Profit E-Magazine Issue 33

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8 Weekly Roundup 11 Is Treet Corporation Pakistan’s next big conglomerate?

16 Sugar Sharks: How does the most powerful lobby in Pakistan get its way?

24 24 Fit in Punjab, unfit in Sindh?

30 Klockwork’s mantra: The bigger, the better

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32 Why purpose driven companies are often more successful 36 E-commerce: Where does Pakistan stand?

38 Menace of fake drugs in Pakistan

Managing Editor: Babar Nizami l Joint Editor: Yousaf Nizami l Contributing Editor: Farooq Tirmizi l Business Editor: Agha Akbar Editor Reporting: Farooq Baloch l Reporters Aisha Arshad l Arshad Hussain l Bilal Hussain l Eleazar Bhatti l Syeda Masooma Ahmed Ahmedani l Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l Zulfiqar Butt (Lhr) Mudassir Iqbal (Isl) Design & Layout: Rizwan Ahmad l Illustrator: ZEB Photographers: Zubair Mehfooz & Imran Gillani Publishing Editor: Arif Nizami Contact: profit@pakistantoday.com.pk

CONTENTS

Readers Say There are some troubling parts in this story that call into question neutrality and some genderized problems. What I like though in general about Profit is that they are writing very readable business writing and tackling some issues with a flair beyond general business writing in the press. It doesn't put them absolutely above reproach, but for a relative newbie it's punching above its weight.

(Apropos: Can Tapal’s new boss lady defy the odds & retain market leadership?)

Fasi Zaka, Journalist I found the bit about family run businesses withering away after 3 generations somewhat intriguing. And my mind could not accept this as a universal truth. So I did some research of my own. Yes, there are a number of studies that support this contention. But I also found that there are at least a hundred continuously family-owned firms all over the world which are at least 225 years old; four have lasted in the same family for more than a millennium!

Tapal Tea is an unparalleled success story of entrepreneurship. The fact is that Mehvish Tapal is growing the business even more.

Shouldn’t then this write up have been more positive and projected her as a growing success story of female corporate leadership?

(Apropos: Can Tapal’s new boss lady defy the odds & retain market leadership?)

Zohare Ali Shariff, PR Professional A bit dragged but it is a good article giving an insight into an exciting sector, and an exciting local brand. The candid and non-committal style leaves the reader come up with his or her conclusions, particularly about the management styles of two generations. A good read.

Business students should read it.

(Apropos: Can Tapal’s new boss lady defy the odds & retain market leadership?)

Dilpazeer How to ContaCt

facebook.com/Profitpk twitter.com/Profitpk linkedin.com/showcase/13251020 profit.com.pk profit@pakistantoday.com

COMMENTS

Quite a comprehensive article however the title and intention behind need to be understood. It's strange that the writer is acknowledging the continuous growth of Tapal even after 2006 , yet stressing on the incompetence of new leader. I exactly do not know much

about the new Leader who happens to be a women ( usually not welcomed in man dominated businesses) but can say that the new leadership brings new directions that should be taken positively. ( Apropos: Can Tapal’s new boss lady defy the odds & retain market leadership?)

Zainab Qaiser Khan Succession is one of the biggest risks that a family owned enterprise faces. Experience and a wise head who listens to everyone counts a lot and it is clear that these qualities are lacking from the new boss. The experienced senior resources who have invested a lot of years in the company should be given more power and authority rather than directing them to do what you desire. A recipe for disaster for a company like Tapal where it is all about management’s quality and their decisions which would make or break the company’s future.

(Apropos: Can Tapal’s new boss lady defy the odds & retain market leadership?)

Khurram TAPAL will surely see a decline in Market share and growth. This girl may be smart but knowing when to chuck old experience and when to compliment and groom new staff is a slippery slope. Performance bonuses are a great motivator but the framework required to implement this and to rule out bias and agendas result in increased employee dissatisfaction and turnover. Aftab Tapals family run style changed the game for Tapal. There is an old saying don’t fix what ain’t broke. Maybe there are still lessons to be learned from the old fox by this young vixen. ( Apropos: Can Tapal’s new boss lady defy the odds & retain market leadership?)

Adrian Colaco Excellent. Well I hope soon to be a part of this industry specially with you and your team.

And I pray for your profit touch to be the goal at the sky limits….keep it up bro.. Great achievements Fahad and Ghazanfer.

(Apropos: 3 men show how to successfully mix business with pleasure) Ahmar Abbas

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“Pakistan’s investment policy is one of the most liberal in the region and provides a conducive environment for attracting FDI” Minister for Commerce Pervaiz Malik

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BRIEFING

“UK will unilaterally agree to mutually beneficial GSP Plus arrangements with Pakistan.”

British High Commissioner Thomas Drew

which was to be raised from Eurobond was cancelled at the last moment during a meeting of the federal cabinet, removing any possibility of going to international markets this year. Development policy credit (DPC) from World Bank and program loans from Asian Development Bank (ADB) are under threat as IMF’s upcoming report loom and questions over Pakistan’s ability to keep forex reserves over 2.2 months of import bill continue. Persisting slide in forex exchange reserves was increasing the risk on the external front and could stop the WB’s DPC and program loan in coming months, official sources said. The Washington-based lenders report is expected to be tabled before the Fund’s executive board by first week of March and will then be released for public vetting. Ex-Secretary Finance Shahid Mahmood last time declinec to conclude macroeconomic estimates especially on current account deficit front before the last past post program monitoring (PPM) and both sides agreed to improve understanding after finalizing data for end December 2017.

$1b

increase in debt was recorded by Water and Power Development Authority (WAPDA) touching Rs62 billion by end of 2016 against Rs14.4 billion in 2015. Public-sector enterprises during July-January of financial year 2017-18 borrowed Rs115 billion, as the government’s inability was reflected in turning around these entities. As per SBP data, the government during the above-mentioned period also obtained loans of Rs368 billion for budgetary support purposes. Also, banks funding to PSE’s rose 45 percent compared against FY 2016-17. During July-January, credit extended by banks to PSEs was recorded at Rs79.8 billion. Losses of PIA, PSM, Pakistan Railways and power distribution companies were equivalent to 0.3 percent of GDP. Asian Development Bank (ADB) also offered technical help for turning around loss-making PSEs including PIA and Railways.

