"It took a real leap of faith to launch a product at twice the price of the local benchmark"

Farhan Hassan, COO, U.G. Food Company, speaks to Aurora about the launch of Peki and the challenges of breaking into the cake market.

AURORA: Ülker is a new name in FMCGs in Pakistan. Briefly, what can you tell us about the company?
FARHAN HASSAN: Ülker is a huge success story from Turkey. In 1944, a gentleman called Sabri Ülker, along with his brother, three employees and a single oven, launched a bakery that ended up making 75 tonnes of biscuits in the first year. Today, this bakery has turned into a company with a US$ 11 billion turnover worldwide. Although Ülker does not position itself in this way, it is the largest Muslim-owned food company in the world. Ülker brands are available in 100 countries; the company owns 43 factories of which 34 are located in Turkey and nine in other countries – of which the newest was built in 2008 and is located in Pakistan at Port Qasim. Similar to many other big international companies, Ülker over time acquired a number of different brands, partly due to organic growth and partly by the acquisition of other Turkish owned or regional companies. In Turkey, Ülker is the largest company in the cake business; it is also the largest in the chocolate business. In fact in 2008, Ülker made its first big international business acquisition with Godiva chocolates. Added to that Ülker is counted among the top three soft drinks, ice cream, dairy and bottled water businesses in Turkey.

A: What is the nature of Ülker’s investment in Pakistan?
FH: It is a joint venture. In 2000, Omar Jilani a friend of Ülker’s Chairman & CEO, Murad Ülker, approached him regarding setting up a joint venture in Pakistan. As a result, Murad Ülker and his senior executives came to Pakistan to make an assessment and they saw some striking similarities between Pakistan and Turkey. Murad Ülker comes from a country with a similar history to Pakistan’s in terms of political and economic upheaval, and because his family created a hugely successful business in that environment, he was very positive about Pakistan. Pakistan and Turkey not only as countries, but as people, have a cultural affinity, and this in some way also played an emotional role in appealing to both partners.

A: What is the extent of Ülker’s commitment to Pakistan?
FH: Their investment in setting up a world class, state of the art, food manufacturing site at Port Qasim; one of Ülker’s biggest contributions to the project was the technical expertise they brought. Ülker manufactures enough cakes to ensure that every person on the planet can potentially eat one every 14 days! They have a huge history and a huge repository of knowledge and understanding of making cakes. Today, there is only one Ülker Turkish expat working in Pakistan, and he is the head of our manufacturing facility. Ülker’s biggest level of involvement took place when the factory was under construction and subsequently commissioned.

A: Given Ülker’s huge FMCG portfolio, why did they decide to introduce their cake range?
FH: After studying the FMCG food market space in Pakistan we came to the conclusion that the cake category was either under competitive or nascent. In fact, our sole local competitor simply added cakes to their confectionery portfolio rather than focus on cake as a category. For us, Peki is the sole focus of our business.

A: Who is your target audience?
FH: Our audience at this point is varied for two reasons. One is the size of the product portfolio, which goes from the individual Peki layer cake all the way to larger family sized cake. We need to work across different touch points and target not only the consumer, but the buyer as well. We need to differentiate between a mum who buys the family-sized Peki layer cake because she can divide it into four, six or eight parts, depending on the size of her family, and the five-rupee Dankek which is aimed at a slightly different socio-economic price point. And if you are a bit more affluent, then the 10-rupee product is more innovative; its (smaller/individual) size makes it a different type of consumption product. We have price points across the spectrum of purchasing power.

A: Dankek is also part of the Ülker portfolio, yet it is not being pushed.
FH: Although Dankek was the first brand we launched in Pakistan, we are currently evaluating the brand’s role in our portfolio. The brand that was chosen as part of Ülker’s strategy in Pakistan was Peki. About 18 months ago a decision was made to put all Ülker international cakes under the Peki brand and Pakistan was the first country to launch Peki under this new look, feel and packaging design.

A: Most people are used to buying their cakes from a bakery. How will you change that mindset?
FH: The cake category in Pakistan is largely unbranded and even within the branded category there is no FMCG approach to marketing cakes. The next step is to move consumers from the unbranded part of the cake category into a branded mindset, and that is where convenience, hygiene, sealed freshness, quality of the ingredients, longevity of the product, in terms of the packaging, are going to play a major part. Our aim is that every time someone opens the product, he or she will consistently get the consumption experience we promise.

