CLUSTER PROFILE BAKING UNITS, LAHORE

Transcription

1 CLUSTER PROFILE BAKING UNITS, LAHORE Turn Potential into Profit Small & Medium Enterprise Development Authority Ministry of Industries AND Production Government of Pakistan 3 rd Floor, Building No. 3, Aiwan e Iqbal Complex, Egerton Road Lahore Tel: Fax:

2 Table of Contents 1. Introduction Description of Cluster Analysis of Business Operations Institutional Setup Issues & Problems / Support Requirement Investment Opportunities in Cluster References

3 1 Introduction Lahore Lahore is the capital city of the province of Punjab, and is the country s second-most populous city after Karachi. The city is located in the north-eastern end of Pakistan's Punjab province. Lahore is one of Pakistan's wealthiest cities with an estimated GDP of $58.14 billion, Lahore is the historic cultural center of the Pakistan and is one of Pakistan's most progressive and cosmopolitan cities. The District is playing a leading role in bakery products production. Lahore is home to many of the biggest bakery chains and food chains. Other industrial markets include: Auto parts, Trading, Footwear, Oil mills, as well as flour mills, Services and Manufacturing industry. 2 Description of Cluster 2.1 History and Background of Cluster The bread industry in Pakistan has seen many changes in the last twenty-five years. It has emerged as a small-scale bakery processing industry to numerous industrial bread making units all over Pakistan. The bread industry in Pakistan is flourishing very quickly and bread products are gaining much popularity. Bread has been accepted as a popular substitute of rice, naan, chappati, paratha. Bread continued to be a staple food and a significant presence within baked goods. It is a substitute for roti (flatbread), which is an important part of every Pakistani meal. With the standard urban lifestyle busier than ever, bread became an important part of meals especially for breakfast and lunch. Baked goods is dominated by unpackaged/artisanal offerings which constituted 75% of total value sales in Description of Products With the rise in population the baked goods industry in Lahore has seen a considerable rise in especially in the past decade. This industry is on the rise as Baked goods is expected to grow as consumers seeking better product quality and variety shift from unpackaged to packaged goods. The major bakery products produced by the baking units in Lahore are as follows: Bread Biscuits Dry Cakes Cream Cakes Pizzas Rusks Patties 3

4 Baguettes Muffins 2.3 Core Cluster Actors Total number of manufacturing units (Including small, medium & large units) is around 150 in Lahore and its surroundings. Total production (average Production Capacity of one unit varies with the size of unit as given in table below): Table 1: No of Units, Employees and Production Capacity Size No. of No. of Production units Employees Capacity SKU/Day Product Quality Market Large ,000 High/medium Export/local Medium ,000 Medium/medium low Local Small Medium Low Local Micro Cluster Low Local 2.4 Other Cluster Actors Raw Material Raw material is easily and widely available locally. For some units which are making customized products for customer (Large Units) use some imported products in confectionary but those too are available in the market. Around 30 flour mills and 10 sugar mills as these are the main ingredients in baking. Rest raw material is widely available in the local market Raw Material Suppliers There are more than 100 raw material suppliers for raw materials other than Flour and Sugar. Locally available and mostly procured from traders of Shahalmi market maintain the demand. More than 8 packaging industries and paper mills are supplying the finishing and packaging materials to all the units. The important suppliers widely manufacturing in this sector are Packages group, Hussain can, Pak packages, Tetra pak and Danpack etc. 4

5 Table 2: Raw material Details: No. Material consumption Local Material 90 % Imported Material 10 % Total 100 % No. Source % Share 1 Localy produced 90 % 2 Import 10 % Total 100 % 100 % 2.5 Geographical Location Geographically the majority of Baking units in Lahore are located at following areas. Raiwind road Multan road Kot Lakhpat Industrial estate Sundar industrial estate 2.6 Major Players Sr. No Name of Company Daily Production (SKU) Gourmet Foods Raiwind Road, Lahore. Golden Harvest Foods Quaid e Azam Industrial Estate, Kot Lakhpat, Lahore. Doce Pvt Ltd. Quaid e Azam Industrial Estate, Kot Lakhpat, Lahore. Shezan Bakers Multan Road, Lahore Malmo Foods. Thokar Niaz Baig, Multan Road, Lahore

6 2.7 Current Cluster Scenario Baking Industry of Lahore has a huge potential. The industry faces numerous problems particularly with raw material, power outages and compliance with local and International Food Standards. At present, Baking industry in Pakistan is relatively less organized with sales primarily generated via shops/premises with limited financial and banking history. However, demand for this segment is expected to increase substantially, given strong historical sales and increase in population although some business owners face the threat of decline due to increasing influx of large confectionery companies making inroad into the same segment as most of the smaller or micro units are home based. 3 Analysis of Business Operations 3.1 Production Process & Work Flow Production in all baking units is done in two shift 12 hours each. The products with longer shelf life are made at day and the products having less shelf life and are perishable are made at night and all the supplies to the retails stores starts in the morning. 3.2 Technology Status Majority of the machinery is locally produced and locally available. The main machines used are Ovens, Refrigerators, Stoves, Fryers, Mixers, Cutters and Packaging machines. Some of the big units are also using the imported machinery but their numbers are very less majority are using costumed designed local used machinery. 3.3 Quality assurance/requirements for National/International standards and certifications Majorly food safety management systems and certifications are adopted by large units. Small and medium units lack in quality control and assurance. The PFA is playing major role in monitoring of these units relating to Food Safety & also provide training and licensing for enforcement of certain standards. Major Private Organizations involved in certifications are Bureau Veritas Certification, SGS Pakistan, Moody International and Pakistan Systems Registrar. The government institutions for prescribing & enforcement of local quality standards are PFA, PSQCA and PNAC. The international standards required are ISO 2200:500 FSMS, ISO 9001:2015, FSSC 2000, HACCP and HALAL. 3.4 Major Market The traditional sweets manufactured have a potential in export to the countries like Gulf, USA and UK rest and only two of the big units are exporting these items but on a very small scale. Demand is very high and According to Pakistan Biscuit & Confectionery Manufacturers 6

