Abrar Hasan, Chief Executive, National Foods, speaks to Aurora about his company’s evolution from making spices to becoming a major player in the branded food category.
AURORA: What kind of company does National Foods aspire to be?
ABRAR HASAN: Our vision is to be a player in the branded segment of the total food market in Pakistan and to make a significant dent in the international market. We aspire to be an international brand and we are setting up the infrastructure that will help us achieve these goals.
A: Which markets are you looking at?
AH: We export to about 38 countries and the concept is to set up regionalised hubs to cater to those countries. We will do this by working with professional logistics operators; the objective is to develop a world class international distribution system for our products, which would be a precursor to setting up offices and starting marketing and
sales activities.
A: How close are you to achieving this objective?
AH: We are in the modelling stage. Working across borders is tricky, as there are taxation and local regulatory compliance issues.
A: Are you exporting the full range of your products?
AH: More or less the full range, although the biggest potential lies in pickles and recipes; they command a much higher demand from the ethnic population as they are indigenous to the Subcontinent and cannot be easily reproduced by other international players. Patak’s was the one English company that was successful in doing this. They started with pickles and then diversified into other products. Although they are an English company, the owners were from India, so they knew what to do in terms of the formulation. However, there are not many players out there who can do this, which is why National pickles are the best in the international market and we command the top slot. In terms of the recipes, I think Shan has the upper hand in some countries and we do in others; so there are divided loyalties in recipes, but the bottom line is that as far as pickles and recipes are concerned, Pakistani manufacturers excel. India has tried to produce such recipes, but has not been successful because Indians are more or less vegetarians, so their blends are not very good when cooking meat. We specialise in meat-based products and we get the flavour right, which is why even meat eating Indians prefer Pakistani recipes.
A: Are Patak’s and Shan your main competitors overseas?
AH: Patak’s pickles are bracketed in a very high price range and cater to a different, niche segment. They don’t do recipes in powder form but in pastes and sauces, which is more convenient, but again this segment is very different and these are expensive products. Patak’s is not a direct, but an indirect competitor. In terms of direct competition there is Shan and among the Indian companies MDH is a large player. Then you have a whole lot of other Indian companies.
A: Has India cornered the market in terms of getting their products out there?
AH: From a marketing perspective the Indians are very good. We see that in the quality of their advertising. However, in terms of product quality and sales there is a huge difference, because what they claim in their marketing does not live up to consumer expectations. The taste leaves a lot to be desired. They make their products very cost competitive and therefore compromise on their image; the packaging is not very good, the quality of the labelling is poor. This is the advantage we have over them. However, we need to learn a thing or two about marketing and advertising from them; the Indians are very creative and we must give them credit for this.
A: Do you face added issues in terms of quality control in the export markets?
AH: We do not have two sets of products; what is good for the export market has to be good for the local one. It would be much more expensive to manufacture two sets of products; it doesn’t make sense. The regulatory compliances in Europe and North America are made in the interests of the consumer, and if you are a manufacturer who believes in a code of ethics then you must produce what is good for the consumer. You have to manufacture and package products that are hygienically fit and made from ingredients that conform to current health trends, and these ingredients must be clearly declared on the labelling. Consumers must be given sufficient information to judge whether they want to buy your product. These are good manufacturing practices and by doing so you are creating value added consumers who know that they can trust your brand.
A: How big a player is National Foods in the rice market?
AH: We are not a very big player in either the export or local market, because this is a category that has to be built up over time. In the local market the biggest challenge is distribution. The product we market is of the topmost quality, 100% unbroken super basmati, but because of its weight it needs to be distributed in an innovative manner. We are looking at different distribution techniques, at how the product is handled and how to increase market penetration. The beauty of rice is that it is a large volume, quality-based product, although it is an expensive commodity to invest in. Setting up a modern rice plant costs less than investing in the stocks. Rice develops quality as it ages and this puts a strain on cash flows. It takes years to become a major player and you do it by slowly turning over the stocks. This is our third year distributing rice domestically and our sixth year internationally; we are doing close to 3,500 tonnes and in the next couple of years we aim to cross the 10,000 tonne barrier.