A: Are there imminent plans to introduce more products from the Peki range?
FH: There is a full portfolio behind the Peki brand which we will be launching in phases. We have a range of other and more sophisticated Peki products. Obviously, the more sophisticated you get, the more investment you need, because the manufacturing process becomes more complex. However, depending on how we can manage the price points for the Pakistani consumer, all this is available. We will be adding a couple of larger family-oriented products to the portfolio very soon.

A: Peki is being marketed under the umbrella of ‘Take a Peki Break’. What positioning are you trying to achieve for the brand?
FH: At the end of the day, after all the planning and strategising is done and the agency, creative and marketing inputs are in, luck favours the brave. We came to this concept after thinking about where our consumer touch points were, and we realised that there was another big and successful global brand that said ‘Take a break, have a…’

A: ‘Kit Kat.’
FH: … in our case we wanted to brand the moment itself. To turn different moments into ‘Peki Peki moments’. There are complexities in doing this. Mainstream advertising has no regard for the specific time of day, afternoon or night it goes across to the consumer. So we had to drive our media buying agency to do something new with the electronic media by having them manage the complexity of running our TVCs and radio spots to coincide with different times of the day. We also had a lot of success with FM radio, because they created five to eight spots which ran at different times with different taglines; for example: ‘Have a Peki Peki drive home’ because Peki Peki is a state of mind. Our tagline is ‘Peki se hi khushiyan, yeh Peki Peki duniya.” Peki Peki Duniya is a place where you can take a moment to enjoy a bit of life. It’s a happiness moment; it could be your drive to work, dinner at home with the family, a cricket match or even a ‘Peki Peki’ joke. So throughout the day we had multiple taglines running through our communication.

A: Given your previous experience in the food business in Pakistan, how do you see the category as a whole evolving in the short term?
FH: My previous experience was with the ice cream business, with Wall’s ice cream. Wall’s successfully brought ice cream back to the hearts and minds of consumers and today ice cream is a thriving category in Pakistan. When it comes to food, Pakistan’s consumer dynamics and certainly its population have their own role to play. Our family-oriented culture, our eating culture, our celebration around food, in some cases our sadness around food, our togetherness around food, all this is contributing towards making Pakistan a potentially huge food market.

A: Do you see any emerging trends?
FH: The food category is going to keep on growing much faster relative to most other categories, not only because of the population growth, but also because many companies are entering the category. I expect to see more global brands coming to Pakistan. Now, whether they commit to bringing in manufacturing investment or not is a different issue; that is impacted by returns, currency fluctuations, government policies and regulatory issues, among other things. But they will certainly come to Pakistan to build their business and make money. For example, the chocolate category has started to show that if you apply yourself to understanding what is in the consumer’s pocket and how much you can stretch that to meet your basic margin requirements, you can create a really good business. Food is to some extent recession proof. People will still consume, although they will down trade to more value for money products. For example, in the case of the Peki 10-rupee product, the only benchmark we had was that a five-rupee local brand had been in the market for a long time. At the end of the day, any person coming into a business opportunity will have to be brave. It took a real leap of faith to launch a product at twice the price of the local benchmark and then to believe that the value of that product at that price point would resonate with the consumer. Interestingly enough – and this is anecdotal – some of our consumers as well as some of our competitors are expecting us to increase the price. The thinking is that this has to be an introductory price because we are giving much more value than the price point justifies. So, even in a recession, even with less money in their pockets, consumers are still saying: “even for 10 rupees I am getting more than this price point should be offering me.” Therefore, be brave and understand the consumer enough to follow your heart and the experience you have been able to acquire from the market.

A: Recently at the Aurora conference on the New Value Seekers you spoke about creating a ‘sachet’ economy. Could you elaborate on this?
FH: The question is: if the bulk of consumers in a particular marketplace is earning less that $1000 a year, why are you constantly trying to sell them something that has been designed and created for, and marketed to, people who are 20 times more affluent? Sachet marketing is not only about size. It is not only about saying: ‘I want to wash my hair with a great brand of shampoo but I can’t afford the bottle, so if you offer me a five-rupee sachet I will buy your brand.’ It’s also about gleaning insights about those consumers and then giving them more value, at a price point that will delight them rather than simply meet their outlay. Interestingly, many sachet marketing ideas are making their way back to the affluent economies. When a recession hits, most consumers go into a sachet frame of mind; they want to down trade, but they want to still be delighted, no matter what price point they are at. We believed that by giving value, even with a 10-rupee price point, we would get the business, and we have been surprised and delighted by the response.

Farhan Hassan was talking to Mariam Ali Baig. For feedback, e-mail aurora@dawn.com