Walk down the frozen food aisle in your supermarket of choice and take in the number of products available

everything from raw chicken (in a variety of cuts), frankfurters, seafood, shami kebabs, gola kebabs, koftas, chicken nuggets and burger patties to frozen fruit and vegetables, parathas, rotis, diet rotis, and then finally the ice-cream and frozen desserts. Think back to 10 years ago when practically none of these products were available in their frozen form and you will realise that the Pakistani frozen foods industry has come a long way in a little less than a decade. And yet, Pakistans industry is only the tip of the iceberg when viewed in the context of the global market.

A study by Research and Markets (a market research resource) titled Global Frozen Food Market Analysis Trends and Forecasts (2010-2015) predicts that the global frozen foods market, which was worth $218.4 billion in 2010, is expected to grow to $261.5 billion by 2015, with a compound annual growth rate (CAGR) of 3.7%. This growth is significant and is driven by two factors: the first is recessionary pressures which have forced consumers to eat more at home; and secondly, frozen foods brands have introduced more wholesome and nutrient-rich options making them more attractive to increasingly health conscious consumers.

In spite of this predicted growth, however, a research report by IRI titled Why is frozen growth thawing out found that although growth remains positive (over three percent), it is a good deal lower than the previous growth rate of over five percent. One of the major reasons for this is the growth of private label brands (brands offered by retailers) which, because of lower prices are accounting for an ever growing share of grocery purchases in general and frozen foods in particular.

The local market As with most categories, the value of the local frozen foods market is almost impossible to quantify. Salman Tariq, Director, Seasons Foods (owners of the Seasons Menu brand) says part of the reason for this is that the frozen foods category is massive, covering everything from meat, French fries, processed foods to vegetables and ice-cream; and there is no single organisation or body that combines them all.

However, various estimates and educated guesses exist.

A source at Food Mart says that the category (excluding ice-cream) is worth Rs 50 million. This is a far cry from the estimate given by Zafar Mehmood Khalid, GM Marketing, PK Meat and Food Company, which has recently launched the PK brand of frozen chicken, mutton and beef. Khalid says that the frozen poultry and meat category alone is worth five to six billion rupees; however he declined to offer an estimate about the total market.

Whatever the real figure is, two things are certain: the first is that at least in terms of the numbers, the growth in the Pakistani market seems to have closely mimicked that of the global market. According to Datamonitor, the local frozen foods market grew at an annual rate of 6.6% between 2004 and 2009; however it has slowed down to roughly 3.4%. Secondly, frozen meat products, and more specifically poultry account for 47% of the market (of which chicken burgers and nuggets account for a staggering 60% of all consumer purchases).

The growth Part of the reason why frozen food wasnt on the shelves before the late 90s was because of the very common Pakistani perception (which exists in some circles to this day) that frozen food is not fresh and therefore inherently unhealthy. Two brands (Bibi Jan and K&N) took on the pioneering role of educating consumers about the difference between domestic and commercial freezing the latter uses the quick freeze process to freeze freshly prepared food within 20 minutes of cooking, at a temperature of minus 20 degrees. In contrast, domestic freezers have a minimum temperature of minus 13 degrees.

Both brands started by offering raw chicken, all the while emphasising that not only was frozen chicken as healthy as its freshly slaughtered counterpart, it was also cleaner and more convenient. It took a few years to hammer the message home, but the change became apparent from 2001 onwards when the frozen food market grew by over nine percent (Source: Datamonitor). The focus on chicken as a starting point was obvious as it was the cheapest and therefore the most consumed meat in Pakistan, in addition to the fact that the poultry industry has an average annual growth rate of between 15 and 20%.

Once frozen chicken took off as a safe and healthy (K&Ns tagline) alternative, more traditional poultry businesses got into the game with Quick Food Industries (owners of the Mn Salwa brand) being the most notable player. As the competition in frozen meat began to heat up, the big players tapped into the fact that the metropolitan cities were seeing a change in the family structure with the nuclear family in the ascendant and a larger number of women entering the workforce. Catering to these lifestyle changes, they began to offer a range of ready-to-cook, frozen meat products, each trying to outdo the other in terms of product range and the taste.

Frozen products were clearly gaining traction but not everyone had deep enough pockets to set up a back end poultry operation from scratch. But not everyone needed to do so. Dawn Foods, a household name in Pakistan, expanded its line of traditional bakery products to include frozen parathas and puris. Yet another player, Mahi, traditionally a seafood exporter, expanded into a range of frozen seafood products. Several others followed suit.

However, four factors have helped in propelling demand for frozen foods: the Pakistani markets mass shift towards branded, packaged foods; the consumers demand for quick and convenient food products; the competitive pricing of frozen foods and most importantly, greater acceptance of frozen foods as healthy options to supplement meals and snacks.