A: National Foods started as a spice manufacturer; today the company is into a range of food products, how did this evolution take place?
AH: Slowly. When it first started, the company was very small and was financed by the directors’ own money. They honestly and diligently kept reinvesting and thereby kept the company growing. I must give them credit for having managed the company so well financially, it set up the infrastructure and pace for growth. They kept on launching new categories of food and as those products became successful, more money came into the company. By 1988 the company was of a respectable size and went in for an IPO, and after we became a public limited company, we received a significant capital injection and that helped us grow immensely. Today we have over 15 different product categories and we are looking to expand further.
A: In terms of expansion, what product categories are you looking at?
AH: We like to do things a bit differently. If we are going to look at different categories then they need to be ‘different’ categories. They need to bring in some value to consumers that they are not receiving now, and these are the convenience-based products. As lifestyles change, the economy develops and more women come into the workplace, there will be a need for more convenience-based food products that are either ready-to-eat or are preparation based meals that can be quickly put together. However, we also want a share in certain normal food categories, because the category band is extremely large. We were late entrants in ketchups and jams, yet today we are the number one leader. In the recent Brand Elections, National Foods won the sixth position in the top 100 countdown and the best were National’s recipes, which came in at number two for the entire country and that is a good feeling in terms of how we market our products.
A: Given changing consumer lifestyles, do you see the traditional masala market eventually declining?
AH: It has to because there are different mediums out there that are more convenient. Within the spice category map there are parallel segments. The first are the simple ingredients, plain spices like red chilli, coriander, turmeric, etc.; in this semi-category, the level of expertise required is very high. You have to be an expert cook; you need to know your recipes and how to use these ingredients to come up with your own concoctions. But what about people who don’t know how to cook? Here the powdered recipes take over. You don’t have to be an expert cook; if you know how to heat the oil, chop the vegetables and read the instructions, you are guaranteed a taste. It adds to the convenience factor and shortens the cooking time, although the process requires 30 minutes. Then you move into the pastes and sauces. Here the advantage is that fresh ingredients like onions, tomatoes or herbs are already part of the sauce. All you have to do is brown your meat, pour the sauce on top, cover and simmer and the dish is ready in 15 minutes. You can see the convenience chain evolving, and the ultimate are the ready-to-eat meals, where the expertise required is zero; all you need to know is how to heat the product. We have tapped into every single segment; we have products which we have not launched yet because the market is not ready for them, but our product range is complete and we have been exporting those products successfully.
A: In Pakistan, who is your target consumer?
AH: Everyone is my consumer. However women are our primary consumers.
A: In terms of segmentation, how deep down do you go?
AH: We rarely take our products beyond the C segment. Salt is the only category that goes all the way to the D and even the E segment. However, below the C segment is unfortunately where all the unorganised activity takes places and there are a lot of fakes, counterfeits and infringed products; taxes are unpaid and the goods supplied are spurious and harmful to health.
A: You mentioned the economy improving; do you see this happening?
AH: No matter how bad things are, there are certain fundamentals around which the economy operates, and it is not doing that badly. The biggest factor is inflation and we cannot blame Pakistan alone for this because we are dependent on various external factors. Pakistan is not generating enough income, so it has to borrow, and borrowing is a constraint in terms of having the flexibility to do things. Globally oil prices have increased tremendously and then there have been the financial collapses and various economic disasters, so it is not only Pakistan where things have not improved. Despite all these circumstances Pakistan has managed its economy quite well. However, there are certain fundamentals that need to be looked into very critically. We need to take certain bold and critical decisions, and if we do so we will be able to come out of this.
A: How badly has inflation impacted the branded food market?
AH: There has been a migration from branded to unbranded and that threat remains, but there is also a segment which is brand conscious and will not migrate. So we have a very small proportion of people who sway both ways, and as soon as inflation tapers off, they come back. To put it simply, yes, food products do get affected.
A: How much emphasis does National Foods put on HR training?