PIA losses soared to Rs146 billion over the course of last four years, compelling the stateowned airline to cease operations on important routes. And PSM has been suffering monthly losses of Rs509 million considering the government has doled out billions of rupees for clearance of its liabilities, tax incentive on import of raw material and restructuring. Despite exhibiting improvement in services, Pakistan Railways incurred a loss of Rs26 billion during FY 2016-17.Attempts to privatize PIA, PSM have proven futile due to fierce opposition and SBP report revealed loss-making PSEs total debt rose to Rs822.8 billion by end of June 2017.

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22pc rise in sale of passenger cars was recorded during January 2018, a record high. Rupee’s devaluation in December caused prices to rise, but that didn’t have an impact on sales as loan availability and economy remained strong. Data available from Pakistan Automotive Manufacturers Association (PAMA) revealed car sales for first seven months of present financial year 2017-18 were recorded at 147,700 units against 118,416 in corresponding period last year. This growth in record sales was stimulated according to analysts due to rise in demand from ride-hailing services and car loans being available at low interest rates. Sales of trucks and buses grew 21 percent year-on-year (YoY) and 18 percent during July-Jan FY 2017. Sales of tractors grew 9 percent YoY during January 2018 and 45 percent during first seven months of FY 2017-18, touching 38,173 units. In the tractor segment, Al-Ghazi Tractors remained the standout performer with 53 percent YoY rise in sales, touching 2,715 units during January 2018 and Millat Tractor sales declined 12 percent YoY to 3,109 units.

BRIEFING

“PTI has framed a policy under which it aims to supply power at 7.5 cents and LNG at $6.5 per unit to the industries” Pakistan Tehreek-eInsaf leader Asad Umar

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11.62pc

increase in petroleum production was witnessed during the first five months (July-November) of the current fiscal year as compared to the corresponding period of the last fiscal year.

According to latest data of the Pakistan Bureau of Statistics (PBS), the petroleum products that contributed in positive growth included motor spirits, the output of which grew by 13.31 per cent during the period under review. The production of high-speed diesel grew by 12.19 per cent, production of diesel oil grew by 45.38 per cent while the output of furnace oil witnessed a growth of 12.18 per cent.

was the figure of rice exports from Pakistan during by the end of January 2018 from July 2017 showing an increase of 29 per cent in value and 15 per cent in quantity. In a statement, Rice Exporters Association of Pakistan (REAP) Senior Vice Chairman Rafique Suleman said that Pakistan exported total 2.28 million metric tonnes of rice worth $ 1.06 billion in last seven months, whereas in the same period of last fiscal year the figure was 1.971 million metric tonnes amounting to $ 820 million. ‘We have come out of the crisis. REAP members were making their untiring efforts and doing aggressive marketing to increase the rice exports and to earn valuable foreign exchange for our beloved country Pakistan,’ he reaffirmed. He was hopeful that this year the set target to export more than 4.0 million metric tonnes of Pakistani rice and would earn $ 2 billion. Due to the excessive pesticide residue found in Indian rice, India is expected to lose the European market hence REAP had also focused on European countries.

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projects were approved by Executive Committee of the National Economic Council (ECNEC) in a meeting chaired

by Prime Minister Shahid Khaqan Abbasi. Several projects were approved including the scaling up of Glacial Lake Outburst Flood (GLOF-II) Risk Reduction in Northern Pakistan at a cost of Rs 3946.481 million. Enhancing Public-Private Partnership in Punjab project at a cost of Rs 23,478.84 million was approved by ECNEC. The programme will provide direct financial support towards Viability Gap Fund, Project Development Fund and the capacity building beside providing adequate financial resources to government departments for project identification, transaction execution and development of sustainable PPP projects. Furthermore, the meeting approved the establishment of Combined Effluent Treatment Plants (CETP) for Industrial Areas of Karachi including laying of Interceptors Sewers at an estimated cost of Rs 11,799.00 million.

Rs167.06b

was the figure of trade deficit recorded for first seven months (July-January) of FY 2017-18. Trade deficit was recorded at $21.546 billion for July-Jan 2017-18 against $17.351 billion in July-January 2016-17. Imports for July-January FY 2017-18 shot up by 18.92 per cent, touching $34.512 billion considering the government’s effort to rein in imports. But, exports during the July-January 2017-18 period rose by 11.11 per cent to touch $12.966 billion against $11.67 billion in the same period last year (SPLY). Month-on-month exports during January declined 0.30 per cent to reach $1.971 billion against $1.977 billion in December 2017. But imports during January increased by 14.20 per cent to touch $5.607 billion despite the government’s decision to impose SRO on items in October to rein in imports, seemed to have failed altogether.

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97.5pc work has been concluded on strategically important 969 MW Neelum Jhelum Hydropower Project and its wet testing will be carried out in March. This was stated by NeelumJhelum Hydropower Project Chief Executive Officer Brig (R) Muhammad Zareen.He said 100 per cent concrete work of the project had already been completed besides 98 percent dry test of the equipment’s. The CEO said that National Transmission and Despatch Company (NTDC) would hand over 500 kV transmission line on February 11-12 after which feedback of switch- yard would be assessed. Muhammad Zareen said that water filling (pressurization) of its water way system comprising 51.5kilometer long tunnels has also been commenced in January.

BRIEFING

The making of multi-industry, multi-business behemoth: Aside from its core business of razor blades, the company is investing in motorcycle assembly, pharmaceuticals, batteries for solar power, higher education, and venture capital CONGLOMERATE

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By Syeda Masooma and Farooq Tirmizi yed Sheharyar Ali is now the fourth generation of his family to be a major business owner in the region that is now Pakistan, and fifth if you count his greatgreat grandfather Syed Wazir Ali. Conventional wisdom dictates that the family business would at the very least have been in severe decline by now, if not outright bankrupt. But Sheharyar, an executive director and heir apparent at the Treet Corporation, and his father Syed Shahid Ali, the CEO of Treet, appear to have the kind of zeal to grow their family business one rarely finds among men who have grown up with generations of wealth in their family’s past.

