Why P&G is leaving Pakistan

The company’s presence in the country is an example of a global multinational creating a hard-fought market for itself from scratch. Its departure will leave a gaping hole

However bad you think Procter & Gamble leaving Pakistan is, we suspect after reading this story, you will see that it is worse. There are no two ways to say it, so we will start with the uncomfortable truth first: P&G is important for Pakistan, but Pakistan is not important enough for P&G.

P&G’s presence in Pakistan is perhaps one of the best examples of how a global multinational started off in the country with a miniscule presence and barely any resources and ended up becoming one of the largest manufacturers in the nation. Indeed, P&G had gone from being mainly an importer, to a domestic manufacturer, and had already begun to be an exporter.

It was one of the best examples of attracting foreign direct investment into the country: allow imports to start with, let them build up their market, and slowly they will start manufacturing, technology transfers, and even exports. It was working.

Until it stopped.

This is one of those stories where there is not one person or party to blame. Did the government’s policies drive away the company? They certainly did not help, and we will explain the specific policies that hurt P&G’s business. But a detailed examination of the company’s financials indicates a much more complex story, one that indicates that Pakistan’s consumer goods market may be a lot smaller, and growing a lot slower, than the headline numbers may indicate.

In this story, we take a look at what P&G built in Pakistan, and how they moved from importers to manufacturers and net exporters. We then examine the recent downturn in the company’s performance in the Pakistani market, as well as its generally sluggish growth globally. Finally, we take a look at reasons why P&G may have made the decision to leave the country.

 

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Farooq Tirmizi
Farooq Tirmizi
The writer was previously, managing editor, Profit Magazine. He can be reached at [email protected]

2 COMMENTS

  1. Great article, Farooq. As part of the early founding team at P&G Pakistan, having returned from Cincinnati, US to lead the marketing team, and having left P&G in 1996 to join Pepsi Pakistan as Country Manager, your article helped me understand many nuances of the changes “our baby” went through. You also nailed it well that a lot of the reason for this decision also includes P&G’s recent dismal performance as a global company. I sold all my shares ten years ago as the company seemed to be stuck at $80B in revenues growing at 1-2%. The company seemed to not be innovating and the market valuation was also stagnant at $300B to $340B or so, so really no upside as an investor. Your article is so well written that it actually makes me think this is a win win for both P&G and Pakistan. P&G will have a very tough time competing in a country like Pakistan that is so close to China. With Chinese manufacturing having excess capacity, I see a huge opportunity for Pakistani entrepreneurs to disrupt global companies like P&G by creating local brands importing initially from China. In the US, we constantly think about disrupting large players, like Intel, Google etc – so I really think Pakistani entrepreneurs should think of it as a win that they disrupted a old global player by gaining market share and stunting its growth. I do realize through that access to capital in Pakistan is not easy, so I may be being too optimistic. But having said that, let me explain why I am framing it this way. For the last 5 years I have not bought a Gillette razor as Harry’s starting out as a DTC brand has disrupted a lot of Gillete customers in the US. Anyway, thanks for a solid and well researched and presented just-in- time article. Best Regards, Bari Abdul

  2. Very well explains and excellent conclusions. Unfortunately our rulers, since our inception with Ayub khan early days being an exception, are short minded focused, quick benefits and majority with risk minded focus. This country needs a paradigm shift as you said from being a trading economy to an investment friendly economy. Until that strategic shift takes place, may God have mercy on the country and its citizens.

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