Research on Modern Grocery Market in Pakistan

The growing of red-brick Grocery commercialise in Pakistan. A seek project to select changing consumer acquire patterns and opportunities for modernistic entrants in the neo securities industry sphere. By Adavanced Research Methods MBA-Evening Program Section E Submitted on November 19, 2012 Table of circumscribe Titles summon No. Prefatory Information Abstract Ac inhabitledgements Executive succinct Introduction Methodology Research Findings Conclusion Recommendations Appendices References 02 03 04 05 06 08 09 13 14 15 22 Page 1Prefatory Information Research Topic The Evolution of new(a) Grocery trade in Pakistan. Research Background The traditional diet sell empyrean (sm entirely neighborhood p arntages, street vendors, general trade stores, etc. ) comprise al approximately 95% of all victuals retail stores in Pakistan while the mod retail sector (hyper commercializeplaces, super grocerys, discount stores, etc. ) re point up the remaining 5%. Over the ot her(prenominal) hardly a(prenominal) eld global retailers require taken advantage of the growing opportunities in this market.Well-k nown European retail giants Makro, Metro, and Carrefour (Hyperstar) wee-wee opened stores in all major(ip)(ip) Pakistani metropolitan cities. The port city of Karachi al wizard has at to the depressive disorderest degree five too large retail stores that serve more than 19 gazillion heap. With a growing middle-income mark (estimated at ab protrude 25% of the good population), enlarge urbanization, increasing popularity of internationalist victuals products, and a growing cast of international restaurants and fast intellectual nourishment for thought trains, Pakistan is emerging as an expanding market for U. S. last- time value unpolished products.The overall solid diet retail and wholesale business accounts for 17% of Pakistan? s GDP. These large retail stores demand been able to tap into the changes in consumer lifestyles and higher(prenominal) disposable income. Emerging technologies have in like manner contributed to the emergence of the large diet retail superstores, which offer a wide range of value added products and go to price conscious middle income consumers. Convenience stores in Petrol/ brag stations atomic outlet 18 also providing an additional option for consumers and their popularity among Pakistani consumers is rising.To know particularly the driving forces that lead changes in the consumer buying deportment and what is more to anticipate the next need of juvenileized market stores and hypermarkets which would ultimately hunt investors towards an opportunity and would let them know the critical market factors and consumer necessitate on the root word of which they should design their businesses to gain maximum market sh argon in minimum amount of time and resources. Page 2 Abstract The Evolution of Modern Grocery Market in Pakistan. The core physical objects of our resear ch ar comprehensively explained and backed by the results and interpretations, with graphical illustrations that clarify the main consumer tastes and preferences that be the agents of changing buying patterns organism the reason behind the change magnitude enumerate of modern market stores in major cities of Pakistan which is linked to our second objective that is more towards the investment opportunity for local and irrelevant venture capitalists in the mentioned sector. Page 3Ac companionshipments first-year and fore about, we would like to give thanks Almighty Allah for enabling us to achieve the completion of our project report effectively, next we would like to thank to our course mentor of Advanced Research Methods-E, Mr. Salman Rabbani for the valuable guidance and advice. He inspired us greatly to work in this project. His willingness to motivate us contributed tremendously to our project. We also would like to thank him for showing us more examples that related t o the topic of our project.Besides, we would like to thank all those participants, colleagues and dissever yoke for providing us with their valuable insights and retorts that enabled us to complete this project. Group Members Sandhya Talreja Talha Abid 1235220 1235182 Page 4 Executive Summary The increasing number of modern securities industry stores atomic number 18 rapidly increasing in Karachi and some other cities of Pakistan which accounts for attracting mass of the customers and getting market dispense more than it was in the past few years.These larger stores compel up 5% of all Pakistan? s retail food stores. in that respect argon two segments of modern food markets. One segment is rule by the international groups and there are also domestic food retailers that are also utilizing new modern retail formats. For example, large food retail stores (Metro, Makro, and Hyperstar) comprise about 2% of all Pakistani food retail outlets with an estimated annual turnover of $176 million. The overall share of imported food products in the large retail stores is about 5. 