Indeed, the company’s leadership may be overdoing their attempts to ward off the decline that typically set in for family businesses by this stage in their life cycle. At its core, their growth strategy relies on investing in what appear to be several high growth businesses that have almost nothing in common with each other. If they succeed, they may well build one of Pakistan’s most successful and dynamic diversified conglomerates. Yet the diversity of the businesses they are seeking to expand into may yet prove the group’s undoing if they are not careful.

Treet is Pakistan’s leading manufacturer of razor blades for men’s shaving products, besting the global leader Gillette by a wide margin in terms of market share within the country (85% to 5%, according to estimates by the Treet management). And yet, over the past decade, and continuing into the coming years, the company has gone on a diversification kick the likes of which are almost unprecedented in corporate Pakistan.

Treet is now involved in everything from its core business of razor blade manufacturing to motorcycle assembly, manufacturing batteries that can be used in cars as

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well as backup storage for solar power, and higher education. And that does not include their venture capital investments in companies that range in product offering from artificial intelligence, the internet of things (IoT), to e-commerce.

Will this gamble work? The company’s history and management structure suggest at least some room for optimism, though there does not appear to be precedence for the level of complexity the current management has taken on for themselves.

The other branch of Syed Maratib Ali’s empire reet Corporation’s genesis lies in the industrial empire whose origins trace back to the peak of British rule over South Asia.

Syed Maratib Ali was a highly successful entrepreneur in the early part of the twentieth century and made his fortune supplying a variety of goods to the British government in India, specifically the British Indian Army.

He followed in the footsteps of his father, Syed Wazir Ali, who had initially started a canteen that served troops in the British In-

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‘IF ONLY THE FAMILY THAT OWNS TREET CAN FOCUS ON THEIR MOST PROMISING BUSINESSES, AND NOT TRY TO DO EVERYTHING ALL AT ONCE, TREET CORPORATION MAY WELL BECOME A CONGLOMERATE TO BE RECKONED WITH IN CORPORATE PAKISTAN’ 12

dian Army, a business that gradually morphed into Wazir Ali Industries. “In the early 1900s, we caught a decent break, and at one point were managing 10 of [the Royal British] regiments,” said Sheharyar, in an interview with Profit.

As the business continued to grow, Sheharyar claims that the family decided to hold off on further expansion as independence continued to grow closer, supposedly with the intention of supplying the Pakistan Army if Partition were to go through. “My family was in favour of the Partition and we also contributed towards attaining it in many ways,” said Sheharyar.

Maratib’s three sons – Amjad, Wajid, and Babar – leveraged their father’s financial success to become highly successful individuals in their own right. Amjad, the eldest, became involved in politics. He served as the chief whip of the ruling Unionist Party in the Punjab Assembly from 1940 to 1945, and in 1946 he was elected to the Constituent Assembly of India. After Partition, he went on to become Pakistan’s ambassador to the United States (1953-55), Federal Finance Minister (1955-58), and ambassador to the United Nations (1964-67).

Wajid and Babar decided to stay in the family business. While Wajid and Babar were both involved in the Packages Group, as both the business and family expanded, over time the shareholding between the two brothers and their descendants has diverged somewhat, with the Packages Group having a larger (but not exclusive) shareholding held

‘AT ITS CORE, THEIR GROWTH STRATEGY RELIES ON INVESTING IN WHAT APPEAR TO BE SEVERAL HIGH GROWTH BUSINESSES THAT HAVE ALMOST NOTHING IN COMMON WITH EACH OTHER. IF THEY SUCCEED, THEY MAY WELL BUILD ONE OF PAKISTAN’S MOST SUCCESSFUL AND DYNAMIC DIVERSIFIED CONGLOMERATES’ Syed Shaharyar Ali, Executive Director, Treet Corporation Limited

by Babar and his children, and the Treet Group having a larger shareholding belonging to Wajid’s children and grandchildren. (We have previously covered the history of the Packages Group in an earlier article).

While the Packages Group is clearly the larger of the two, the Wajid Ali side of the family has a sizeable business of their own in Treet Corporation and Loads Ltd, both of which are publicly listed companies that each owns several subsidiaries.

Loads Ltd is an automobile parts manufacturer that makes radiators, exhaust systems and other parts for both car and motorcycle assemblers in Pakistan. Treat Corporation, the larger of the two, has several business lines, almost none of which has anything to do with any of the others.

Razor blades – the core business he blade business is the oldest – and by far the largest – part of the Treet Corporation’s business, accounting for Rs5.4 billion (63.6%) of the company’s total revenues of Rs8.4 billion for the financial year ending June 30, 2017. The Treet brand of blades is by far the best-selling blade in Pakistan.

“The packaging is for the masses – as are the blades,” said Sheharyar. “We don't pitch for niche markets, as our family strategy has always been to go after the mass market.

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The issue with niche markets is that there is always going to be somebody who is going to make something better or something cheaper.

So instead of focusing at that, we concentrate on the mass market where, even if competition comes, there is a lot to share.”

With regard to the competition, Ali said: “That Gillette leads the market here is a major misconception. In reality, they don't even control 5% of the Pakistani market. Gillette was manufacturing here some time ago but they shut down [the manufacturing plant] because they couldn't compete. Besides Gillette only targets the ‘A’ class [of consumers], but that's not the majority of Pakistani population and not our market, so Gillette is not even our competitor.”

That said, to him, Gillette remains an inimitable brand. “They spent over $2 billion just to develop the Gillette Mach 3. We are at number two when it comes to quality but we don’t aim to compete with Gillette anyway.”

To him, the main competition to Treet blades comes from India, Turkey, China and the brands operating in and around Pakistan.

“New brands keep coming, but our major strength is the barber segment and that remains intact. Our biggest fear is counterfeiters using the Treet name, which happened in 2007, when low-quality Chinese blades marked ‘Treet’ started flooding the market, which made people think that our quality had deteriorated. It took away 50% of our sales

and that was the only time in 70 years that we felt scared.” To maintain quality control, and to be able to detect counterfeiting, Ali said that the company now has an extremely detailed record of its production, distribution and sales.

