AURORA: The growth of Engro Foods has been very rapid in terms of the number of brands that have been launched within a relatively short span of time. What were the challenges involved?
SARFARAZ A. REHMAN: We launched the business in March 2006. From the start the management emphasised that our shareholders wanted us to do something different from the usual. They did not want a company that was just a profit crunching machine. Obviously, they wanted profits, but they wanted it done in a certain way. So the management crafted a vision that was ‘to elevate consumer delight worldwide’. So here is a company that is not yet in existence and yet aspired to a worldwide presence. Everything we do in the company requires that we develop relationships with our rural background, with our indigenous connections and with our culture. We are trying to create a centre of excellence in Pakistan so that people can see what can be done, and hopefully there will be a lot of replication. We would love it if, in time, there were 100 Engro Foods type companies.

A: How difficult was it for Olper’s to break into a market dominated by two established players?
SAR: Surprisingly it wasn’t, although we thought it would be. When we launched in March 2006, Haleeb was the market leader, followed by Nestlé. Those two giants dominated 90% of the market share in the category. Today, we are the leaders in the liquid dairy area, Nestlé is second and Haleeb is third.

A: To what do you ascribe this success?
SAR: We decided to take up a challenger position in almost everything we did. The packaging was red in a green and blue industry. We went in with a slim box; the whole country was running on a brick shaped box. We went in with an advertising programme based on Pakistani family values and traditions. The industry had run on functionality forever; Nestlé was into health and wholesomeness and Haleeb was into indulgence and taste, we went in with an all-purpose positioning. Olper’s created an inspirational and aspirational value connection with the consumer.

A: What gave you the momentum to keep launching new products?
SAR: That came from success. If Olper’s had not been a success, we would not have launched Tarang and if Tarang had not been a success, we would not have launched Omoré. We have nine brands today; the three major ones are Olper’s, Tarang and Omoré.

A: You mentioned Olper’s’ all-purpose positioning. Was that the genesis of the brand name?
SAR: Olper’s is not a short form for ‘all purpose’, although a lot of people think it is. We went through a process whereby we solicited names from different sources and shortlisted 327. Then we went into consumer testing and eventually we came down to seven and then down to one. Olper’s projected an international image, and somehow in people’s minds, it linked in with our positioning about family values. And then after Olper’s, Olwell and Olfrute seemed to connect.

A: Why the departure from the ‘O’ series with Tarang?
SAR: Tarang targets a different market segment and the name Tarang seemed to resonate with that market. Tarang is by far our biggest and most profitable brand. In the three years since we launched, Tarang has seen dramatic growth. It is worth over 10 billion rupees and is one of the top five brands in Pakistan.

A: One has the impression that breaking into the juice market was not as easy for Olfrute as it was for Olper’s when it broke into the milk category.
SAR: It was bound to be harder because Nestlé now knows how we do things. Also, there isn’t much one can do in terms of differentiation with juices. Personally, I think our juices taste better, but maybe I am biased.

A: What is next in terms of new product launches?
SAR: We are in the process of going into the rice business by setting up a rice farm in Muridke.

A: Why rice?
SAR: Our intention was always to go into milk, grains and fruit. We are going into rice on a B2B basis. We have set up a separate company called EXIMP, which will export the basmati rice we produce. Pakistan produces two million tonnes of basmati every year, of which one million is exported. In Europe and the Middle East there are between 15 and 20 big importers, and if we can do business with them, it becomes a feasible venture. They want consistency and quality, which is lacking in Pakistan at the moment. Our objective is to deliver consistent and quality volume on time.

A: Why has Omoré not been launched in Karachi yet?
SAR: I can launch Olper’s nationally, put it on the shelves and it will not spoil, but with ice-cream, if there are any problems with the freezer or the supply chain, I am in trouble with the retailer. If I do not put enough ice-cream in the freezer, the retailer will complain that I am wasting his electricity, but if I put in too much, the ice-cream is squashed, looks uninviting and may even melt. There is a huge science in managing that freezer and huge difficulties too, which is why we have been very careful. We first launched in 13 cities in Khyber Pakhtunkhwa and Punjab; today we have covered 79 towns and have come down as far as Multan. We are doing it step by step in ever widening circles.

A: Is the supply of freezers key in the ice-cream business?
SAR: Yes. You need thousands of freezers. Also, retailers do not like it if you enter the market in the middle of the season. They will complain that you are wasting their electricity, because when the season ends and the bottom drops out of the ice-cream market, they will not have sold enough product. Ice-cream is a seasonal business and you have to be in there at the beginning of the season with your freezers on the ground; if you cannot manage this, then you are better off waiting for the next season. And behind that freezer, you need to ensure that you have enough cold storage and enough cold distribution trucks; a lot of stuff has to be aligned. For example, if I have enough freezers and storage space, but I don’t have enough trucks, my system is going to crash. There are a lot of technicalities involved in ensuring the whole pipeline.