AH: A tremendous amount. Among Pakistani companies, National Foods was the pioneer in setting up a Human Resource Management (HRM) department, and this was way back in 1997. Before this there was no concept of HRM in the local industry. The first training and development budget we put together in 1999 was Rs 100,000 or 150,000, yet the very next year I made a budget of four million rupees. This was our level of commitment to training and today people are trained all year around. At the same time it was important to develop metrics to measure what this training delivers in return. There are a lot of companies which give blind training; they don’t assess what value has been added back. The idea is not to train for the sake of training, but to train so that it contributes to the value of the company’s strategic intent.
A: Initially, where did you get the trainers to train the people?
AH: There is a massive knowledge base deprivation in Pakistan. When this HR evolution took place in the industry and we had identified the skill sets required for various positions, we started thinking from where to acquire the knowledge base. At the time a lot of external HR training companies were emerging and there were also a lot of established institutes, such as the Pakistan Institute of Management, which had their own skill development courses. Also, every company acquires a rich knowledge base as it grows and this is something which needs to be passed on to the employees through a conscious effort and it is usually done by the top leaders.
A: Why is your digital presence so low key?
AH: We are working on a comprehensive website. I am changing the way the internet is used in this country, which right now is only for purely information purposes or website hosting. Our website will not only provide information, it will be a business transactional tool. There will be four of pillars to it. The first will be information, the second is B2B and will be aimed at our supply chain partners so we can transact business with them directly, the third is a transactional tool for our employees and the fourth is B2C, and this aspect will take a little bit longer, as it is dependent on how quickly we can set up our global logistic network.
A: Is there a market for more players in the food category in Pakistan?
AH: Absolutely. Today the unbranded segment is still the largest segment and conversion to the branded segment is required. In the branded segment, plain spices account for no more than seven percent of the total market. n
Abrar Hasan was talking to Mariam Ali Baig. For feedback, email aurora@dawn.com
First published in the January-February 2011 issue of Aurora.
ABRAR HASAN: Our vision is to be a player in the branded segment of the total food market in Pakistan and to make a significant dent in the international market. We aspire to be an international brand and we are setting up the infrastructure that will help us achieve these goals.
A: Which markets are you looking at?
AH: We export to about 38 countries and the concept is to set up regionalised hubs to cater to those countries. We will do this by working with professional logistics operators; the objective is to develop a world class international distribution system for our products, which would be a precursor to setting up offices and starting marketing and
sales activities.
A: How close are you to achieving this objective?
AH: We are in the modelling stage. Working across borders is tricky, as there are taxation and local regulatory compliance issues.
A: Are you exporting the full range of your products?
AH: More or less the full range, although the biggest potential lies in pickles and recipes; they command a much higher demand from the ethnic population as they are indigenous to the Subcontinent and cannot be easily reproduced by other international players. Patak’s was the one English company that was successful in doing this. They started with pickles and then diversified into other products. Although they are an English company, the owners were from India, so they knew what to do in terms of the formulation. However, there are not many players out there who can do this, which is why National pickles are the best in the international market and we command the top slot. In terms of the recipes, I think Shan has the upper hand in some countries and we do in others; so there are divided loyalties in recipes, but the bottom line is that as far as pickles and recipes are concerned, Pakistani manufacturers excel. India has tried to produce such recipes, but has not been successful because Indians are more or less vegetarians, so their blends are not very good when cooking meat. We specialise in meat-based products and we get the flavour right, which is why even meat eating Indians prefer Pakistani recipes.
A: Are Patak’s and Shan your main competitors overseas?
AH: Patak’s pickles are bracketed in a very high price range and cater to a different, niche segment. They don’t do recipes in powder form but in pastes and sauces, which is more convenient, but again this segment is very different and these are expensive products. Patak’s is not a direct, but an indirect competitor. In terms of direct competition there is Shan and among the Indian companies MDH is a large player. Then you have a whole lot of other Indian companies.
A: Has India cornered the market in terms of getting their products out there?
AH: From a marketing perspective the Indians are very good. We see that in the quality of their advertising. However, in terms of product quality and sales there is a huge difference, because what they claim in their marketing does not live up to consumer expectations. The taste leaves a lot to be desired. They make their products very cost competitive and therefore compromise on their image; the packaging is not very good, the quality of the labelling is poor. This is the advantage we have over them. However, we need to learn a thing or two about marketing and advertising from them; the Indians are very creative and we must give them credit for this.