“Of the 1.5 billion blades produced every year, you give me one packet and I can trace where they were produced, who the distributor was, and where it was sold.”

A key problem for the company in terms of production is the fact that it is not able to rely on locally produced steel to manufacture its blades and has to import them. “No Pakistan steel mill produces the sort of quality needed for manufacturing blades. So, our cost is very high.” He does not expect this challenge to disappear any time soon, even with new steel mills coming online. “We would try to come up with some sort of an agreement with the new steel mills that are being set up, but the steel needed for shaving blades is very specialised. And it's going to take them a long time to develop something that fine. There is no room for any inconsistency in the blade, it has to be completely smooth, which means the steel has to be at par with that sort of quality as well.”

The other businesses:

‘...THERE IS CERTAINLY STIFF COMPETITION IN THE soap, packaging, BATTERY SPACE FROM MORE WELL-ESTABLISHED motorcycles, and PLAYERS, BUT IF TREET IS ABLE TO SELL ANYWHERE pharmaceuticals n addition to the blades business, Treet is NEAR THE NUMBER OF BATTERIES THEY WILL a manufacturer of soap, corrugated HAVE THE CAPACITY TO PRODUCE, THE COMPANY boxes, and is also engaged in motorcycle assembly. While soap manufacturing has WILL LIKELY GROW EXPONENTIALLY’

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been a long-time business of Treet corporation (the company owns the low-end “Saba” brand of soap), and is at least related to blades in that both are products involved in grooming, the foray into packaging, motorcycles, as well as the other businesses that started last year, happened after Sheharyar joined his father at their business in 2007 and began aggressively pursuing a strategy of diversification.

“Treet was a neglected company,” says Sheharyar. “We had other businesses. We have been here for a very long time and we are the only blade manufacturers in Pakistan.

And yet we didn't grow as much as we should have.”

The first business Sheharyar decided to expand into was arguably the worst idea he has had so far: motorcycle assembly. This was a venture that has no chance of making a dent in the Pakistani market for two-wheeler automobiles.

Here is why. While Pakistan has dozens of motorcycle brands, and the country regularly sees sales in excess of 2 million motorcycles a year, the market is dominated by one company – Atlas Honda – which makes a motorcycle that is the dominant brand (over 50% market share) and also the most expensive brand of motorcycle you can buy! If over half of customers in a market look at your product, and look at one that is sometimes as much as twice as expensive and still say “I want the Honda”, what chance have you got to make inroads? In what universe are you going to beat that product?

You would have to engage in a completely game-changing strategy that fundamentally transforms the nature of the industry, and judging by the fact that, five years on, Treet still only sells Rs322 million worth of motorcycles a year, the company does not have that kind of commitment to the motorcycle business.

Nor could it possibly have that kind of commitment to any other business, given how many ventures the company has decided to deploy capital into. For instance, while the

packaging business of manufacturing corrugated boxes has been around since 2005, the company does not appear to be interested in expanding it at all, using the subsidiary that is incorporated to engage in that business – the publicly listed First Treet Manufacturing Modaraba – to also become the vehicle that manages the group’s foray into battery manufacturing.

the ba‫מּ‬ery manufacturing idea f the many lines of business Treet has started, the one that appears to have gotten the most attention – both in terms of management focus as well as capital – is the new battery manufacturing business. For this business, the company has invested in a 40-acre, Rs6.25 billion manufacturing facility in an industrial estate

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Providing the energy storage for all of those Panels could become a lucrative business and it looks like the treet management has had the foresight to invest in that caPacity earlier than their comPetitors’ 14

in Faisalabad.

The company has signed an agreement with South Korean conglomerate Daewoo to manufacture maintenance-free batteries, also known as valve-regulated lead acid batteries.

The batteries do require some maintenance, but are generally easier to manage than conventional batteries. Crucially, their biggest feature is that they can store nearly as much energy as a lithium-ion battery, but are significantly cheaper to manufacture.

This feature is especially important in Pakistan, where power outages are still common, and many middle class consumers – in both urban and rural areas – install uninterrupted power supply (UPS) systems in their homes, which rely on lead-acid batteries as the storage capacity.

In an interview with Business Recorder in September 2017, Ali Aslam, the chief operating officer (COO) of the Treet Battery Project identified why the company believed that the UPS market will be a crucial one for the company. “As long as load-shedding is not completely eliminated, there will be a need for backup power. So even if load-shedding comes down to 2-3 hours in a day, the demand for batteries will still be there,” he said.

But more importantly, he highlighted what is potentially an even bigger end market: the energy storage capacity for the increasingly large number of homes in Pakistan that now have solar panels installed on their rooftops. “You have to also realise that solar power is developing very rapidly with an ever declining cost structure and an improved back-up service,” said Aslam. “Our projections for solar based electricity generation are extremely positive. Therefore, even when UPS sales might decline if load-shedding is eliminated, we expect solar energy to continue with its rapid expansion in the future.”

Rapid expansion may be a bit of an understatement. Since Pakistan does not have any manufacturing capacity for photovoltaic cells, all solar panels in Pakistan are imported. In fiscal year 2003, the country imported $0.2 million worth of solar panels. In fiscal 2017, that number was an astonishing $722 million (Rs75.5 billion). That comes to an average annual growth rate of nearly 79% per year. In the last five years, Pakistan has imported $1.8 billion worth of solar panels.

Providing the energy storage for all of those panels could become a lucrative business and it looks like the Treet management has had the foresight to invest in that capacity earlier than their competitors.

The Treet battery plant is aiming to produce up to 1.5 million batteries in their first phase of production, though they will have an installed capacity for producing 5 million batteries a year. Trial production has already begun at the Faisalabad plant and commercial production is expected to begin before the end of March 2018.

The venture capital business n addition to all of these – and other – businesses that are housed within the company (we have not even described the company’s foray into higher education), Treet also acts as a venture capital investor, and has invested in several promising startups.