A: Engro has been at the forefront of many CSR initiatives; what will your approach be in terms of flood relief?
SAR: We have created a 200 million rupee fund – although having been to the flood affected areas many times in the past two months, I feel this is a drop in the ocean. I wish we could pour billions into our relief and rehabilitation efforts. As a matter of fact, we normally do not mobilise funds, but we have done so this time as we are probably one of the more efficient entities in terms of knowing what we can do with them.

A: And what will you do with them?
SAR: We are working primarily with the Pakistan Poverty Alleviation Fund (PPAF). In the first six to eight weeks we set up a number of camps in Muzaffargarh and Layyah in Punjab, and in Sukkur and Ghotki in Sindh. The Engro Foundation is coordinating the CSR work. We have provided food, water and medical support and installed hand pumps. We have worked on saving animals that were trapped by the water and inoculated them against disease. Next is the rehabilitation phase, which is a very important phase, but things are going off the boil; there is less media reporting about the floods and definitely none in the international media. Yet I cannot think of any national disaster of a bigger scale; 20 million people have been displaced; lives have been altered and this could have society changing effects.

A: How do you identify and select your milk producing livestock?
SAR: We have a farm, which meets two percent of our milk needs, and this will increase. The industry as a whole has 30-40 industrial commissioned farms. The rest is made up by individual farmers. We have about 800 collection units in the rural areas stretching from MirpurKhas to Sahiwal. There are about 15-20 villages around each chilling centre and the village collectors bring in the milk every morning, we chill it and ensure it remains safe until our chill trucks deliver it to the plant.

A: Do you have a programme aimed at educating farmers on milk yielding techniques?
SAR: We do, although some of the education happens when you reject their milk; they then understand what has to be done. But there are other technical aspects; we have 150 people in our extension services and they travel all over our milk areas, advising farmers on how to improve their breeds and yields; ensure good quality milk, how to preserve that milk and stuff like that. It is not a battle you win in a day; you win it over a number of years. I think the industry has done this very well.

A: As a result of the floods there has been a shortage of milk across all brands. How long is this likely to last?
SAR: When the floods struck, our chilling centres either became inaccessible or they were damaged and had to close down. As a result, soon after we were down 15% on our production. We were lucky that we had built up stocks for Ramazan, so the public did not feel the shortage in the first 15 days of Ramazan. After the initial impact of the floods, the animals had to be shifted and that was the major problem, not the loss of life; we estimate that 300,000-400,000 animals were lost out of the 36 million in Pakistan. The problem was that the animals were under stress. They are like human beings; you change their environment, they are not fed properly, they can’t drink properly or sit in the shade and their milk production goes down substantially. Until this situation settles down and the chillers and milk collection centres are up and running there is nothing much anyone in this industry can do. At the moment we are down to about five percent of our normal production capacity and we expect to reduce this to about three percent in a couple of months.

A: Will this affect the price?
SAR: Yes it will. When we launched in early 2006, the price was about 36 rupees per litre and today it stands at 69 rupees. It has gone up almost 100% in the last four and a half years, but this has still not been as much as some other items have, although it is still substantial.

A: Do you think some consumers will start buying ‘loose’ milk?
SAR: No. The price of loose milk has gone up even more. When we launched in 2006, at 36 rupees, loose milk was about 22 rupees, and today a litre of loose milk costs 60 rupees and we are at 69 rupees.

A: Perhaps people will reduce their milk consumption?
SAR: That could be. What we have done in terms of relief is that our tea whiteners are cheaper. Tea consumption is a huge milk occasion in Pakistan and a lot of milk usage has gone into tea whiteners.

A: Within the dairy category, are you planning more product expansion?
SAR: We are looking into doing a lot more chilled powdered dairy.

A: As a food company, what is your ultimate goal?
SAR: I would like to be on the dining table 24 hours a day.

A: Post floods, how do you see growth shaping up next year? SAR: This year we grew by 40% despite everything; last year we grew by 80%. We have grown every year so far.

A: Forty percent is pretty impressive given this year’s economic slowdown.
SAR: Achieving 40% growth comes through effort and through the thought that this country belongs to us and we need to make the best out of the situation. Put our heads down, work hard as a team and deliver as much as possible, and sometimes this works, like it has for us in the last four years. I am hoping it will work next year and the year after as well. I would hate to be in a situation whereby I tell my colleagues that next year we anticipate a three to four percent growth. It would be demotivating, especially after the growth we have experienced for four years. Next year I expect 20-25% growth at least, but I am not sure if every company will be able to achieve this.

Sarfaraz A. Rehman was talking to Mariam Ali Baig. For feedback, email aurora@dawn.com