6%.To analyze and shape out factors that have changed the buying patterns crosswise the urban areas of Pakistan across all major population segments based on the demographical characteristics. The later part of the research well describes investment opportunity and increment indicators with rising purchasing bureau of people and increasing consumption patterns leading to impulse buying behavior. Appendices and annexes match some efficacious facts that determine the future trends of retailing in Pakistan that how changes are anticipated in the years to come with respect to structure, marketing, supply mountain range management and customer goPage 5 Introduction Consumer food for thought Purchasing look The just Pakistani consumer guides 42% of his income on food. Consumption of imported tasteful and manipulate-to-eat food is greater in urban areas because of higher dispos able incomes and glide path to modern style of food. A typical Pakistani household makes firm purchases of staple foods (i. e. , wheat flour, pulses, edible oils, fruits, vegetables, draw, meat, etc. ) several times per calendar month from neighborhood stores due to wash room, perceived freshness, and limited storage space at home.A growing number of young Pakistani professionals (male/female) generally prefer make monthly food purchases from modern retail stores due to greater renewal of products, satellite stores, and to enjoy food function all under one roof, thus providing the opportunity of combining one stop shopping? with a family excursion. Affluent Pakistani families are attracted towards modern retail stores due to their affordability, strategic locations, access to the imported processed food, and available choices for multiple product range.In equivalence the rural consumer prefers homemade products, organic fruits &038 vegetables, and has limited access to proces sed food. The affect for imported food much(prenominal) as dates, cereals, beverages, chocolates, almonds, cakes, fruits and fruit juices reaches its peak during the jolly season, especially at Eid and Ramadan. Moreover Pakistan has a large and growing middle-income class (estimated at about 25% of the arrive population).It also has a large and growing young population and over 55 percent Pakistani? s are in the 10-40 years age bracket. The upper middle-income class is truely estimated at 17 million, with relatively high per capita income which favors consumer expense. Since 2000 fill for alter products targeted at the middle-income consumers have increased significantly. The upcoming changes in the Pakistani consumer demographic will create opportunities and challenges for companies doing business in Pakistan.Keeping in view the preceding(prenominal) stated scenario and these facts the well described the consumer demographics in Pakistan, we decided to conduct a quantitativ e research to know the factors of changing buying patterns and also to label the magnitude of opportunity for the new entrants in the huge retail foodstuff market that estimates about US$ 42 one thousand million per annum. Page 6 Research Objectives ? ? To study the changes in buying patterns of consumers in metropolitan cities of Pakistan, subsequently(prenominal) the advent of modern grocery stores.To what extent these retail chains have been successful and to analyze if there is an opportunity for new entrants in the topical scenario. Research Question ? ? What factors are responsible for changing buying behavior of people belonging to urban areas of Pakistan? What is the sizing of opportunity that exists for new entrants in the current market? Page 7 Methodology The research methodological analysis comprised of an online look back and questionnaire that was conducted by dint ofout the city of Karachi, Hyderabad, Lahore and Islamabad. There were 10 option-based question that were designed to get the responses covering the two basic research objectives.Respondents were randomly selected and were asked to involve out a questionnaire which contained predetermined options and with other open-ended options as well, close(prenominal) of the participants were belonged to Karachi along with a significant number of online respondents from Hyderabad, Lahore and Islamabad adding a vicissitude of responses from urban areas of Pakistan. Respondents were divided into four main categories on the basis of their Gender, Age, married Status and Income to have a fair understanding of different casings of needs and preferences of different consumer segments.Quantitative Research There was a need to quantify the number of consumer that opt or prefer a certain attribute, products or avails at these different stores so in terms of percentages it was easy to present and interpret data that was collected as a result of survey- questionnaire. First of all there was a pre-test conducted to know the validity and effectiveness of the questionnaire and methodology and after that actual survey was launched online and respondents were asked to fill the survey.Online survey reduced the time and other costs associated to our research and proved to be a cost-efficient tool to conduct our survey. Page 8 Research