What the Mondelēz investment in Pakistan tells us about export opportunities in the region

Chocolate and snacking giant, Mondelēz International, is investing $5 million into its Pakistan business. Mondelēz Pakistan, a subsidiary of Mondelēz International, will use this cash injection to grow its local presence in the country and increase its export capabilities.

“Mondelēz has chosen to invest in the Pakistan F&B market due to its significant growth potential, driven by consumer demand and our business requirements,” says a spokesperson for the company.

Going ‘glocal’ in Pakistan​

“The $5 million investment will prioritise localisation efforts, enhancing production capacity while maintaining high-quality standards,” says the company’s spokesperson. Mondelēz aims to reduce its reliance on imported raw materials by increasing local sourcing to 50% by 2025. Along with strengthening its supply chain, the company hopes the investment will support local industries, generate employment and contribute to economic development.

Mondelēz Pakistan’s investment comes following “severe macroeconomic pressures and a foreign exchange liquidity crunch in the country”, the spokesperson notes. The company is localising half of the materials it previously imported as a way to mitigate the impact of these issues. However, Mondelēz will continue to import ingredients such as cocoa beans that are not locally harvested.

Mondelēz Pakistan’s two manufacturing plants in Hub, Baluchistan, produce 100% of their products locally. In addition to sending these products to its domestic retailers, the country’s Mondelēz production units export some of these to Gulf Cooperation Countries (GCC), including Qatar and Saudi Arabia. It is a business move that is “helping to expand our global reach,” a spokesperson for Mondelēz says.

Mondelēz plans to double its export volume to GCC countries by 2025 and explore new international markets.

Confectionery in Pakistan​

Confectionery is a sub-sector in Pakistan’s processed food sector, the country’s second-largest industry after textiles. The processed food economy is responsible for 27% of the country’s value-added output and 16% of industrial employment.

Value-added output​ ​measures the actual value products or services bring to an economy by calculating output minus consumption and the amount of income products and services generate.

The country’s Made in Pakistan initiative aims to grow the country’s value-added exports, desirable import substitutes and help increase government revenues. The Pakistan Business Council (PBC) which advocates for policies, has focused on building its ​bakery, biscuits, and confectionery sectors​ ​as core manufacturing industries.

Mondelēz Pakistan has been a leading confectionery and snack manufacturer in the country for more than three decades. The company produces its Cadbury, Tang, Eclairs and Soft-Mints brands there and also has a joint venture with Continental Biscuits, the manufacturers of LU biscuits. Lotte and EBM are big-name brands in Pakistan, along with small-scale players that typically use single machines for production.

Confectionery and biscuit collaborations are a big opportunity for brands to grow their presence in Pakistan’s local market and expand their global reach. According to the Pakistan Credit Rating Agency (PACRA), Pakistan’s biscuit industry has increased by an average of 9.1% every year since 2017. The country’s bakers’ confectionery industry has also grown at a 9.4% rate over this time, a ​report​ ​detailing the country’s plans to expand its biscuit and baked confectionery market says. 

Positioning Pakistan as a key Asian production hub​

Recent efforts to revitalise the country’s Made in Pakistan initiative have spurred more attention on developing its manufacturing capabilities. Described as a “development movement” following a Made in Pakistan event in November 2023, the initiative strives to create a policy framework to revive its production.

Concerns were raised about the rate of imported products into Pakistan and how smuggling negatively impacts the country’s finances. Export efforts out of Pakistan contribute to growing its economy while lifting the presence of Mondelēz and other brands operating out of Pakistan.

Mondelēz anticipates this to be the case for its brand awareness efforts following investment into local production and exports to APAC and worldwide. “The localisation and export initiatives will drive sustainable growth, making our supply chain more resilient and cost-effective,” Mondelēz’s spokesperson adds.

Pakistani manufacturers have traditionally concentrated on their local market, focusing on imports and domestic growth. Since the country launched its Made in Pakistan initiative, confectioners have been exploring exports as their “next major growth opportunity.” Brands plan to grow production through exports while still focusing on the Pakistani market and the Pakistani diaspora in markets throughout APAC and the globe.

Pakistan’s biscuits and bakers’ product exports have increased by 49.4% since 2016, reaching almost $41 million in 2020. Despite this growth, the North American and Middle Eastern markets are largely untapped. Potential markets include countries in Africa, which have an export potential of almost $78 million. Trade opportunities for exports from Pakistan to China, Malaysia, and Indonesia also exist.

“By leveraging Pakistan as a key production hub, we can efficiently meet demand in neighbouring countries, reinforcing our overall footprint in APAC and positioning us for long-term success in the region,” Mondelēz’s spokesperson says.

Overcoming challenges in Pakistan’s emerging market ​

Brands like Mondelēz that want to grow their local presence in Pakistan face marketing, competition, and economic challenges.

The country has experienced increasing edible oil prices, high rates of inflation, utility cost hikes and an overall economic slowdown that has put confectionery producers at risk.

Pakistan faces competition from neighbouring countries India and Bangladesh. India has a larger domestic market size and more manufacturing plants and machinery. Corporate tax and policy rates are higher in Pakistan than they are in India, too.

Between 2011 and 2020, Bangladesh and India grew their confectionery exports by 5.2 and 1.6 times, respectively whereas Pakistan’s exports increased by 1.1 during this time.

There are also numerous barriers to exporting products to these regions. Testing requirements for banned ingredients, packaging and labelling are considerations for sweet treat brands wanting to move into smaller markets in Africa and Eastern Europe. Frequent regulatory changes in developing countries can disrupt manufacturers’ long-term planning and investment decisions.

Why Pakistan is an innovation hotspot​

Improving industry facilities and creating effective marketing strategies that capture consumers’ calls for confectionery are high on the agenda to help overcome these challenges.

Along with its Made in Pakistan initiative, PBC is pursuing numerous recommendations to help confectionery businesses with a presence in Pakistan scale. PBC says Pakistan needs a Pakquality initiative similar to Turkey’s Turkquality stamp of approval to promote the country and its domestic brands. It also recommends that the country provides incentives for R&D, invests in accreditation labs for compliance testing and implements a strategy that supports export to markets in Africa and Europe.

Similar to the US, Pakistan also has provincial food standard policies which often conflict so the PBC is calling for national industry standards to be implemented that will align with global market regulation.