7 Association, Pakistan s Bakery and Confectionary Industry has grown with an average annual rate of 6.5% to 7.5%. 3.5 Marketing & sales mechanism Independent retailers and wholesalers are still the largest contributors to the segment. Larger units have their own retail outlets. Small and micro are mostly involved in the direct sales. Marketing is mostly done by TV commercials by the larger units and Billboards along with their sales and marketing field teams. The smaller ones have no mechanism for marketing. 3.6 Distribution channels The businesses operate in both rural and urban areas of Pakistan with significant presence in commercial and residential vicinity. It is done through conventional methods of branches and direct sales agents without involving any intermediary channel. 3.7 Terms of trade The perishable items for e.g. Bread placed on the counter of shops are replaced after expiry with the fresh ones. Mostly the goods are provided on credited terms on 30 days to shopkeepers and distributors. Distributors are registered with the units through a security deposit which varies for different units. Since the smaller units are producing in very less quantity so they sell all what they produce on their own retail shops. 3.8 Business cycle etc. The segment experiences cyclical trends due to seasonal sales, traditional occasions such as religious and wedding occasions give significant rise to sales. The segment is also affected by fluctuation in raw materials prices for producing bakery and confectionary items. Businesses suffer from general increase in prices which in turn causes reduction in sales. 3.9 Financial Management Funds are mostly managed by the owners themselves, mainly required for business assets and working capital which are mostly fulfilled by their own personal savings or cash flows from the business. Among the fixed assets, finance need is mainly centered on machinery and equipment for the business. A large number of owners have well stocked raw materials for carrying out smooth business operations in case of material shortage or unusual hike in prices which leads to the problem of tied up working capital. This issue pertains throughout the year as a minimum level of inventory has to be maintained for uninterrupted business operations. The segment has generally limited exposure with respect to financing and banking products. 7

8 3.10 Human resource/education level, technical knowledge Due to the labor intensive and manual nature of work, education is not considered as a major factor for business owners. However, they require skilled workers who have the knowledge of baking and confectionary production for business operations. Larger and Medium Units have production Managers (Food Technologists) and production supervisors but smaller and micro units are supervised by the owners or the family members. 4 Institutional Setup 4.1 Relevant Associations Relevant Associations: Active Non-active Pakistan Biscuit & Confectionery Manufacturers Association (PB & CMA) Registered Non-registered Active Non-active Pakistan Food Association (PFA) Registered Non-registered Table 2: Details of Institutions involved Educational Institutions Details Government - Semi Government - College of Tourism and Hospitality Private Management (COTHM) is a private institute which offers diplomas and certificates in Professional Baking. Authorities Details Punjab Food Authority (PFA), Pakistan Government Standards and Quality Control Authority (PSQCA) Semi Government - Private - 5 Issues & Problems / Support Requirement 5.1 Financial There is no such products or scheme available from the Banks or the Gov. to provide loans/financials for the business of this sector. Also business owner s reluctance and nonavailability of proper accounting records presents an issue for calculation of segments 8

9 benchmark financial ratios. 5.2 Marketing Lack of Knowledge about low cost marketing e.g. social media marketing techniques amongst the SMEs. No systematic marketing mechanism. Lack of funding for Marketing. 5.3 Infrastructure The large and mostly medium units are properly developed but some medium and almost all the small and micro units are very poorly established and does not fulfil proper infrastructure requirements thus effecting the product quality and pricing. 5.4 Technology Small and medium units continue to operate using an outdated manual and labor intensive model with limited or no use of technology. The main reason for lack of automation in this segment is due to non-availability of funds to Bakery and confectionary producers/owner for purchase and installation of such equipment. There is a lack of innovation in technology at both ends as the modern technology base equipment is unavailable in the market; also there are no local manufacturers of these equipment/machinery. 5.5 Human Resource Smaller and medium units mostly depend upon single persons for mutli positions to save cost. There is a lack of knowledge about the importance of technical HR like Food Technologist etc. for adding the value in the production process. Lackof availability of skilled workforce. 6 Investment Opportunities in Cluster 6.1 Technology 9

10 There is a huge opportunity for investment in technology sector as mostly conventional methods are used for baking and manufacturing and demands of the finished product is rising constantly. More local and user friendly machines, ovens, and fryers with modern technologies like conveyer systems can be manufactured which will be cheap and cost effective. 6.2 Research and Development More private & public R&D labs can be established which could help in product development and also help in the improving the finish life of the product. 6.3 Working capital The segment has generally limited exposure with respect to financing and banking products. The businesses operating in the segment are not aware and therefore reluctant to obtain financing or to have a more far reaching relationship with banks and financial institutions. 6.4 Franchising Mostly units sell their products on their own retail stores and concept of Franchising doesn t prevail in this sector so there is a huge gap in franchising sector which can be a very good opportunity for new investors. 7 References Baker%20and%20Other%20Confectionary%20Products.pdf