Findings On the basis of two distinct objectives the research findings are include in this report, the sign objective to determine factors that influence consumer buying behavior are the overall services offered, quality and branded products, convenience of getting all items at a single point, no grocery items including fashion apparel, cosmetics, medicine, home interior decoration and so on remained the draw choices of the respondents.Regarding the second objective that was to know the size of opportunity for new entrants that was asked in a question to know precise demand of the modern grocery outlets in Karachi and other urban cities, the findings salute that a clear majority of the respondents want to have more modern grocery stores in their locality, exact figures are mentioned in the graphical means section later in this report. Other quantitative results include the absolute frequency of purchases, expenditure and best-loved store type that are also useful to calculate the size of the opportunity in this sector.Moreover participants also provided very insightful responses in open-ended options that highlighted m any other things that they prefer at these modern stores. Including improvement suggestions regarding, customer support and burster, loyalty and discount programs were dominant responses of the survey discussed in the detail in graphical representation section. Page 9 Graphical Representation and Analysis 1. Grocery come in Type It? preferably clear from the market share that supermarkets and hypermarkets have acquired during past couple of years is significantly improved up to 30% for each categ ory. Grocery Store Type General stores 30% 30% 18% 22% Dept. Stores especial(a)ly Markets Hypermarkets 2. Grocery Frequency Frequency as compared to past trend of periodical or daily grocery purchases has been shifted to monthly purchases leading towards impulse buying behavior after the advent of the modern hypermarkets and superstores 60% 40% 20% 0% Grocery Frequency Weekly Fortnightly Monthly others 3.Grocery Market Share Modernized supermarkets lead the market with 48% share of the grocery sector these markets are convenience to people living in essential areas of Karachi catering their grocery needs effectively. Grocery Market Share Hyperstar 14% 18% 20% 48% Metro/Makro Naheed/Chaseup /Aghaz/Imtiaz others 4. Grocery Spending well-nigh of the people that opted for modern grocery stores belong to higher income segment and majority spends more than Rs. 7000 on their grocery needs. This indicates a higher die hardency of the people to consume in the society. 0% 30% 20% 10% 0% Grocery Spending (PKR) 26% 6% 32% 36% Page 10 5. appealing Factors The factors that were dominant among the responses were convenience of getting all items at a single stop and economical purchases thus lowering grocery budgets, this is the core reason that has changed buying patterns of consumers in the new-made years. other factors Appealing Factors frugalal Safe and Convenience Adequate Economical 0% 20% 40% Adequate set Convenience Safe and Secure other factors Non grocery items 6.Non-grocery items Out of the non-grocery items most people preferred cosmetics reason being the majority of female respondents in our sample. Rest of the people preferred medicines and ready to wear apparels. 0% 50% 46% 20% 16% 8% 10% 7. Additional Food Items Other than usual grocery items as food staples there was a significant rise in the demand and preference to ready-to-eat/ frozen-food, reason being the most of the married females are opting for careers and employments accordingly frozen fo ods provides them convenience and quick food solutions. 70% 60% 50% 40% 30% 20% 10% 0% Additional Food Items 2% Fresh fruits and vegetables meat/chicken/p oultry Frozen food others 16% 16% 6% 8. Improvement Suggestions tax write-off cards were the most opted option by the respondents as people tend to buy in larger quantities they expect a significant amount off as a discount as well as the loyalty or privilege cards were also and added suggestion along with the speedy billing process due to the shortage of time in the busy document of people living in the large cities. 60% 50% 40% 30% 20% 10% 0% Improvement Suggestions 48% 28% 12% 12% Loyalty cards Discount cards speedy billing process others Page 11 9.More Grocery Stores So about 90% of the people responded in positive when they were asked about more grocery stores in their city mainly because the convenience these stores offer, while the remaining 10% who opted for No, throw out explained there are enough no of stores in the ir neck of the woods only need is to improve their service quality. 