In early 2017, Treet Corporation invested $150,000 (Rs16.5 million) in Car Chabi, a Lahore-based startup which provides a digital key to cars using smartphones. At the time of this investment, Sheharyar said: “Automation is the future and Pakistan still has a long way to go. Car Chabi will get the first mover advantage.”

Later in the same year, he invested in

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‘TO MAINTAIN QUALITY CONTROL, AND TO BE ABLE TO DETECT COUNTERFEITING, ALI SAID THAT THE COMPANY NOW HAS AN EXTREMELY DETAILED RECORD OF ITS PRODUCTION, DISTRIBUTION AND SALES’ two more startups. The first of these was Grocerapp, an ecommerce company that seeks to make grocery shopping in Pakistan migrate online. Sheharyar invested Rs10 million for 17% of the equity, which valued the company at just under Rs60 million, or 2.5 times their sales.

The second startup was Dataspine, a company that dabbles in the intersection between cloud computing and artificial intelligence, and is building a platform that can be deployed as a service on any cloud or onpremises enabling data science and engineering teams to seamlessly build, deploy, monitor and scale their models and production pipelines using their existing tools and workflows – without the in-house technical debt and operations overhead. Sheharyar teamed up with a friend to invest Rs10 million in Dataspine, in exchange for a safe note.

The pharmaceutical business nd in January 2017, Treet bought a 58% stake in Renacon Pharma, a small pharmaceutical company that produces hemodialysis concentrates in Pakistan. The concentrate is used to make dialysis fluids, which consists of water, glucose, and electrolytes in quantities that closely resemble that which naturally occur in blood. It is used by dialysis patients who suffer from kidney failure. An estimated 40,000 people in Pakistan are diagnosed with kidney failure each year, and each of these people need to get hemodialysis three times a week in order to be able to survive.

Renacon had sales of just over Rs310 million in fiscal 2017, a growth of 14% over the previous fiscal year. Crucially from the perspective of investors, Treet Corporation plans to list the company publicly in April 2018.

“The mandate has already been given to Arif Habib and BMA Capital,” said Sheharyar. “Hopefully by April we would have the book-building process for Renacon. We are using the IPO proceeds to not only expanding the current production capacity but also diver-

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sifying into other concentric areas. We have acquired land in Faisalabad Industrial City for our diversification/expansion plan.”

How is the business doing? f that list of businesses was exhausting to read, one can only imagine how exhausting it must be to actually run all of those ventures. It is clear from the lack of connection between most of those enterprises that some of them are going to succeed, but most will likely fail and should probably be shut down before they take up too much of the management’s energy and the shareholders’ capital.

But Treet as a whole appears to be growing at a reasonable pace. Revenues for the twelve months ending September 30, 2017 (the latest for which financial information is available) clocked in at Rs8,714 million. Since fiscal 2006, that number has been growing at an average of 18.8% per year – a respectable percentage, indeed. However, all of the management attention that has gone into businesses that have no ability to scale due to a lack of attention and capital means that operating costs have grown faster than revenues, and hence net income has grown by a much slower average of 7.1% per year during that same period.

Nonetheless, it appears that in the battery project, Treet has finally found the one big winner that they have been looking for to seal their fate as a fast-growing conglomerate in Pakistan. It is not yet clear if that venture will succeed, and there is certainly stiff competition in the battery space from more well-established players, but if Treet is able to sell anywhere near the number of batteries they will have the capacity to produce, the company will likely grow exponentially.

If only the family that owns Treet can focus on their most promising businesses, and not try to do everything all at once, Treet Corporation may well become a conglomerate to be reckoned with in Corporate Pakistan.

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COVER STORY

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SUGAR SHARKS:

HOW DOES THE MOST POWERFUL LOBBY IN PAKISTAN GET ITS WAY? Examining the situation closely reveals blatant rent-seeking by the politically powerful sugar barons

By Kazim Alam cores of sugarcane-laden lorries are parked on the main road in front of an abandoned car-making plant in Sujawal district, about 130 kilometres from Karachi. The signboard on the deserted factory says Dewan Farooque Motors in big, pale letters. Badin-Sujawal Road separates the one-time maker of Santro cars from Dewan Sugar Mills (DSM), one of the three functional canecrushing units in the area.

A group of drivers and their helpers is sitting underneath a parked lorry that is carrying as much as 1,600 maunds of sugarcane. How long have they been waiting here to offload sugarcane, I ask them.

“One week,” says Abdul Razzaq, a driver, in Sindhi. He says he has hauled his trailer from Gambat, Khairpur district.

And how long does he think he’ll stay here? “God knows better,” he shrugs his shoulders in resignation.

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“SUGAR INDUSTRY IS A HAVEN FOR UNDOCUMENTED CASH. GROWERS AND DISTRIBUTORS WHO TRADE WITH THE SUGAR INDUSTRY ON EITHER SIDE OF THE SUPPLY CHAIN ARE UNDOCUMENTED. IT’S FAIRLY EASY TO KEEP MONEY OFF THE BOOKS” Syed Shabbar Zaidi, Chairman, AF Ferguson & Company The fact that a grower based in Gambat has to send 64 tonnes of his crop to a sugar mill that’s almost 400 kilometres away, and then wait around indefinitely for the buyer to accept his highly time-sensitive produce, speaks volumes about the crisis that sugarcane growers of Sindh currently find themselves in.

The government notifies around October every year the minimum price that sugar mills must pay to growers. Initially, the notified price for this season was Rs182 per maund (40 kilograms). Sugar mills stopped crushing, saying the price was too high. The matter went to court, which decided that the minimum price should be Rs160 per maund.

Now it seems everything is back to normal: growers are selling, mills are crushing, retail price is steady and exports have been allowed (along with the promise of a heavy subsidy to mill owners).

But examining the situation closely reveals blatant rent-seeking by arguably the most influential lobby in Pakistan: the sugar industry.

“I’m still getting Rs130 per maund despite the court’s order that set the minimum price at Rs160. I had to accept even Rs105 per maund on certain varieties (of sugarcane),” says Kamran Memon, 35, who has cultivated sugarcane on 135 acres this season in Darro, Sujawal district.

