk plant at Landhi Cattle Colony, collects milk from Landhi, Karachi, pasteurizes
it at the plant, and supplies the milk in pouches with Dr Dairy Milk trade mark.

The list of countries which export dairy machinery to Pakistan (with imported values in thousands of US dollars)
are given below:

22
23

FAO. 2011. Dairy development in Pakistan, by Umm e Zia, T. Mahmood and M.R. Ali. Rome
http://www.fao.org/docrep/011/i0588e/i0588e07.htm

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Table 18: List of Supplying Markets for a Product Imported by Pakistan: Product: 843420 Dairy Machinery

Source: Trade Map (2013)

Table 19: List of Supplying Markets for a Product Imported by Pakistan: Product: 84342000 Milking Machines and Dairy Machinery Dairy Machinery

Source: Trade Map (2013)

FOOD PROCESSING SECTOR IN PAKISTAN

49

Table 20: List of Supplying Markets for a Product Imported by Pakistan: Product: 84349000 Milking Machines and Dairy Machinery Parts

Source: Trade Map (2013)

3.1.9.7. Import of Semen


There are several existing facilities in Pakistan that are maintaining purebred herds of indigenous cattle for the
purpose of semen production, e.g. Red Sindhi at Tando Jam, Sindh, and Sahiwal at Bahadarnagar, Punjab.
Pakistani cows produce just 4-5 litres of milk per day. However, a test study done at Jasar Farms showed that
artificial insemination of cows with elite bulls raised milk productivity per animal by 2,000 litres per year which
translated into US $706 additional income for the farmer from every cow. The semen is imported from the USA
and costs around US $40 US $100 per dose depending on the quality of the bull. This is much cheaper than
importing animals from abroad.24 Each cow generally requires 2.5 doses of semen.25

24

http://tribune.com.pk/story/241432/divine-bovination-how-cross-breeding-can-save-the-dairy-industry-in-pakistan/
www.nbp.com.pk/Agriculture/DairyReport.pdf

25

FOOD PROCESSING SECTOR IN PAKISTAN

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Table 21: Livestock Semen in Pakistan - Market and Demand Sizing

3.1.9.8. Import of Vaccines


Vaccine production especially for Foot and Mouth disease and veterinary pharmaceuticals: Foot and Mouth
disease is the most prevalent disease in livestock of Pakistan and no locally manufactured vaccine is available.
Imported vaccine is too costly for most of the farmers to use. Thus there is acute demand and need for FMD
vaccine which is of good quality and of reasonable price. Similarly there is growing market for quality veterinary
pharmaceuticals.

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Table 22: Cow Vaccination Routine

The average annual cost of vaccinations is 1200 PKR per cow. The vaccines are produced at the Veterinary
Research Institute at Ghazi Road, Lahore.26
3.1.9.9. Tariff Rationalization for the dairy sector
Currently, finished goods and input materials of dairy and stationery industry are zero-rated subject to conditions
as specified under SRO 670(I)/2013, dated 18-07-2013.27

3.2. AN OVERVIEW TO POTENTIAL FOR PROCESSING FOLLOWING ITEMS:


3.2.1. Milk in Powder28
The powdered milk industry is a PKR 21.7 billion industry divided into e major categories i.e. FCMP (full cream
milk powders), GUMP (growing up milk powder) and tea whiteners. FCMPs account for 65% of the market, teawhiteners account for 29% and GUMP accounts for 5% of the market. Total industry volume is approximately
35000 tons per annum.
The FCMP category is majorly dominated by Nido (Powdered Milk) with its products Nido fortified and Nido
Buniyad capturing 80% of the market. 8% of the market belongs to imported brands while 12% is owned by small
scale producers in the industry.
The GUMP category is similarly captured by Nido which has a 65% market share. The rest of the market belongs
to other imported products.
The volume of the tea-whiteners in the industry is approximated to be 10,000 tons and the market is a monopoly
controlled by Nestle Everyday (Tea Whitener).