100% 80% 60% 40% 20% 0% More Grocery Stores 90% 10% Yes No Yes No 10. Most preferred attribute Quality is the most opted attribute and mostly the quality products and services available at modern grocery store provide an added benefit to the customers and delight them in many ways. 0% 60% 40% 20% 0% Most preferred attribute Quality Pricing blade Other Page 12 Conclusions After studying the brief results and graphical illustrations we hereby conclude that major causes of change in consumer purchase patterns are superior quality of products and services offered to customers at economical prices, thus elevating the overall value for customers when it comes to convenience shopping, hassle-free parking, gratifying environment, serene ambiance, safety and security which previously was not offered by any of the conventional grocery stores of their localities.Now majority of the consumers prefer going to modern supermar kets and hypermarkets rather than the wholesale markets, to avoid the long tiring grocery shopping which included stressful parking, lack of security and safety. Moreover people on weekends go for grocery shopping with their families which allows them to spend quality time with their family as an outing or entertainment and enjoy shopping with all the modern progressive facilities offered by malls and shopping centers.Furthermore, along with the basic grocery items people tend to shop additional items including garments, cosmetics, fashion products, frozen foods, medicines and so on that is once more an appealing factor that directed majority of the customers towards these modernized grocery store thus offering more and more benefits and ease to customers.As it has been witnessed that in the past few years the retail market dynamics have changed dramatically with modern grocery stores capturing the 40% share in the sector it is therefore a lucrative sector for foreign investors in the sectors and source of high FDI (Foreign Direct Investment) that would increase employment opportunities for our population and also would add up to fiscal revenues for the government. Page 13 RecommendationsAfter the completion of this research that was in response to previous researches on Emergence of Modern sell in Pakistan and Market Transformation Due To Current Economic Turmoil (USA and European retail celestial spheres) we suggest a comprehensive and more sophisticated research should be carried out on a commercial level to have an in-depth knowledge and insights about the market. Many of the indicators suggest the modern society in Pakistan are moving towards mass consumption and retail sector particular has been the key per motive accounts for an annual turnover of about US$ 42 billion(estimated).So in response to it another research should carried out on Factors of Impulse purchasing Behavior of consumer segments in Pakistan with respect to the modern grocery marke ts rapidly increasing and expanding the retail sector in Pakistan. The scope of our research was limited to few major cities of Pakistan i. e. Karachi Lahore Islamabad and Hyderabad, so its scope should be increased for future research also incorporating the useful insights of the key industry players of the modern grocery markets. Page 14 Appendices Appendix-1 (Survey Questionnaire) ARM-Questionnaire Demographics Age ? 7-28 ? 29-40 ? 41 &038 above Gender ? M ? F Marital Status ? Single ? Married Average mansion Income (PKR) ? 10,000-20,000 ? 20,001-50,000 ? 50,001 &038 above Area of Residence ________________________________________________________ 1. What type of grocery store do you prefer for your grocery shopping? ? General stores ? Departmental stores ? Super market ? Hyper-markets 2. 3. 4. 5. How often you go for grocery shopping? ?Weekly ? fortnightly (every 15 days) ? Monthly ? others please specify_____ Which store do you often prefer for your grocery needs? ?Hyperstar ? Metro/Makro ?Naheed/Chase-up/Imtiaz/Aghas ? Others___ On average how practically amount you spend on your grocery? (PKR) ? 1000-3000 ? 4000-7000 ? 7000-10000 ? Above 10000 Based on the precedent selected store which factor makes you buy from that store? ?Economical ? Adequate Parking ? Convenience (all items under one-roof) ? Safe and secure environment ? Others please specify___________________ What type of items do you prefer to shop along-with grocery? ?Cosmetics ? Garments ? Medicines ? Electronic Appliances ? Others_____ What additional foods items do you like to buy form the grocery stores? Fresh Fruits and Vegetable ? mettle/Chicken/Fish ? Frozen Foods ? Others__________ What improvements you like see as far as services are concerned? ?Loyalty cards ? Discount coupons ? Speedy billing process ? Others _______ Would like to have more stores and hyper markets? ?Yes ? No What do you prefer the most for your grocery items? ?Quality ? Pricing ? Brand ? Others please specify___ ________ 6. 7. 8. 9. 10. Thank you for your time and attention. Page 15 Appendix-2 FMCG Companies Profit From bucolic Consumption Boom in Pakistan By Riaz Haq Higher crop prices have increased farmers? ncomes in Pakistan by Rs. 342 billion in the 12 months by June, according to a government economic survey. That was higher than the gain of Rs. 329 billion in the preceding eight years, according to a report by Bloomberg News. Companies like Millat tractors, Honda Atlas Motorcycles, Pak Suzuki Motors, Engro Foods, Telnor, Nestle, Colgate-Palmolive, Proctor and Gamble and Unilever have been big beneficiaries of the current rural consumption boom. Nestle Pakistans chief Ian Donald has summed up the rising demand for his companys products as follows It? a common perception that chinaware and India are much bigger in terms of harvest than Pakistan. But for Nestle, the per capita consumption of our products in Pakistan is twice as much as we have in China and India. It should be note d that Nestle is the spheres largest packaged food company, and Pakistanis per capita consumption of milk and dairy products is about 2. 