His crop is ready to be harvested. With a per-acre average production of 600 maunds, he expects to produce around 81,000 maunds this season. But even in the

beginning of February when the produce should’ve already been shipped off to sugar mills for crushing, Memon had harvested only 8,000 maunds.

In other words, about 90% of his crop is still standing while the crushing season is nearing its end.

Memon is in two minds. His understanding of the business tells him he should immediately harvest and ship the crop off for crushing. But mills started crushing late and are now giving farmers far less than the notified price.

Harvesting the entire 71,000 maunds at once poses the risk of a loss in sugarcane

weight. A delay of one week before the sugar mill opens its gate for the lorry to enter the premises means the produce will ultimately weigh about 20-25% less. Sugarcane dries and its weight reduces with the passage of time. This puts a dent in the farmer’s income as he gets paid according to the weight of his sugarcane.

In addition, a late start by mills means

IN SPITE OF GROWERS FALLING OVER EACH OTHER TO GET THEIR SUGARCANE TO DEWAN SUGAR MILLS, WHICH CHURNS OUT BAGS AFTER BAGS OF REFINED SUGAR, THE COMPANY HAS CONSPICUOUSLY POSTED NET LOSSES IN FIVE OF THE LAST SIX YEARS 18

an acute shortage of vehicles to transport sugarcane for crushing.

Usually, mills set up sector offices in sugarcane-growing areas and help farmers get access to trucks and trailers. But a black market of sorts has emerged for transport vehicles in Sindh. Mill officials receive bribes through transporters at the rate of Rs10 per maund for arranging transport.

“It’s a buyer’s market. I can’t resist the mills for paying me less than the noti-

fied rate. My sugarcane will be reduced to fodder if I don’t sell it immediately,” he says.

Who owns sugar mills? he business card of Anwar Majid lists Larr Sugar Mills (LSM) as part of the Omni Group of Companies, his holding company that owns businesses mainly in sugar and energy sectors. Yet the general public in any of Sindh’s agro-towns – even in PPP strongholds like Sujawal and Badin – refers to LSM as former president Asif Ali Zardari’s enterprise.

The same goes for Ansari Sugar Mills, Bawany Sugar Mills, Khoski Sugar Mills,

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“I’M STILL GETTING RS130 PER MAUND DESPITE THE COURT’S ORDER THAT SET THE MINIMUM PRICE AT RS160. I HAD TO ACCEPT EVEN RS105 PER MAUND ON CERTAIN VARIETIES (OF SUGARCANE)” Kamran Memon, Farmer Chamber Sugar Mills, Naudero Sugar Mills, New Dadu Sugar Mills, Tando Allahyar Sugar Mills and New Thatta Sugar Mills – all formally listed as part of the Omni conglomerate. Zardari denies ownership.

Sugar is the fuel that national politics runs on. Each of the three largest political parties is funded primarily by the sugar lobby. But this is not merely a case of crony capitalism, which symbolises only a nexus between business and political classes.

Here the political class is the business class. Business and politics have not just teamed up in the sugar lobby; they have become one. Newspaper reports suggest as many as 50% of sugar mills are owned by politicians. Industry insiders assert that politicians’ holdings in the sugar industry are even larger than that.

As Memon contends, it’s a buyer’s market. Even though growers have to send their crops to sugar mills located hundreds of kilometres away, queue up for weeks to deliver them at the mill’s gate and accept lower-than-notified rates, setting up new sugar mills remains next to impossible in Sindh.

The good, old licence raj still holds

sway, and new entrants are hard to find.

Even established players face stiff resistance from within the sugar lobby should they try to play smart. Case in point: attempted ‘relocation’ of five sugar mills, allegedly owned by the family of former premier Nawaz Sharif, to South Punjab.

When the sponsors of Abdullah Sugar Mills, Abdullah Yousaf Sugar Mills, Chaudhry Sugar Mills, Haseeb Waqas Sugar Mills and Ittefaq Sugar Mills tried to move their plants to South Punjab from other parts of the province, PTI leader and sugar mill owner Jahangir Tareen and others from the area went to court to prevent the ‘relocation’ citing a ban on the establishment of sugar mills under the Punjab Industries (Control on Establishment and Enlargement) Ordinance 1963.

Tareen’s motive was, according to his lawyer Aitzaz Ahsan, to protect the cotton crop in South Punjab. Setting up ‘new’ sugar mills in the area would discourage farmers from growing cotton, the petitioner said. Subsequently, the apex court ruled against the relocation and even barred Sharifs’ mills from crushing sugarcane in this season.

Trucks loaded with sugarcane wait outside Dewan Sugar Mills in Sujawal district.

Critics question, however, why a sugar mill owner would feel so strongly about the possible damage to the cotton crop as a result of the establishment of ‘new’ mills in the area. They argue that it reflects Tareen’s willingness to spend a lot of political capital by insisting on de-industrialising his constituency and forcing voters to stay on in a low-paying, less productive vocation.

Supply-demand dynamics o mill is currently buying sugarcane in Sindh at Rs160 per maund in line with the court’s order. A few of them are buying it at Rs130 per maund. Some are offering as low as Rs105 per maund.

Sugar mills are able to buy cheaply partly because of the arrival of sugarcane from Punjab. Long trailers often seen outside mills in different districts of Sindh around the crushing season bring sugarcane from South Punjab.

Increased supply gives further room to crushing units in Sindh to dictate the rate to growers. Sindh-based growers claim that four million tonnes out of 36 million tonnes of sugarcane produced in Punjab is being crushed here.

Data released by the Pakistan Sugar Mills Association (PSMA) shows Punjabbased mills crushed between 28 and 30 million tonnes of sugarcane in the last two seasons.

One reason why sugarcane from the neighbouring province is arriving in Sindh is that growers in Punjab face the same problems in selling their produce to local mills. But unlike their counterparts in Sindh, most Punjab-based mills are ‘clean’

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AGRICULTURE

in the sense that they technically don’t buy sugar at less than the notified price, which is Rs180 per maund this year.

That is to say, if they buy sugarcane directly from growers at all.