26

www.nbp.com.pk/Agriculture/DairyReport.pdf
http://www.brecorder.com/taxation/181:pakistan/1189460:government-of-pakistan-revenue-division-federal-board-of-revenue-budget-2014-15part-ii/
28
http://www.slideshare.net/hassankh/powder-milk-industry-in-pakistan
27

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52

3.2.2. Yogurt

Table 23: Company Shares of Major Yoghurt Producers

Source: Euromonitor (2013)

3.2.3. Butter

Table 24: Production of Butter and Fat during 2008 - 2013

Source: Euromonitor (2013)

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53

3.2.4. Cheese
Table 25: Sales of Cheese by Category: 2008 - 2013

Source: Euromonitor (2013)

FOOD PROCESSING SECTOR IN PAKISTAN

54

The market shares of other value added products of the dairy industry such as cheese, butter, yogurt etc. are given
below:

Table 26: Dairy Processing Company Shares: 2008 - 2013

Source: Euromonitor (2013)

FOOD PROCESSING SECTOR IN PAKISTAN

55

Table 27: Dairy Brand Shares: 2008 - 2013

Source: Euromonitor (2013)

3.3. AVAILABILITY OF UHT AND PASTEURIZED MILK


Approximately 96% of the market is still held by loose milk. 4% of the market belongs to the pasteurized milk
sector.29

29

http://tribune.com.pk/story/649118/loose-vs-uht-milk-processed-milk-still-has-a-minuscule-market-share/

FOOD PROCESSING SECTOR IN PAKISTAN

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Figure 18: Milk Forms Available in Pakistan

Source: Gallup and Gilani National Survey, 2011

3.4. QUALITY OF SHELF LIFE OF MILK


The quality of loose milk is only sustainable for a maximum of 3-4 hours. Pasteurized milk, however, can last for
up to 15 days while UHT milk can last 3-6 months without refrigeration. However, once the tetrapack is opened,
the UHT milk needs to be consumed within 2-3 days.30

3.5. SUGGESTED COURSES OF ACTION AND RECOMMENDATION


The overall dairy sector has a huge opportunity because the demand locally is far greater than the supply.
Pakistan being the fourth largest producer of milk in the world has the potential to export milk as well. The
situation overall presents a lot of opportunities. No wonder new players such as Engro Foods, Shakarganj, Dairy
Land and lots of textile giants are entering the dairy sector. However, in order to tap opportunity at various
stages certain challenges have to be tackled with.
The initial stage which is the yield per animal could be dealt with by improving upon the quality of the animals
through cross breeding, artificial insemination, provision of right quality of fodder and vaccines. At this stage the
opportunity exists for the international exporters in terms of export of silos, mixing wagons, maize cutters etc.
They are being used by the big dairy farms and are being currently imported mostly from turkey and Italy
respectively. These opportunities were tapped because of the efforts made by Pakistan Dairy Development
Corporation (PDDC) and Small & Medium Enterprise Development Authority (SMEDA) in educating the farmers
regarding proper farming practices. The PDDCs Farmers Educational Program has helped small and middle
sized farmers in improving milk yield by following the right practices such as shed development for the cattle,
development of fence so that cattle could freely move and consume water as per its desire, milking techniques,
fodder and water requirements etc.. Many middle sized farms have been converted into model farms because they
adopted the simple farming practices taught to them by the PDDC officials. However, there is still a lot of room
for improvement. Due to lack of government support, the project has come to a halt. If these types of trainings

30

http://tribune.com.pk/story/649118/loose-vs-uht-milk-processed-milk-still-has-a-minuscule-market-share/