5 times higher than in India. concord to the FAO, the average dairy consumption of the growing countries is nonoperational very low (45 kg of all dairy products in liquid milk equivalent), compared with the average of 220 kg in the industrial countries.Few developing countries have per capita consumption exceeding 150 kg (Argentina, Uruguay and some pastoral countries in the Sudano-Sahelian zone of Africa). Among the most populous countries, only Pakistan, at 153 kg per capita, has such a level. In South Asia, where milk and dairy products are preferred foods, India has only 64 kg and Bangladesh 14 kg. East Asia has only 10 kg. Here are a few key points excerpted from a recent Businessweek story on rise of the rural consumer in Pakistan 1. Unilever and Colgate-Palmolive Co. re sending gross salespeople into rural areas of the world? s sixth mo st-populous nation, where demand for consumer goods such as Sunsilk shampoo, Pond? s moisturizers and Colgate toothpaste has boosted local units? revenue at least 15 percent. Page 16 2. The rural push is aimed at the boisterous youth in these areas, who have bountiful cash and resources to increase purchases, Shazia Syed, vice president for customer victimisation at Unilever Pakistan Ltd. , utter in an interview. Rural growth is more than soprano that of national sales. 3.Consumer-goods companies forecast growth in Pakistan even as an increase in ethnic violence in Karachi has made 2011 the deadliest in 16 years for the country? s biggest city and financial center. 4. Nestle Pakistan Ltd. is spending 300 million Swiss francs ($326 million) to double dairy output in four years, boosted sales 29 percent to 33 billion rupees ($378 million) in the six months through June. We have been focusing on rural areas very strongly, Ian Donald, managing manager of Nestle? s Pakistan unit, s aid in an interview in Lahore. Our observation is that Pakistan? rural economy is doing better than urban areas. 5. Haji Mirbar, who grows cotton wool on a 5-acre farm with his four brothers, said his family? s income grew quintuple in the year through June, allowing him to buy branded products. He uses Unilever? s Lifebuoy for his open-air baths under a hand pump, instead of the handmade lather he used before. We had a great year because of cotton prices, said Mirbar, 28, who lives in a village exterior south Pakistan? s Matiari town. As our income has risen, we want to buy nice things and live like kings. 6.Sales for the Pakistan unit of Unilever go up 15 percent to 24. 8 billion rupees in the first half. Colgate-Palmolive Pakistan Ltd.? s sales increased 29 percent in the six months through June to 7. 6 billion rupees, according to data compiled by Bloomberg. In a generally faltering economy, the double-digit growth in revenue for companies servicing the consumer sector has come almost entirely from the rural areas, said Sakib Sherani, chief decision maker officer at Macroeconomic Insights Pvt. in Islamabad and a former economic adviser to Pakistan? s finance ministry. 7.Unilever is pushing beauty products in the countryside through a program called Guddi Baji, an Urdu phrase that literally means biddy sister. It employs beauty specialists who understand rural women, providing them with vans filled with samples and equipment, Syed said. Women in villages are also employed as sales representatives, because rural is the Page 17 growth engine for Unilever in Pakistan, she said in an interview in Karachi. art object the bulk of spending for rural families goes to food, about 20 percent is worn-out(a) on looking beautiful and buying expensive clothes, Syed said. . Colgate-Palmolive, the world? s largest toothpaste maker, aims to address a huge gap in sales outside Pakistan? s cities by more than tripling the number of villages where its products, suc h as Palmolive soap, are sold, from the current 5,000, said Syed Wasif Ali, rural operations manager at the local unit. 9. Its detergents Bonus Tristar and Brite are packed in sachets of 20 grams or less and priced as low as five rupees (6 cents), to boost sales among low-income consumers hurt by the fastest pace of inflation in Asia after Vietnam.Unilever plans to increase the number of villages where its products are sold to almost half of the total 34,000 within three years. Its merchandise, including Dove shampoo, Surf detergent and Brooke Bond self-governing tea, is available in about 11,000 villages now. 10. Pakistan, Asia? s third-largest wheat grower, in 2008 increased wheat prices by more than 50 percent as eyeshade Minister Yousuf Raza Gilani sought to boost production of the staple. The injection of purchasing powerfulness in the rural sector has been unprecedented, said Sherani, who added that local prices for rice and sugarcane have also risen. 