A: Do you face added issues in terms of quality control in the export markets?
AH: We do not have two sets of products; what is good for the export market has to be good for the local one. It would be much more expensive to manufacture two sets of products; it doesn’t make sense. The regulatory compliances in Europe and North America are made in the interests of the consumer, and if you are a manufacturer who believes in a code of ethics then you must produce what is good for the consumer. You have to manufacture and package products that are hygienically fit and made from ingredients that conform to current health trends, and these ingredients must be clearly declared on the labelling. Consumers must be given sufficient information to judge whether they want to buy your product. These are good manufacturing practices and by doing so you are creating value added consumers who know that they can trust your brand.
A: How big a player is National Foods in the rice market?
AH: We are not a very big player in either the export or local market, because this is a category that has to be built up over time. In the local market the biggest challenge is distribution. The product we market is of the topmost quality, 100% unbroken super basmati, but because of its weight it needs to be distributed in an innovative manner. We are looking at different distribution techniques, at how the product is handled and how to increase market penetration. The beauty of rice is that it is a large volume, quality-based product, although it is an expensive commodity to invest in. Setting up a modern rice plant costs less than investing in the stocks. Rice develops quality as it ages and this puts a strain on cash flows. It takes years to become a major player and you do it by slowly turning over the stocks. This is our third year distributing rice domestically and our sixth year internationally; we are doing close to 3,500 tonnes and in the next couple of years we aim to cross the 10,000 tonne barrier.
A: National Foods started as a spice manufacturer; today the company is into a range of food products, how did this evolution take place?
AH: Slowly. When it first started, the company was very small and was financed by the directors’ own money. They honestly and diligently kept reinvesting and thereby kept the company growing. I must give them credit for having managed the company so well financially, it set up the infrastructure and pace for growth. They kept on launching new categories of food and as those products became successful, more money came into the company. By 1988 the company was of a respectable size and went in for an IPO, and after we became a public limited company, we received a significant capital injection and that helped us grow immensely. Today we have over 15 different product categories and we are looking to expand further.
A: In terms of expansion, what product categories are you looking at?
AH: We like to do things a bit differently. If we are going to look at different categories then they need to be ‘different’ categories. They need to bring in some value to consumers that they are not receiving now, and these are the convenience-based products. As lifestyles change, the economy develops and more women come into the workplace, there will be a need for more convenience-based food products that are either ready-to-eat or are preparation based meals that can be quickly put together. However, we also want a share in certain normal food categories, because the category band is extremely large. We were late entrants in ketchups and jams, yet today we are the number one leader. In the recent Brand Elections, National Foods won the sixth position in the top 100 countdown and the best were National’s recipes, which came in at number two for the entire country and that is a good feeling in terms of how we market our products.
A: Given changing consumer lifestyles, do you see the traditional masala market eventually declining?
AH: It has to because there are different mediums out there that are more convenient. Within the spice category map there are parallel segments. The first are the simple ingredients, plain spices like red chilli, coriander, turmeric, etc.; in this semi-category, the level of expertise required is very high. You have to be an expert cook; you need to know your recipes and how to use these ingredients to come up with your own concoctions. But what about people who don’t know how to cook? Here the powdered recipes take over. You don’t have to be an expert cook; if you know how to heat the oil, chop the vegetables and read the instructions, you are guaranteed a taste. It adds to the convenience factor and shortens the cooking time, although the process requires 30 minutes. Then you move into the pastes and sauces. Here the advantage is that fresh ingredients like onions, tomatoes or herbs are already part of the sauce. All you have to do is brown your meat, pour the sauce on top, cover and simmer and the dish is ready in 15 minutes. You can see the convenience chain evolving, and the ultimate are the ready-to-eat meals, where the expertise required is zero; all you need to know is how to heat the product. We have tapped into every single segment; we have products which we have not launched yet because the market is not ready for them, but our product range is complete and we have been exporting those products successfully.
A: In Pakistan, who is your target consumer?