FOOD PROCESSING SECTOR IN PAKISTAN

57

continue not only will the demand-supply gap be minimized but these programs will also help investors to
provide feeding and breeding solutions to the farmers.
The second stage which is the milking stage presents opportunities in terms of milking parlours. The farms have
herd size of more than 100 animals will be ideal to pitch this. The right way forward is to pitch this product
category to the dairy associations of various areas of Pakistan who act as opinion leaders and educators and will
recommend the importance of it to the farm owners.
The third stage is the storage stage which requires the farmers to install chillers. Due to the lack of proper storage
facilities at the farm level a lot of milk is wasted. The chiller cost starts from Rs. 100,000. PDDC had provided
loans to the dairy farmers to install cooling tanks. However, due to the lack of current government funding
nothing is being done currently. The polymeric pipes which transport the milk from the chillers to the packing
machinery could be used by the big farms and model farms. The cost of these polymeric pipes starts from Rs.
1,000,000. The packaging option is only applicable for the model farms and big farms. Here again the
educational programs by the dairy associations would help because the concept of branding and packaging is
almost negligible. Joint ventures with dairy associations and/or potential investors such as local giants like the
Mansha Group, Dawood Group, Lakson Group etc. is a way forward to avail the opportunities available to Swiss
SMEs.

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58

4. Mango Industry in Pakistan


The mango is a juicy stone fruit belonging to the genus Mangifera, consisting of numerous tropical fruiting trees
that are cultivated mostly for edible fruits. The mango is native to South and Southeast Asia, from where it has
been distributed worldwide to become one of the most cultivated fruits in the tropics.
Mango is being referred to as Amra in Sanskrit literature and is being cultivated by man since 4000 years. It
attained an important place in horticulture during the rule of Mughal Emperor Akbar.
The mango is now cultivated in most frost-free tropical and warmer subtropical climates; including India, China,
Pakistan, Burma, Spain, Bangladesh, Australia, South & Central America, West and Central Africa, and South
East Asia.

4.1. OVERVIEW OF THE MANGO FARMING SECTOR IN PAKISTAN


4.1.1. Global Mango Map (Geography)
Figure 19: World Mango Production

The above map illustrates mango cultivation area (in hectares), and Pakistan lies amongst the top countries of the
world where mango is cultivated. Mangos share in the world export of fruit is about 15%. Annual production of
mangos in Pakistan is about two million ton, out of which 77 thousand ton is exported, which is only 7% of the
total output.
Mango is the 4th most rapidly growing trade after taro, single strength citrus juice and cassava tapioca. The world
trade in mango including re-export grew almost three times during the past decade. Current mango trade is
estimated around 650,000 ton, per annum. The prominent mango exporting countries include Mexico, Brazil,
Pakistan, India, Philippines Ecuador, Peru, South Africa and Thailand. Top producers of mango are shown in the
following table:

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59

Table 28: Top Mango Producers

Rank

Country

Production (Metric Ton)

India

11,400,000

China

3,130,000

Thailand

1,750,000

Mexico

1,523,160

Pakistan

1,036,000

Indonesia

891,566

Philippines

880,000

Nigeria

730,000

Brazil

542,000

10

Egypt

326,063

Source: FAO (2011)

4.1.2. Global Mango Production (Area and Volume)


Over the period of last ten years, the cultivated land and production both have increased two fold.

Figure 20: Mango Production per Hectre

45000000

6000000

40000000

5000000

35000000

4000000

25000000

3000000

20000000
15000000

Ha

tonnes

30000000

2000000

10000000

1000000

5000000
0

Production Quantity

Area Harvested

Source: FAO (2013)

Although, mango is referred to as King of all fruits, it is primarily consumed locally and a significantly low
amount is available for exports. This makes Mango a pricey fruit internationally. The following graph shows
global mango exports in (1000, US$).

FOOD PROCESSING SECTOR IN PAKISTAN

60

Figure 21: World Mango Exports, US $, 2002 - 2011

World Mango Exports (1000, US$)


1'600'000
1'400'000
1'200'000
1'000'000
800'000
600'000
400'000
200'000
0
2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: FAO (2012)

Pakistani mango exports are gradually increasing but in the recent past floods and heavy rains during harvesting
season has effected it production and exports.

Figure 22: Pakistan's Mango Exports, US $, 2002 - 2011

Pakistan Mango Exports (1000, US$)


50'000
40'000
30'000
20'000
10'000
0
2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: FAO (2012)

Mango being an expensive commodity attracts farmers and associated business. Over the past few years, Far
Eastern countries have increased their mango production and exports by adhering to international standards and
best practices. As a result, Pakistan has lost its position from 4th largest mango producer and is currently 7th
largest producer. The following table illustrates top mango producers of the world.

