Pakistan Dairy Association

Pakistan Dairy Association

Pakistan Dairy Sector

Overview 2020 Presented By:

Dr. Shehzad Amin CEO – Pakistan Dairy Association

P a k i s t a n D a i r y A s s o c i a t i o n i s t h e representative body of forward looking dairy farmers and milk processors of the country. More than 90% of the packaged dairy products sold in Pakistan are produced by our members. In addition to delivering safe and healthy dairy products to the consumers, PDA members are the only private sector companies assisting the dairy farmers to improve the quality and quantities of milk produced in the country and provide them access to the market through a structured supply chain.

PDA Members

Pakistan: Country and Market Dynamics

Pakistan at a Glance

PAKISTAN ECONOMIC SNAPSHOT PAKISTAN’S ECONOMY BY 2030’S

USD 314 BILLION Nominal GDP 5 Year Average GDP Growth: 4.5%

212 MILLION Population growing at 1.9% p.a.; GDP per capita income (PPP): USD 5,400 (2017)

18th Largest Middle Class in the World 60% of the population aged under 24

18.9% Percentage of GDP accounted for Wholesale & Retail Trade

37.2% Population living in Urban Areas, increasing urbanization every year

20th Biggest… Economy by 2030 according to PWC’s estimate

High Working Population… The current World Bank projections suggest annual working population growth rate as 2.4%, one of the highest in Asia. Fast Urbanization… United Nations has projected Pakistan’s urban population growth at 2.4%, one of the highest in South Asian region

Rated as one of the Leading… Potential Emerging Markets By 2030

Greater Regional Trade… World Bank forecasts Pakistan to benefit from 3 times increase in regional trade growth, with potential benefit to reach $58 billion by 2030.

Source: CIA Factbook, State Bank of Pakistan (SBP), World Bank, Ministry of Finance (MoF)

Economy Overview Pakistan : Country and Market Dynamics

STRUCTURAL DRIVERS OF PAKISTAN ECONOMY

Demographics A Young Population with a low dependency ratio

Strategic Location Situated between energy-hungry Asia and energy-rich Middle-East

Consumption led Economy Consumption accounts for 80% of the GDP

Dependence on Imports Energy & Commodity Deficient Economy resulting in a high import bill

Persistent CA & Fiscal Deficit Developed as a result of a low tax base and lagging exports

Volatile FX Reserves Caused by perpetual current account deficits

KEY CHALLENGES TO THE PAKISTANI ECONOMY

Source: Ministry of Finance (MoF)

Demographics – Favoring a strong consumer market Pakistan : Country and Market Dynamics

TOTAL POPULATION VS. PEERS 5TH LARGEST POPULATION IN THE

WORLD

4th Indonesia 270 Million

5th Pakistan 212 Million

6th Brazil 211 Million

7th Nigeria 201 Million

8th Bangladesh 163 Million

9th Russia 146 Million

10th Mexico 128 Million

11th Japan 127 Million

12th Ethiopia 112 Million

POPULATION DISTRIBUTION BY AGE MAJORITY OF THE POPULATION AGED

UNDER 24

41%

19%

32%

5% 3%

0-14 Years 15-24 Years 25-54 Years 55-64 Years 65 Years+

POPULATION IN URBAN AREAS VS. PEERS 37% OF POPULATION LIVES IN CITIES WITH A 2.4% GROWTH COMPARED TO 2.3% IN

INDIA 55.30%

36.60% 36.51% 35.90% 34%

25.50% 18.50%

Indonesia Pakistan India Sri Lanka

Source: Pakistan Bureau of Statistics (PBS), United Nations, (UN)

LOW DEPENDENCY RATIO TO PROVIDE A HIGHER SPENDING

POPULACE

4.9 7.6 7.9 8.7 9 9.9

11.1 11.1

20.4

MEDIAN AGE VS. PEERS OF 24 MAKES ONE OF THE YOUNGEST

POPULATIONS

24

24

24 27

28

29 31 33 37

38

Pakistan is the 4th largest producer of milk in the world. Ninety percent of the dairy sector comprises of farmers with less than ten heads of cattle. Unlike the production systems in the developed countries, milk production systems in Pakistan represent smallholding with subsistence- or market-oriented-level farming followed by peri-urban or commercial-level farming. Historically, dairy sector has been owned and managed by the private sector. During the past two decades, new initiatives have been taken because of the active involvement of corporate private sector. These e f f o r t s have resu l t ed i n improvements like enlargement of herds and import of high-quality milk germ plasm, the productivity per animal, milk collection, processing and marketing, the supply of dairy inputs (machinery, equipment, feeds, semen, and elite dairy animals), and farmers knowledge, and skills on modern management practices.

Dairy Sector Highlights - Pakistan

Source: OECD-FAO Outlook 2019, AC Nielsen

52.4 54.3 56.5 57.6 59.6

42.4 43.8 45.2 46.6 48.1

0

10

20

30

40

50

60

70

FY15 FY16 FY17 FY18 FY19

Pakistan Milk Production and Consumption (million tonnes)

Production Consumption

World Milk Production Million Tonnes % India 169 20% European Union 149 18% United States 98 12% Pakistan 57 7% Africa 44 5% Brazil 35 4% China 35 4% Russia 30 4% New Zealand 22 3% Rest of World 191 23% Total World Production 826 100%

Milk Prod. 57 Bio. Lit.

