SADIA KAMRAN: As a well-known international brand, what business model has Emborg adopted in Pakistan?
SYED MUHAMMAD SALMAN: Emborg products have been imported and distributed by Samrah Enterprises in Pakistan since 2014. Currently, Emborg products are available in 24 cities in Pakistan and at more than 150 retail outlets.
SK: Which product categories does Emborg offer in Pakistan?
SMS: Emborg entered the market with 70 products and 75 SKUs in 2014 and has more than 140 SKUs across most categories today. Dairy includes butter, cheese, flavoured yoghurt (a recent addition), protein smoothies and milk. Processed foods include sausages only; three years ago, we tried to introduce nuggets and burger patties, but with strong mainstream competitors such as K&Ns, we had to withdraw these products, although we plan to re-introduce them a few years down the road. Our frozen French fries have been very well-received.
SK: To what extent is Emborg’s premium price a challenge?
SMS: It’s about informing consumers. We have to develop the market gradually because Emborg is a premium brand. Our frozen vegetables are the most expensive in the market; brands such as Fauji and Star offer a one kilogram pack for Rs 200, whereas our 450 gram pack retails at the same price. The difference is that our competitors import bulk packs from Belgium or China and then repackage them into smaller SKUs in Pakistan. The drawback here is that the quality control at the facilities where the repackaging is done is often not monitored and the handling procedures are not standardised, as a result, some of the vegetables end up thawing out and are refrozen, which is a huge compromise on product quality. Our vegetables are packed in retail-sized SKUs and frozen at the point of origin (Belgium or the Netherlands) and the plants there comply with standardised protocols for preserving and freezing fresh produce. This not only guarantees quality, it also substantially increases our costs. Another reason for the price differential is that our vegetables are sourced from the European market, which is known for non-GMO (Genetically Modified Organisms) treated vegetables; therefore our peas and sweet corn are standard in size, whereas companies importing from China have oversized sweet corn, as they are GMO-treated. Globally, consumers are moving away from GMO-treated products because they are unhealthy. However, awareness about the health hazards of consuming GMO-treated edibles is limited in Pakistan. Once consumers understand this difference, the rationale behind the premium prices of our products will be appreciated and consumers who are not driven by price alone will be more likely to become loyal customers.
To promote our recently introduced protein smoothies, we partnered with health studios and private instructors as we realised that this product will sell on expert recommendations and word-of-mouth. However, this year, because we added mass consumption products to our portfolio such as milk, there was a need to move from product integration and activation to communication channels with a greater reach, hence print.
SK: Emborg has been in Pakistan since 2014, but print advertising started only recently. What triggered this change?
SMS: Our traditional media presence has been very limited because our offerings target a select customer base and we chose to address them in a different way. For example, people are unaware about how to use different types of cheeses, so we partnered with celebrity chefs (Chef Mehboob, Chef Zakir and Shireen Anwar), cooking shows and magazines to teach customers how they can best use our products in common recipes. To promote our recently introduced protein smoothies, we partnered with health studios and private instructors as we realised that this product will sell on expert recommendations and word-of-mouth. However, this year, because we added mass consumption products to our portfolio such as milk, there was a need to move from product integration and activation to communication channels with a greater reach, hence print.
SK: Who exactly is your target audience?
SMS: People who value a healthy diet. Our vision is to establish Emborg as a day-to-day healthy food option for families. Our vegetables are more expensive because they are not GMO-treated; similarly, our cheeses cost more because they are pure and not processed. Processed cheese is detrimental to health as it fuels obesity. In Europe, people are more inclined to using fresh cheese because of its health benefits and we expect the trend to catch on in Pakistan.
SK: What is the competitive landscape for Emborg?
SMS: In the butter category, Lurpak is an international brand that is well-established in the Pakistani market; Nurpur and Adam’s are local brands that have a strong presence on the shelf. For flavoured yoghurt, there are plenty of local brands in the market, but ours has real fruit chunks inside.
Discouraging the import of a product that is produced locally is justifiable, but hiking taxes to discourage imports that are not available locally, such as the raw cheese variety we offer, is not logical. These taxes at times add up to 95% of our product cost, making it extremely difficult to maintain a feasible price point in the market.
SK: What challenges do you foresee in increasing market share in Pakistan?
SMS: The biggest challenge will remain induction; making the brand available at retail points. Retailers are used to receiving discounts for shelf placements and it is very challenging to have retailers on board while ensuring competitive price points for a brand that does not play on volume. Also, most of our products have specific storage needs to maintain optimal quality and most retail spaces are not equipped to stock such products. A further challenge is that prices are going to increase, given the rupee depreciation and although I will compromise on margins, a certain portion of the cost hike will be passed on to consumers. Our USP is product quality and our focus will remain on inducing trial. Once customers try our products, the difference in quality will become obvious; repeat purchases prove that the quality differential that Emborg offers is so remarkable that price alone does not remain a concern in the purchase decision. On the supply side, importers in Pakistan are not a favoured community. Import taxes (including custom duties and sales tax) and regulatory duty taxes have increased tremendously in the last few years. Discouraging the import of a product that is produced locally is justifiable, but hiking taxes to discourage imports that are not available locally, such as the raw cheese variety we offer, is not logical. These taxes at times add up to 95% of our product cost, making it extremely difficult to maintain a feasible price point in the market.
SK: Long-term, what are your plans for Emborg in Pakistan?
SMS: By 2020, we aim to establish manufacturing plants in Pakistan so that a few ranges can be manufactured locally, thus benefitting the local economy by offering employment and contributing to government revenue. This will also reduce the end product cost because manufacturing will be done locally. The Pakistani market has responded extremely well so far. Sales are constantly increasing, despite the premium prices and this suggests that Pakistani consumers are discerning when it comes to quality.
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