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61

Table 29: Top Mango Exporters in 2011

Rank

Country

Export Qty (tons)

Mexico

287,771

India

229,192

Thailand

152,285

Brazil

126,568

Peru

123,863

Netherlands

110,179

Pakistan

105,130

Ecuador

49,066

Yemen

35,727

10

Philippines

30,565

Source: FAO (2011)

4.1.3. Mango in Pakistan


Pakistan is an agricultural country and production of fruits is an important part of this sector. Mango is the king
of fruits and one of the most important fruit crop in the world as well as in Pakistan. Its a tropical, climacteric
fruit liked by all due to its taste, flavour and excellent nutritional properties. Mango is a delicious fruit being
grown in more than 100 countries of the world.
The mango is the national fruit of India, Pakistan and the Philippines. It is also the national tree of Bangladesh.
Pakistan mangoes are sweet, aromatic, yellow skinned and soft. This delicious fruit is nutritionally superior,
source of several vitamins and minerals. Mango farms range in size from less than 2ha to more than 400ha.
The main mango growing districts in the Punjab province are Multan, Bahawalpur, Muzzaffargarh and Rahim yar
Khan. In the province of Sindh it is mainly grown in Mirpur Khas, Hyderabad and Thatta in the province of
NWFP Mango is grown in D.I Khan, Peshawar and Mardan. Subsequently, a new trend of growing late varieties in
Punjab has received a wide popularity, which has extended the market period and added to the exportable
surplus.
4.1.4. Mango Varieties in Pakistan
In Pakistan, 250 varieties of mango are found while most important commercial cultivars of Pakistan are:

Table 30: Mango Varieties Cultivated in Pakistan

Alamas
Alphonso
Anwar Retaul
Baganapalli
Chaunsa
Chaunsa late
Dosehri

Gulab Khas
Fajri
Langra
Malda
Neelum
Retaul late
Sindhri

Saroli
Sensation
Swarnarika
Totapari
Yakta
Zafran
Zardalu

4.1.5. Cultivation Conditions


Mango trees perform well both under tropical and subtropical climatic conditions. The trees can survive at 10 C
to 65 C but the optimum of temperature is 21 C to 27 C.
Mango trees grow over a wide range of frost free climates. The trees produce best in climates that have well
defined, relatively cool dry season with high heat accumulation during the flowering and fruit development
period.

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62

Highest production of quality fruit occurs in those areas with distinctive non-freezing cool periods and an
extended dry period prior flowering, hot temperatures during fruit development and access to water from
flowering to harvest. Drought during fruit onset and development may result in reduced yields and fruit size.
For coastal areas, seasonal flooding of the heavy clays and lower humidity than in the savannah areas
differentiate these two important ecozones. In the case of mangoes, plants may develop extensive canopies and
grow into large size trees in both ecozones, however it is only in the areas with relatively lower humidity that
mango trees are able to consistently produce fruit.
Summer temperatures also affect the production of good quality mangoes. Cool summer temperature with
average minimum temperature 18C delay the ripening of fruit. It is stated that the mango trees produce largest
crop and most brilliant fruit in regions where there is well defined dry season corresponding with the blooming
and ripening periods. Rain during the blooming season (November to March) is deleterious as it stimulates
vegetative growth but interferes with flower production and encourages fungus diseases of the inflorescence and
fruit. Cyclones and windstorms during the fruiting season can play havoc causing excessive shedding of immature
fruit.
4.1.6. Total Area Cultivated, Production and Yield per Hectre
The total area under mango orchards in Pakistan is 157,000 hectares. Out of which 67% of the area falls in
Punjab; 32% in Sindh; 0.8% in Balochistan and only 0.2% in NWFP. The major mango producing areas include
Khanewal, Multan, Bahawalpur, Rahim Yar Khan, Dera Ismael Khan, Sukkur, Hyderabad and Mirpur Khas.

