Prospects in agriculture sector

December 26, 2012

Rashid A Mughal


Wednesday – Emerging markets, including Pakistan, will drive the growth of the dairy industry as global demand for liquid dairy products (LDP) is set to accelerate in 2011-2014, according to a study released by Tetra Pak. According to Daily Index 2012, Pakistan is the third largest milk producing and consuming country in the world with 64 percent of the country’s population classified as “Deeper in the Pyramid” (DiP), which represents 60 percent of LDP consumption. DiP represents a golden opportunity for delay processors and packaging companies because today’s low-income consumers are tomorrow’s middle class, according to Tetra Pak, a leading food processing and packaging solutions company.

The challenge for the dairy industry in Pakistan has been to reach DiP consumers, especially in a country where 94 percent of the population consumers unpackaged milk and 70 percent of the population lives in rural areas. Food processors in Pakistan are coming up with innovative affordable products to reach this market. One such product is affordable tea creamers, which has a huge potential among DiP consumers as drinking milk with tea accounts for 32 percent of total milk consumption in Pakistan, according to the Tetra Pak research. Consumption by low-income consumers in developing markets is forecast to increase from about 70 billion litres in 2011 to almost 80 billion litres in 2014, according to the Dairy Index, which tracks worldwide facts, figures and trends in the global dairy industry. Many of these consumers are expected to switch in coming years from drinking loose milk to packaged milk.

Low-income consumers represent one of the biggest growth opportunities for the dairy industry. The key to tomorrow’s success is reaching these consumers today, said Tetra Pak President and CEO Dennis Johnson. They make up almost 40 percent of the world’s population and live in economies driving our industry’s growth and they are growing more affluent. These low income consumers live on Rs.180-750 a day and are virtually untapped by today’s dairy processors. These DIP consumers make up about 50 percent of developing countries population and consumer 38 percent of LDP in developing countries.

The Tetra Pak research focused on Pakistan, India Indonesia, Brazil and Kenya which together account for more than 76 percent of LDP consumption by DIP consumers in developing countries. Tapping into this market is not without its challenges, according to the report, Tetra Pak has identified three key challenges for dairy processors seeking to reach consumers in this growth market. They need to make products which are affordable, available and attractive to consumers on limited incomes. That means dairy processors must produce healthy, safe and nutritious packaged dairy products without adding unsustainable costs. They must also make them available in small traditional stores in remote rural areas or congested cities where low income consumers shop.

Tetra Pak also announced that global consumption of liquid dairy products is set to rise by a compound annual growth rate (CAGR) of 2.9 percent in 2011-2014, accelerating from 2.5 percent growth in 2008-2011, led by buoyant demand in Asia, Africa and Latin America. Asia, Latin America and Africa are all expected to record higher growth rates in consumption in 2011-2014 than in 2008-2011. Asia is forecast to consolidate its position as the world’s biggest market for liquid dairy and dairy alternatives, while Latin America is forecast to overtake Western Europe as the world’s second biggest market by 2014, the research shows, Demand in Asia-Pacific is forecast to rise by 4.6 percent (CAGR) in 2011-2014 to some 165.3 billion litres.

Asia-Pacific nations face a year of slowing growth caused by troubled export markets and rising commodity prices, an annual United Nations report warned last week. Despite the gloomy outlook, the region will remain the fastest growing in the world this year, the UN’S Economic and Social Commission for Asia and Pacific survey found. The growth will edge down to 6.5 percent in 2012 from 7.0 percent last year as the rumbling euro zone debt crisis and continued uncertainty over the US economic outlook weaken demand for exports, it said. The region faces a new challenge of volatile commodity prices that the UN warned will hit the poor hardest unless governments make plans to soothe the pain of higher costs. The greatest threat to the region is a disorderly debt default in the euro zone, UN under-secretary Noeleen Hayzer said.

If it (the euro zone) unravels it could lead to a $300 billion loss in the region over 2012 and 2013, she said, adding that the scenario would hamper efforts to cut poverty by keeping over 14 million people in the region below the $1.25 a day poverty line. Heyzer said Asia-Pacific governments are well-placed to make economic policies to meet the difficulties ahead. The region is facing key challengers, but it has continued being an anchor of stability and a growth pole for the world economy, she said.

The survey urged governments to prepare for new economic and social challenges that will shape their development in future years.. Speculative inflows of money, over-reliance on natural resources, income inequality and high rates of unemployment will all require careful political attention, it said. Pakistan, therefore, has a very good chance to develop this sector to reap the benefits of the tremendous potential it offers. All we need is a positive direction and proper road-map and a firm determination at the government level to provide necessary in-puts for developing this important sector which with is tied the future of Pakistan.

—The writer is former Director (Emigration) & Consultant: ILO and IOM.


Courtesy: Pakistan Observer

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