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‘High cost of doing business pushing packaged dairy prices in Pakistan’

By Mehtab Haider
February 26, 2020

ISLAMABAD: Rising inflation, higher interest rates and increased taxation for packaged dairy sector were the major concerns for FrieslandCampina, because these factors pushed the prices of products for Pakistani market.

These concerns were voiced by Roel F van Neerbos, chief operating officer of the Dutch multinational, which is the parent company of FrieslandCampapina Engro Pakistan, during an exclusive interview with The News during his visit to Pakistan couple of weeks ago.

“Currently, they are investing in a campaign to promote processed milk and its benefits. Raw milk, which is not pasteurised or sterilised, is often full of bacteria and is also adulterated and diluted with water,” said Neerbos, speaking about different issues of the milk and dairy sector.

“However, there have also been cases where milk has been mixed with toxic soda - which has led to a lot of serious health issues. We have 1,300 milk collection centers where local farmers can bring their milk. This year we are set to open 250 more of these collection centers, a huge investment for us, as well as, for the industry.”

When asked about their major concerns, he said Pakistan was going through a tough time at the moment. Talking about the macroeconomy, Neerbos said they had seen higher inflation, particularly with regards to food prices going up. “This is never good for consumers, be from any part of this world, because their earnings start to buy them less in exchange. We also see interest rates going up, currently over 13 percent, which makes it expensive to borrow money, particularly to invest,” he added.

The FrieslandCampina official said he understood Pakistani government was working tirelessly to bring relief to end consumers; however, he always looked at things from a consumer’s lens – and inflation and rising interest rates were never good because they chip away at their buying and spending power. “This is a concern for us, because we want to bring affordable nutrition to the people, where those with less income should also be able to afford our products. But with rising inflation and currency devaluations, our prices are pushed up – which is perhaps one reason why we posted a loss last year,” he maintained.

Another concern, he said, “we pay hefty amounts of taxes each year – and we are competing with suppliers of raw milk who pay little to no tax, which means the difference between our pricing and raw milk is increasing”. “However, this is not new to us – our businesses in Nigeria, for instance, amongst other countries, also face similar economic volatility, which we are prepared for now.”

To a question whether Pakistani market was overregulated or not, Neerbos said he would not say that it was overregulated - one can even argue that it is underregulated, because of the different regulation levels present here.

“I wish there was one set of regulations, versus a multiple-leveled structured,” he added. “Now sure, multiple level regulations can mean overregulation too, but that is not the case here.” If it were to be overregulated, there would have been one federal regulation that would be applied everywhere, he said adding that at the moment, “we have all kinds of smaller regulations and we address them individually versus dealing with one big one”.

To another question, he said, “harmonisation of standard comes down to regulations, so this is a great question”. Standards could be quality standards, safety, or even health standards. “I feel, as an example, there is no discretion about the minimum pasteurisation law, where they can ensure all milk is to be pasteurised one way or the other. Pasteurization is a way to kill bacteria and to clean the milk, making it safer to consume,” he added.

Today, he said, there was a different standard for processed milk from that of raw milk; then there was a different standard for Punjab than there was for other provinces - so from that point, helping a singular harmonious standard helped bring trust and reliability to the consumers, at the end of the day. “And this cannot ever be a bad thing,” he concluded.