Table 31: Area and Production of Mangoes

Year

Area (000 Ha)

Production (000 tons)

Yeild (Tons/Ha)

2004 - 2005

151.5

1671.2

11.03

2005 - 2006

156.6

1753.9

11.20

2006 - 2007

164.5

1719.2

10.45

2007 - 2008

166.2

1753.7

10.55

2008 - 2009

170.1

1727.9

10.16

2009 - 2010

173.7

1845.5

10.62

2010 - 2011

171.9

1888.5

10.99

2011 - 2012

172.4

1700.1

9.86

Source: Pakistan Bureau of Statistics

Pakistans annual production is close to 2 million tons.


Figure 23: Mango Production in tonnes: 2002 - 2012

2500000

tonnes

2000000

1500000

1000000

500000

0
2002

2003

2004

2005

2006

2007

Pakistan

FOOD PROCESSING SECTOR IN PAKISTAN

63

2008

2009

2010

2011

2012

4.1.7. Mango Distribution Channel


A typical mango distribution channel is illustrated as:

Figure 24: A Typical Mango Distribution Channel

Source: UNIDO

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64

Domestic and Export Marketing typically follows the following route:

Figure 25: Domestic and Export Flowchart for Mangoes

Source: ICCI

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65

4.1.8. Mango Value Chain System

Figure 26: Value Chain Analysis of Mangoes

Source UNIDO

4.2. MANGO EXPORT REQUIREMENTS


It is pertinent to note that Pakistani exports can get a gigantic leap if locally produced mango meets certain
international export conditions. Fruits from orchards with a history of stem end rot or certain other diseases
cannot be exported.
Carbendazim and prochloraz are not acceptable for exports unless the fruit is treated with a combination of hot
water and vapour heat. The following processes are compulsory export requirement for export:

Table 32: Quarantine Requirement per Importing Country

Importing Countries
EU, Malaysia
Japan
USA
China

Quarantine Requirements
Hot Water Treatment
Vapour Heat Treatment
Irradiation
Extended Hot Water Treatment

4.3. POTENTIAL INVESTMENT PROJECTS IN MANGO SECTOR OF PAKISTAN


Currently approximately only 3% of mangoes are processed into value added products such as pulp for use in
drinks and ice cream, canned mangoes and dried mangoes. Potential investment opportunities in mango sector
are described in the sections that follow.

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66

4.3.1. Mango Pulping Facility


Mango pulps are important value added products having demand in both local and export markets. The local
market of fruit juices, nectars and drinks has been growing at a very high rate during the past five years.
Consequently, the demand for fruit pulps has also increased during this period.
The process flow of mango pulping process is shown in the following flow chart:

Figure 27: Mango Pulping Process Flowchart

Source: SBI

Being a profitable proposition and increasing demand for pulp by local fruit juice and nectar industry, a number
of players are present in the sector. They are:

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67

Table 33: List of Mango Pulping Manufacturers

Source: SBI

4.3.2. Dried Mango Products


Dried mango is an important value added product; made by dehydrating mango slices or mango pulp. Dried
mango products are popular in the world. There are different types of products available in this category. Cutting
mango slices makes dried mango and drying those in solar and/or fuel fired dehydrators. Another variation of the
product is called mango leather, which is made by making mango pulp and drying the pulp. There is demand for
dried mango products in international markets. The entire major mango producing countries produce and export
dried mango products. There is demand of this product in local market also; which is shown by its sale in large
retail stores in the major cities of the country. Test marketing of dried mango products was also carried out by a
small facility in Tando Allahyar Sindh; and the results were very positive.
There is a demand for dried mango slices and also for mango leather. Mango leather can be made in different
flavours by mixing different types of spices and other additives in the mango pulp. Almost all types of value added
products of mango are made in Pakistan; including pulp, juice, drink, chutney, pickle, murabbas, etc. However,
dried mango products are not made in Pakistan. There is only one research scale facility in Sindh which is
engaged in making this product. The facility is situated in Nawazabad Farm in Tando Allahyar, Sindh.
Absence of any commercial facility for making dried mango products presents an attractive opportunity to Swiss
businesses for earning good profits.
4.3.3. Fresh Mango Grading and Packing Facility
Unlike citrus, grading and packing facilities do not exist for mango in the mango growing areas. There are very
few mechanized grading and packing facilities and most of those are located in Karachi. There is a potential for
investment in mango grading and packing facilities in mango growing areas of Sindh.
4.3.4. Mango Chutney & Pickles
Another value added project is making products like mango Chutney, Pickles and Murabbas. Mango pickles of
Shikarpur are already famous in Pakistan for their taste and quality, even when Shikarpur is not a major mango
area. The other important product is mango chutney; which has an export market also; along with the local.
Mango chutney is an important value added product of India which is sold in export markets.
4.3.5. Bottled Mango Juice
Mango juice is a popular product in Pakistan. For the past many decades, mango juice is being consumed by the
Pakistanis in bottles. Therefore, this project is an attractive investment opportunity.
4.3.6. Mango Hot Water Treatment
Sanitary and phytosanitary requirements of the importing countries are becoming stringent with the passage of
time for export of mangoes. To meet those requirements, it is important to have hot water treatment facilities for