According to growers from Punjab, mills buy sugarcane at the notified price from ‘farms’. ‘Farms’, in other words, are the so-called middlemen in the supply chain. They buy sugarcane from small growers at a lower-than-the-notified price and then sell it onwards to the mills at the notified rate. Growers claim that these socalled farms that are registered entities are

farmer based in Khanpur Tehsil of Rahim Yar Khan, cultivated sugarcane on 75 acres this year. Even 70 days after the beginning of the crushing season, Chughtai says his 75% crop is still standing.

“They apply katoti (cut) of up to 40% on one pretext or another. So the effective rate I’ve got so far is only Rs120-130 per maund,” he says.

Middlemen pay up to Rs80 per maund to small farmers who have no choice but to sell their crop at low rates, he added. “There are lines of vehicles as long as eight kilometres. Not everyone can afford to wait around for eight to 10 days on roads,” he says.

He confirmed that growers from his hometown are selling their crop to the local agents of Sindh-based sugar mills.

“The agriculture department should make a schedule and implement it to ensure that sugarcane reaches mills without any weight loss and wastage,” he added.

Checking the arithmetic fronts for the mills themselves. The farm makes a margin on the buying and selling of sugarcane. The mill buys the sugarcane from the farm at the notified rate, which satisfies the government in terms of the legalities of the process. Average it out and the mill’s cost for buying sugarcane decreases. The only loser in this trade is the grower.

Of course, growers are free to take their produce directly to the mill’s gate and receive the notified price. But the gate usually opens for only those vehicles that are brought in by the ‘farms’ not the growers.

Mohammad Aslam Chughtai, a

ith the average sugarcane yield of 600 maunds per acre in Sindh, a farmer’s revenue amounts to Rs78,000 at the going rate of Rs130 per maund.

But growing sugarcane on an acre of land in Sindh costs somewhere between Rs80,000 and Rs105,000, depending on whether the farmer has opted for ratoon cropping, which grows from the stubble of the preceding season’s crop.

For example, per-acre land preparation costs on average Rs15,000, seed Rs25,000, fertilisers Rs15,000, ploughing Rs5,000, sowing labour Rs5,000 and water Rs10,000.

After adding harvesting and transportation costs of Rs40 a maund and ac-

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‘THE GOOD, OLD LICENCE RAJ STILL HOLDS SWAY, AND NEW ENTRANTS ARE HARD TO FIND… EVEN ESTABLISHED PLAYERS FACE STIFF RESISTANCE FROM WITHIN THE SUGAR LOBBY SHOULD THEY TRY TO PLAY SMART. CASE IN POINT: ATTEMPTED ‘RELOCATION’ OF FIVE SUGAR MILLS, ALLEGEDLY OWNED BY THE FAMILY OF FORMER PREMIER NAWAZ SHARIF, TO SOUTH PUNJAB’ 20

Crushed sugarcane is being moved from one machine to another at a sugar mill in Sindh.

counting for bribes, the per-acre cost amounts to more than Rs100,000 – substantially higher than Rs78,000 an acre that farmers are currently getting at the going rate of Rs130 per maund.

And what do sugar mills get out of the whole production cycle? Background conversations with senior members of the production team at DSM reveal it’s rolling out as many as 18,500 bags of 50kg each on a daily basis.

This equals 925 tonnes of refined sugar a day. If the mill operates for 100 days this season, it will have produced 92,500 tonnes of sugar.

Even if it sells sugar to distributors at a conservative rate of Rs40 per kg, it will generate annual revenues of Rs3.7 billion. (The average monthly retail sugar price in Karachi was Rs55 per kg in January.)

Speaking to Profit, DSM CFO Muhammad Ilyas Abdul Sattar said his company is paying growers exactly Rs160 per maund. He put the daily output of sugar at 800 tonnes, about 14% or 125 tonnes a day less than the figure quoted by sources within the company.

Making profit, posting loss he costs of human resources and electricity, otherwise major expenses for any industrial unit, are extremely low across the sugar industry.

They burn bagasse, which is the residue left after the extraction of juice from sugarcane, to produce steam. That steam runs turbines and generates electricity, which is sufficient enough to power not only the mill but also light up the adjacent residential units for staff.

As for labour, a majority of them are hired through a thekedari system for about three to four months a year. This is the reason that the bulk of workers in most Sindh-based mills are Pakhtun. “They are easy to hire.

They are not from around so they stay away from union-baazi and cause little trouble,” said one sugar mill official.

Yet most listed sugar mills record only a marginal increase in earnings in their annual financial accounts.

According to Insight Securities Research Director Zeeshan Afzal, the profitability of major sugar mills listed on the Pakistan Stock Exchange remained stagnant between 2012 and 2016. “The increase in earnings of sugar mills does not reflect the substantial rise that the benchmark index recorded during the same years,” he said.

In spite of growers falling over each other to get their sugarcane to DSM while the mill churns out bags after bags of refined sugar, the company has posted net losses in five of the last six years.

According to its 2016 report, DSM recorded a net loss of Rs696 million. Its net losses in the preceding two years were Rs454 million and Rs110 million.

Commenting on tax laws, AF Ferguson and Company Chairman Syed Shabbar Zaidi said the sugar industry is a haven for undocumented cash. Growers and distributors who trade with the sugar industry on either side of the supply chain are undocumented. “It’s

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fairly easy to keep money off the books,” he says.

Hypothetically speaking, saving sales tax of 8% on 125 tonnes of ‘undocumented’ sugar rolled out in a day can result in a windfall of Rs400,000 or Rs40 million for 100 days.

worth millions of rupees every year.

“I sold refined sugar worth Rs2.5 million in Jodia Bazaar last year. That’s because sugar mills seldom pay farmers in the last month of crushing,” said one grower while requesting anonymity.

Pakistan Sugar Mills Association (PSMA) Chairman Javed A. Kayani did not respond to requests for comment. PSMA Secretary General Inayatullah Khan and the two secretaries for Punjab and Sindh zones also refrained from returning calls for comment.