AH: Everyone is my consumer. However women are our primary consumers.
A: In terms of segmentation, how deep down do you go?
AH: We rarely take our products beyond the C segment. Salt is the only category that goes all the way to the D and even the E segment. However, below the C segment is unfortunately where all the unorganised activity takes places and there are a lot of fakes, counterfeits and infringed products; taxes are unpaid and the goods supplied are spurious and harmful to health.
A: You mentioned the economy improving; do you see this happening?
AH: No matter how bad things are, there are certain fundamentals around which the economy operates, and it is not doing that badly. The biggest factor is inflation and we cannot blame Pakistan alone for this because we are dependent on various external factors. Pakistan is not generating enough income, so it has to borrow, and borrowing is a constraint in terms of having the flexibility to do things. Globally oil prices have increased tremendously and then there have been the financial collapses and various economic disasters, so it is not only Pakistan where things have not improved. Despite all these circumstances Pakistan has managed its economy quite well. However, there are certain fundamentals that need to be looked into very critically. We need to take certain bold and critical decisions, and if we do so we will be able to come out of this.
A: How badly has inflation impacted the branded food market?
AH: There has been a migration from branded to unbranded and that threat remains, but there is also a segment which is brand conscious and will not migrate. So we have a very small proportion of people who sway both ways, and as soon as inflation tapers off, they come back. To put it simply, yes, food products do get affected.
A: How much emphasis does National Foods put on HR training?
AH: A tremendous amount. Among Pakistani companies, National Foods was the pioneer in setting up a Human Resource Management (HRM) department, and this was way back in 1997. Before this there was no concept of HRM in the local industry. The first training and development budget we put together in 1999 was Rs 100,000 or 150,000, yet the very next year I made a budget of four million rupees. This was our level of commitment to training and today people are trained all year around. At the same time it was important to develop metrics to measure what this training delivers in return. There are a lot of companies which give blind training; they don’t assess what value has been added back. The idea is not to train for the sake of training, but to train so that it contributes to the value of the company’s strategic intent.
A: Initially, where did you get the trainers to train the people?
AH: There is a massive knowledge base deprivation in Pakistan. When this HR evolution took place in the industry and we had identified the skill sets required for various positions, we started thinking from where to acquire the knowledge base. At the time a lot of external HR training companies were emerging and there were also a lot of established institutes, such as the Pakistan Institute of Management, which had their own skill development courses. Also, every company acquires a rich knowledge base as it grows and this is something which needs to be passed on to the employees through a conscious effort and it is usually done by the top leaders.
A: Why is your digital presence so low key?
AH: We are working on a comprehensive website. I am changing the way the internet is used in this country, which right now is only for purely information purposes or website hosting. Our website will not only provide information, it will be a business transactional tool. There will be four of pillars to it. The first will be information, the second is B2B and will be aimed at our supply chain partners so we can transact business with them directly, the third is a transactional tool for our employees and the fourth is B2C, and this aspect will take a little bit longer, as it is dependent on how quickly we can set up our global logistic network.
A: Is there a market for more players in the food category in Pakistan?
AH: Absolutely. Today the unbranded segment is still the largest segment and conversion to the branded segment is required. In the branded segment, plain spices account for no more than seven percent of the total market. n
Abrar Hasan was talking to Mariam Ali Baig. For feedback, email aurora@dawn.com
First published in the January-February 2011 issue of Aurora.
Most population of Pakistan, having spicy taste buds is inclined to try something new always, Food streets in Karachi,Lahore and other Metros of the country are living example, which are now permanently monitored by our television Food Channels, and are often covering LIVE, the cooking patterns and spicy Masala filled recipes, which are mouth watering for almost all age groups. Even Food Magazines are most wanted in every home, Every food magazine carries a life till its not readable or torn. This all shows the demand of any Masala product to grab some space in shopping list of every house hold.
ReplyDeleteNational Foods is most reliable name which has its footprint embosed across the country.
After reading details about National Foods and crisp answers by Mr.Abrar Hasan, our faith gets firm in prosprous compnies which are striving for the success in this competative and chalanging enviornment nationally and internationaly.