FOOD PROCESSING SECTOR IN PAKISTAN

68

mango; for taking care of the issue of fruit fly. There are some existing facilities in Karachi; however, there is need
for establishing more facilities in mango areas of Punjab.
4.3.7. Mango Vapour Heat Treatment
Sanitary and phytosanitary requirements of mango importing countries differ. There are some countries like
Japan, which require vapour heat treatment instead of hot water treatment to ward off dangers of fruit fly.
Therefore, this is also potential investment project.
4.3.8. Irradiation
One important means for meeting the sanitary and phytosanitary requirements for exporting mangoes is
irradiation. This is especially important in the context of exporting mangoes to the largest export market of USA.
One such facility (PARAS Foods) has become operational in Lahore. There is need for establishing a larger facility
in Karachi and Multan for mango, which will be used for other horticulture/food products.

4.4. SUGGESTED COURSES OF ACTIONS AND RECOMMENDATIONS


Like in most mango producing countries, a majority of the product is consumed domestically in various forms.
There is a huge opportunity in the Mango Pulping sector as mango is the most popular fruit juice flavour in
Pakistan. The domestic and export juice market is increasing and due to the unavailability of quality pulp, the
growth in the juice sector is facing a bottleneck. Hence, a lot of international juice brands from UAE, Turkey,
Iran, and Indonesia are imported to meet the domestic requirement. Popular Industries is the major juice
manufacturer in the country with 48% market share (brands: Polly, Maza).
To increase fresh fruits exports to USA, IRRADIATION is the process required to fulfil the export requirements.
There is only one irradiation plant in Lahore (Paras Foods) and that too is a pilot project. If investments are made
into IRRADIATION plant supported by the onsite packaging plant located in Multan and Karachi, fresh mango
fruit can directly be packaged as per export requirement and shipped to various destinations. Similarly, hot water
treatment and vapour treatment plants of limited scale are in Karachi but not in Punjab. Such a plant in Multan
and Lahore can radically increase the export value of mangoes, as an early hot water treatment will ward off the
dangers of fruit fly from mangoes.
Grading and Packaging plants are mostly located in Karachi and Lahore and not near mango farms which makes
it possible only for large-scale commercial farmers to transport their produce to the respective facilities. If
packaging and grading units are established near the mango clusters Multan, Bahawalpur, MirpurKhas and
Nawabshah, it will facilitate growers as well as exporters to meet export requirements.
With the global population of South Asian Expatriates growing in North America and Europe, dried and spiced
mango products in the forms of Chutney, Achaar (Pickle) and Murabba have a growing domestic and export
market.

