Pakistan with a population close to 200 million growing at 1.97% per annum is one of the largest markets of edible oils and fats in the world; consuming 3.8 million MT in 2016 (CAGR of 6.3% from 2012). Even more pertinent is the fact that income levels are rising at a CAGR of 5.6% (in USD) since 2012. This has given rise to a rising middle class with more disposable income. These factors signify tremendous potential for this sector stemming from 2 main factors:

• The population effect: With addition of more than 3.6 million individuals to the population each year, one can assume an eventual demand addition of over 70,000 MT per annum with existing per capita consumption.
• The income effect: As incomes rise and in particular families graduate from below the poverty line to the middle class, the per capita consumption will rise on account of 3 factors:
a. Increased use of cooking fats at home.
b. Increase use of cooking fats in the HORECA sector with higher demand for dining out as well as take out / delivery/ catering of ready cooked meals.
c. Rise in small scale and large scale processed food industry.

Putting the two effects together and looking at historical trend, one can forecast a CAGR of 6.3% going forward, reaching a total edible oil and fats demand in Pakistan of almost 5.2 million MT per annum by 2021; of which the population effect will contribute 31-27% and income effect 68-73%.

The significantly higher share of the income effect merits a closer look as the forecast is based on recent historical trends. Past data on rise of the restaurant and processed food industry and market for durable goods, together with a significant improvement in the security situation and massive Chinese investment in CEPC, lend credence to our assumption of future growth.

The key challenge for Malaysian companies is how to benefit from the exciting potential of the Pakistani market in a scenario where Indonesia has grabbed the lion’s share of the market and has a larger number of companies catering to Pakistani customers.

Another challenge that could be of concern to Malaysian palm oil players regarding future Pakistani market is the increasing share of soft oils in domestic cooking use; which is correlated to higher income, increasing health concerns and increasing urbanisation. To counter this, palm oil industry needs to address consumer health concerns towards fats solid or colloidal at cold temperature as well as work on product development toward high IV fats keeping consumer sentiments in mind.