11% Contribution to GDP

10 Million Farming Families

57 Million Animals

Importance of Dairy

57% Contribution of Livestock to value of agriculture

30mn People employed in the livestock

Sector

Rs.4.69bn Value of Exports

in Dairy

Rs.18.42bn Value of Imports

in Dairy

Source: Pakistan Bureau of Statistics 2017

MIK

Liquid Milk Supply, 45,884 Tradable Milk, 25,262

Traditional Dairy Products, 14,023

Farmer usage., 6,599 Waste, 11,466

Processed, 1,988

Loose, 21,676

Flavored, 1,816

Ambient, 1,022

MTD Powder, 596

Other Ind., 211 Chilled, 90

Flavoured , 68 Evap, 0.6

Raw Milk Production Liquid Milk Supply Tradable Milk Processed Milk

Mio

Litr

es

57,350 25,262 1,988 45,884

Home-made dairy products like traditional

sweett, cheese, yoghurt, ghee etc.

Biscuits Ice-cream, Cheese, Yoghurt

Euromonitor Compass

Despite being among the top 5 milk producing nations in the world Less then 5% comprises the formal (taxable) sector…

Initials/YYYY-MM-DD

/ 12

High in per capita consumption as well

Pakistan: One of the largest milk producers globally

124 117 113 97 93

81 78 76 73 73

Ireland Pakistan Finland United Kingdom

Australia New Zealand

Spain Sweden Estonia Denmark

Lite

rs/y

ear

Per capita WM consumption: 2017

64

25 19

11 10 8 7 6 4 4

India Pakistan USA Brazil China Russia Mexico United Kingdom

Germany Ethiopia

Bio

Lite

rs Total Tradable Milk: 2017

Source: Euromonitor Compass 2017

White Milk 45%

Hot Tea 26%

Carbonated Soft Drinks 12%

Water 11%

JNSD 4%

OLDP 2%

Dairy accounts for 45% of 52 Bn liquid food consumption

Source: Compass 2018 Liquid Processed Food Consumption

Tetra Pak/Pakistan/2019-09-24

29.4 27.01

35 39.28

33.19

49.3

€ /1

00kg

Farm Gate Prices 2018 FX Average

USA Chile Netherlands Italy Ireland Pakistan

However, Pakistan has one of the highest Farm Gate prices amongst major dairy producing countries

Sources: *https://www.quandl.com/data/ECONOMIST-The-Economist-Big-Mac-Inde **https://www.clal.it/en/index.php?section=riepilogo

0.36 0.41

0.51 0.50 0.44

0.95

€/1

00kg

Farm Gate Prices PPP Big Mac* Basis

USA Chile Netherlands Italy Ireland Pakistan

How we are faring..

Initials/YYYY-MM-DD

/ 15

Sr. No. Dimensions Pakistan Germany 1 GDP/Person/Year $5,035 $45,229 2 GDP/Person/Day $13.8 $123.9 3 Per Capita Consumption L/Day 0.32 0.13 4 Keeping Pakistan Consumption L/day constant 0.32 0.32 5 Farm Gate Prices $/L $0.637 $0.33 6 Consumption cost ( 3 x 5) $0.2 $0.043 7 Share of Daily GDP Spend (6 / 2 x 100% ) 1.5% 0.03%

Average Pakistani spends

~50 X more on milk

Source: Trading Economics for GDP/capita PPP R

dairy sector can play much larger role to revive rural economy 1% increase in market share of processed milk means

Milk Collection

Rural Economy

Employment

Increase in Allied Industry

Tax Revenue

Exports

~600 mio ltrs Rs 36 Bio 2,500 Rs 17 Bio Rs 6 Bio USD 12.5 mio

16 Kashif

+ Reduction in malnutrition!

Cheese

17.6 million tonnes of packaged cheese were sold globally.

Source: Euromonitor International https://fp.brecorder.com/

2017/09/20170911216671/

USA is ranked 1st in cheese sales followed by France, Germany & Russia.

35% of China’s cheese sales came from the internet, up from 15% in 2012.

In 2017,

Cheese sales are expected to reach USD 131 billion worldwide.

Estimated annual consumption: 10,000 tons per year

Adam’s remains the market leader in GT

In Pakistan,

Happy Cow enjoys a significant market share owing to its strong distribution channel.

7500, 75%

2500, 25%

B2B Gen. Trade

5250, 70%

2100, 28%

150, 2%

Mozerralla

Cheddar

Others

1550, 62% 700, 28%

250, 10%

Mozerralla

Cheddar

Others

TOTAL CHEESE MARKET 10,000 Tons/Yr

GENERAL TRADE 2,500 Tons/Yr

B2B Market 7,500 Tons/Yr

Source: www.alliedmarketresearch.com/cheese-market

Technavio

France, Finland, Denmark & Germany show maximum annual per capita consumption touching 25 kg.

Major Players in Pakistan!Local & International!

Yeh Cheese!

Life Well Paired

Shok se Khao

Livestock is raised by more than 10 million small and landless families (65-75 million population) in the rural areas and is their main livelihood source. It is a form of social security for the poor, who cash it at the time of need and it also serves as security against crop failure in Barani (rain-fed) areas. Dairy sector is an important c o m p o n e n t o f P a k i s t a n ’ s economy. The value of milk alone exceeds the combined value of wheat, rice, maize and sugarcane in the country.