1. Telenor Pakistan Pv t. is also expanding in Pakistan? s rural areas, which already contribute 60 percent of sales, said Anjum Nida Rahman, corporate communications director for the local unit of the Nordic region? s largest phone company. charm the presence of multinational consumer product giants like Nestle and Unilever receive more coverage in the western media, the Euromonitor report finds that Pakistani FMGC companies like Engro Foods, Haleeb Foods, Shezan, Tapal, Shan and others dwarf the packaged food business in Pakistan. Heres an excerpt from a recent Euromonitor report on Pakistan.Page 18 Appendix- 3 Study of the International Retail Markets Drivers of Retail Change Internationally There are significant changes afoot(predicate) in the international retail sector. Some are already unmixed in the Irish retail market while others are now beginning to show an impact. The key drivers of change in the retail sector are Consumer shopping habits and meal preparation habits are changing. This is driving the food retail structure to one of large stores for once-weekly shopping trips and smaller convenience stores for top-up purchases. Relatively low growth in retail spending across Europe, particularly in the food sector, which is generating substantial competition between retailers. A shift in the determinant of consumer demand from price consciousness to value for money. A stronger preference for service and convenience, both in retail service and also in product choice. The development of a more international outlook and a greater awareness of international brands. More cerebrate marketing methods, referred to as mass customization? and competition for consumer loyalty. The retail sector is still relatively highly regulated in many countries, specifically in the areas of planning regulations in respect of new store development and workings hours. Developments in information and communications technologies (ICTs) are enabling improvements in market research and ana lysis, and supply chain management. This is driving significant change in international retail supply chains as retailers seek out increasing efficiencies and seek to reduce inventories. Page 19 Appendix-4Future of Retail area in Pakistan The evaluate future trends in the retail sector in Pakistan are that The retail sector can be expected to hold open to grow in line with the overall growth of the economy, thereby providing further employment and an increasing contribution to economic activity. The level of concentration, i. e. , the market share held by major retailers, in both the food and clothing sectors, is expected to continue to increase. Further consolidation in the market can be expected through mergers and acquisitions of national retailers and foreign retailers in the current market.Acquisition is possible to be the mode of market entry for large scale foreign retailers into the future. Size &038 Structure The strucuture of the retail sector is changing as Retai lers are growing larger through mergers and acquisitions both in domestic and international markets The number of large sized stores is increasing significantly Levels of concentration in retail markets are increasing Order sizes and deliveries from suppliers are growing and Suppliers are increasing in scale. Customer Service Customer service is developing rapidly through Home hopping and delivery Internet shopping extended opening hours Loyalty card schemes Better in-store service Micro-marketing to individual customers and amend mail order. Page 20 Diversification Retailers are pursuing growth through diversification into New product areas, by food retailers into non-food goods, and into new markets such as apparel and music New business sectors such as banking and insurance and New geographic markets, nationally and internationally, mail order, teleshopping and ecommerce.Supply-Chain instruction Retailers are increasing their control over the whole supply chain by implementing Centralized distribution Efficient consumer response (ECR) change magnitude traceability of goods Increased investment in Information Technology Supplier rationalization programs greater involvement in supplier operations. Page 21 References Retail Sector Dynamics in Ireland-www. forfas. ie. European Journal of Scientific Research Euro Journals Publishing, Inc. 2009 http//www. eurojournals. com/ejsr. htm http//www. iazhaq. com/2011/10/fmcg-companies-profit-from-rural. html Retail markets planning guide-FAO Bulletin http//www. fao. org/docrep/v8390e/V8390E00. HTM New generation of retail markets By Ashfak Bokhari From InpaperMagzine 23rd July, 2012 http//dawn. com/2012/07/23/new-generation-of-retail-markets/ Retails Hottest Emerging Markets, 2012 http//www. cnbc. com/id/47782726/Retail_s_Hottest_Emerging_Markets_2012 Economic Impact of Retailing in Pakistan Proceedings of 2nd International meeting on Business Management Page 22