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5. Quotes from the Experts


5.1. CHILLI
There is great potential in chilli processing if some steps are taken towards providing assistance. Chilli
processing is currently not a mass scale industry because of a vicious circle we are caught up in. A lot depends on
the drying of chillies. Firms do not want to get involved in the drying process and leave it to farmers who use
traditional sun-drying in open air, thereby contaminating the produce. So it ends up getting lower price in the
open international market (SMEDA research analyst).
Teach farmers improved processes and give them incentives. Motivation through rewarding improved product in
our example. We collaborated with MCB to provide loans to farmers so that they did not have to be liable to
middlemen. These loans would be paid through payments we made directly to farmers accounts once we
purchased their produce.
We provided incentives to farmers through fixing the price at a level of acceptable contamination. If the farmers
brought us better yield with lesser contamination level, then they received premium in price above the fixed rate.
So if the fixed rate was Rs. 10/unit, for example, we gave them Rs. 12/unit for a better yield. So in spite of the fact
that all functions were performed by farmers, we received yields with levels of contamination below our
acceptable rate, in some cases as low as 5-7 parts per billion. That is huge (Engro Foods).
If the SMEDA project works then there will be some support. Farmers may see benefit to forming
cooperatives/associations and may overcome dependence on middlemen. India has been very successful in
tapping export markets. In India the solution is that some companies buy fresh chillies from farmers and dry
themselves so remove aflatoxins. Investors should get in and do this to improve product quality and exports
(Mill Owner).

5.2. DAIRY
Dairy sector has more than 200% profit. However, it is a risky business. Many textile giants are venturing into
this sector because of the margins. For instance, Mansha Group has their dairy facility. They have more than
1000 cattle on their dairy farm. Another example is that of dairy-land which has 350 cattle. They sell their brand
called Day Fresh in pouch which has a shelf life of 24 hours. Feroze Textile has come up with their brand called
Pure milk. They recently imported cows from Australia and have more than 350 cows on a 175 acres land. The
reason that they gave regarding import of cows rather than buffaloes is because cows milk is better than buffalo
milk.
The machinery requirement is dependent on the overall process:

Feed (Silos, Mixing wagon- machinery imported from Italy)


Rest (Showering mechanism)
Milking Parlour (Single ID mechanism, milk PH recording and pulsation system- BouMatic smart dairy
software being used to measure the PH value). Usually imported from the US, UK, Italy and Belgium
CIP (cleaning in place i.e. units used by the cows- lines are flushed out)
Chiller (Candy, a US company exporting chillers)
Polymeric pipes (SS316L): Used for the purpose of transporting milk from the chillers to the packaging units.
Packaging unit (Semi-automated; because films have to be refilled)

Dairy farming may prove a profitable business for small landholders. Dairy farming is one of the best projects if
professionally done on small land holdings. The farm would start the operations with 12 animals (10 cows and 2
buffaloes having daily per animal milk production of 13 and 8 litres respectively) to achieve milk production of
34,560 litres by the end of first year, excluding the milk consumed by suckling calves.
The milk will be primarily sold to bulk buyers at the rate of average Rs.60 per litre. The farm will also offer milk
sale to domestic individual consumers.

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A dairy farm with 12 animals (80% cows and 20% buffaloes) needs a total investment estimated at Rs. 2.19
million out of which the capital cost of the project is Rs.2.01 million with working capital of Rs. 0.17
million.(Large Dairy Farm Owner)

5.3. MANGOES
Mango Farming and processing is a profitable business. It used to be my hobby but now I am fully involved in it.
The weather conditions suit its cultivation and it is a Gods blessing upon us. The problem this sector is facing is
lack of fresh fruit processing facilities. If we have a world class product, our exports are only hampered by
bacterial and fungal control procedures made mandatory by importing countries like USA, Japan and Europe.
(Farm owner).
It is a profitable business. Look at our farms, we are completely integrated and have harvesting to shipping all
under our control. This synergy gives us greater efficiencies and competitive advantage. We export around 6000
tonnes a year and are considering expansion as the demand is ever increasing. (Farm owner).
I have travelled a lot and when I visit fruit markets internationally, I see average fruit but well-packaging
attracting higher prices. Our Mango is best in the world, but we are selling it in ancient packaging. Even if you
look in Karachi, Lahore and Islamabad and all those big marts out there, you see beautifully packaged fruits. We
need packaging and grading plants near our farms. If packaging is improved, local profitability goes up by 30%
and people in large cities are willing to pay more. (Farm owner).

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Bibliography
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