One frozen food expert says that the greater level of consumer acceptance is obvious from the way in which the target market had expanded over time. In the beginning it was mainly consumers from the upper classes but then we started to see an excellent response from middle class areas where there were a lot of working women; and now the level of awareness is such that even people from SEC C and D will occasionally buy frozen foods, although for them it this is usually for special occasions.

The slowdown In spite of the many positive developments, growth is slowing down, although the reasons locally are completely different from those impacting the

international market. Perhaps the most telling fact in this regard is that every frozen food manufacturer interviewed for this story said it would be impossible for their business to survive without a strong export initiative. The reason for this struggle to survive is the power crisis. Prolonged power outages have forced manufacturers to invest massive amounts of money in their cold chain, in better freezers for retailers, backup generators and improved packaging, all of which have reduced profitability.

In spite of these measures, at the end of the day the manufacturer has very little control over what will happen to the product once it is in the shop.

A source at Food Mart complains that most retailers and their shop assistants have little knowledge of how to handle frozen products, often leaving products out of the freezer for an hour or so, on the pretext of cleaning the freezer. Others will overload branded freezers with smaller brands in order to make a quick buck. And worst of all, he explains, Pakistan is the only country in the world where retailers will accept returns of frozen foods, a loss that must ultimately be borne by the manufacturer. The net result is that it is very difficult for frozen foods manufacturers to consistently offer a quality product to their consumers, resulting in poor brand image and occasionally a lack of repeat sales. Most manufacturers have mitigated the extent of the problem by thoroughly vetting each retailer before giving him a branded freezer. Although retailers are generally vetted to ensure that they attract the kind of consumer who will buy frozen products, manufacturers also tend go for larger, modern trade outlets which are more likely to ensure that the merchandise is handled with care.

The future Most frozen foods manufacturers are somewhat pessimistic about the future saying that the power crisis, rising energy costs and high levels of cold chain investment are making it less and less profitable to operate in the local market and many are focusing a large part of their energy on their export business. Others say that while the short term forecast is grim indeed, once the power crisis is sorted, things will start to look up again. Still others, like Zeeshan ul Haq Khan, GM Operations, Quick Food Industries, are extremely optimistic.

The market is growing quickly and steadily. In the next couple of years I believe that giants like Unilever and Engro Foods will also want a share of the pie. The power crisis has made no difference to our sales.

Whatever happens next however, one thing that remains certain is the growing consumer demand for frozen food products. That in itself is reason enough for hope and optimism.

Box - Ice ice baby It is impossible to talk about Pakistans frozen foods market without a look at the frozen desserts and ice-cream category, which by virtue of its longevity and the experience and investment of the players involved, is one of the most well developed in Pakistan.

Adeel Rasheed, Marketing Manager, Walls at Unilever Pakistan says that Pakistans frozen desserts category is worth close to 100 million euros (approximately Rs 12 billion). Salman Ali, Group Brand Manager, Omor at Engro Foods estimates the total volume of the branded ice-cream segment to be between 70 and 75 million litres. Although these figures may seem substantial, Rasheed says that per capita annual consumption of ice-cream in Pakistan is between 0.2-0.5 litres only, which when compared to Turkeys four litres or the USAs 17 litres, is next to nothing.

There are many reasons for low per capita consumption. Firstly, ice-cream is to a great extent an impulse driven category, which is obvious from the fact that of the two major consumption categories out-of-home and in-home the former accounts for 60.3% of sales in Pakistan (Source: Euromonitor). Secondly, branded ice-cream in particular is very much an urban and semi urban enterprise due to it being a cold chain intensive category. This is not to say that there is no ice-cream in rural markets, but it is mostly unbranded and artisanal in nature and therefore largely undocumented.

The low per capita consumption also translates into a vast potential market for Pakistans ice-cream brands. The major players, Walls and Omor currently account for 71% and 20% of market share respectively (Source: MEMRBs Retail Audit), whereas players such as Igloo, Yummy and Hico have

strong pockets of loyal consumers in different regions.

There is certainly a clear move by the major brands towards expanding into new markets. For Igloo, Omor and Walls, it involves moving in to capture a slice of the premium ice-cream market. Igloo launched its premium ice-cream brand Moments last year, Omor has very recently launched two premium flavours of ice-cream, whereas Walls has also recently launched the Selection Gold range (a revamp of its Experts Choice line).

Rasheed says there are two major reasons for this:

There has always been a gap at the top of the ice-cream market in Pakistan which has been filled by premium foreign brands. In addition, in almost every category in Pakistan, the premium product is doing better than the mass product.

However, the premium market in Pakistan is limited to about eight to 10% of the population, which means that brands such as Cornetto and Jet Sport are still the most popular sellers, and women (particularly in the 18-30 age group) and children account for the lions share of ice-cream consumption.

Like the rest of the frozen foods market, ice-cream manufacturers have also been severely hit by the energy crisis, inflation and supply chain issues, leading to lower profit margins. However this has not hampered the growth of ice-cream, which according to Rasheed has been the one of the fastest growing sub-categories of the snack and fun money market in Pakistan for the last two years. MLA