‘BUT A BLACK MARKET OF SORTS HAS EMERGED FOR TRANSPORT VEHICLES IN SINDH. MILL OFFICIALS RECEIVE From sugarcane to tilapia fzal of Insight Securities believes BRIBES THROUGH sugar production will remain on the TRANSPORTERS AT THE higher side this year. A news story by Reuters on Feb 6 quoted a sugar exRATE OF RS10 PER porter as saying that farmers’ appetite for the MAUND FOR ARRANGING crop has diminished because of low domestic TRANSPORT’ prices.

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Plus, there’s an elaborate scheme of sugar-for-money where mills tell growers to either accept refined sugar in lieu of cash or wait for months on end to receive payment against sugarcane. Selling sugar on the black market through growers not only improves their cash flows but also saves them taxes

‘SUGAR IS THE FUEL THAT NATIONAL POLITICS RUNS ON. EACH OF THE THREE LARGEST POLITICAL PARTIES IS FUNDED PRIMARILY BY THE SUGAR LOBBY. BUT THIS IS NOT MERELY A CASE OF CRONY CAPITALISM, WHICH SYMBOLISES ONLY A NEXUS BETWEEN BUSINESS AND POLITICAL CLASSES’

“There is a high chance that farmers will reduce the sugarcane area for the 2018-19 crushing season. Local sugar prices have been depressed because of oversupply,” sugar producer Almoiz Industries Nauman Ahmed Khan told a Dubai sugar conference earlier this month.

Memon, the Darro-based farmer, has already planned what he’s going to grow instead of sugarcane next season: tilapia. It is freshwater fish inhabiting shallow streams and ponds. He has already built a fish farm by erecting dykes around a large piece of land. The fish is exportable. “Its market is not as strong as that of sugar. But at least there’s certainty that I’ll make a decent profit next year and won’t run from pillar to post to sell my product,” he says.

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The curious case of packaged milk

By Farooq Baloch n a first, the Supreme Court of Pakistan’s Karachi registry banned selling and distribution of four brands of packaged milk including Nurpur and Dayfresh in Sindh after Pakistan Council of Scientific and Industrial Research (PCSIR) deemed these unfit for human consumption.

Responsible for ensuring food hygiene in the province, the Sindh Food Department was long in slumber. So this SC move, on the back of similar orders for Punjab last year, was certainly a welcome one. The landmark decision is likely to make Dairyland; Fauji Foods, the makers of Day Fresh and Nurpur brands; and other dairy companies, such as Engro

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(Olper’s) and Nestle (Milkpak), improve their quality and hygiene standards even further. And why wouldn’t they – the decision is likely to cost Rs6.5 million per day to Dairyland alone (the estimate is based on daily production, at 50,000 liters).

Considered to be a complete food, fresh milk is an essential grocery item, constituting 7% daily spending of an average household and needs to be taken seriously by both the producers and the regulator. Despite reports of adulteration and poor hygiene at dairy farms and along every step of the supply chain, the provincial regulator failed to do its job. And if it were not for the SC, consumers in Sindh would continue consuming unsafe milk. It is only logical then that the media, too, check on and highlight issues pertaining to the quality of milk sold in the market because of health concerns and growing public interest in the subject.

That said, it is also for this reason that both the media and social commentators report this issue with responsibility, because misreporting or sensationalism can do more harm than good – which exactly transpired in the present case.

Before we dig into media’s coverage of the issue and how it undermines the larger public good, we would like to highlight what prompts Profit to write a situationer on apparently an open and shut case: the SC verdict banning a few dairy brands, found to be unfit for human consumption by the state’s scientific research arm.

For the record, on January 27, the honorable SC, while hearing a case regarding use of hormonal injections on farm cows, banned Dayfresh (UHT milk), Dayfresh (pasteurized milk), Nurpur (UHT) milk, and Skimillac (skimmed milk powder) based on the findings of PCSIR, which tested market samples of

53 brands but deemed only these four unfit for consumption.

The ruling comes less than a month since Punjab Food Authority, projected as the most rigorous foods regulator in the country, cleared market samples of both Nupur and Dayfresh UHT milks. More recently (on January 19), a legal team led

by Advocate Mohammed Vawda, the SCappointed commissioner for collecting and testing of milk samples in Karachi, inspected the farm and factory of Dairyland. The commission expressed satisfaction over hygiene and cleanliness procedures followed by the company and cleared it of any suspected contamination, according to the inspection report, a copy of which is available with Pakistan Today.

“The employees followed strict personal hygiene and the sanitation controls encompassed handling of ingredients, processing and packaging equipment, and storage houses,” the report says referring to the inspection of dairy farm, milking section, microbiological and associated laboratories, packaging plant and storage house of Dairyland, one of the companies whose products would be banned by the SC a week later.

“The Company has provided the Commission with a copy of various Certificates i.e. Certification of Corporate Dairy Farmers Association, Membership Certificate of Pakistan Dairy (PDA) Association, Certificate of Incorporation of Dairy Land (Pvt) Ltd., Membership Certificate of KCCI, License from Pakistan Standards and Quality Control Authority (PSQCA), Halal Bureau Veritas Certification, Certificates from Punjab Food Authority and Certificate from TUV Austria, which reflect that milk quality complies with good standards of health and hygiene,” it said.

Since Dairyland has only one dairy farm and one factory, the milk samples

‘RESULTS OF COUNTRYWIDE SAMPLING OF LOOSE MILK BY ENGRO SHOWED PRESENCE OF ANTIBIOTICS, CAUSTIC SODA, PATHOGENS AND VARIOUS OTHER BACTERIA, WHOSE COUNT WOULD RUN IN MILLIONS. IN PUNJAB ALONE, ENGRO FOODS GOT SEVERAL FACTORIES OF LOOSE MILK CLOSED WITH THE HELP OF THE GOVERNMENT’

that were found to be unfit by PCSIR were sourced from the same facilities that were cleared for maintaining good hygiene by the SC’s Commission only days ago.

Fauji Foods, the makers of Nurpur UHT milk, has its facilities based in Sargodha, but the Commission’s scope was limited to the Karachi-based dairy operations. Therefore, we could not obtain any details regarding the hygiene standards of its dairy farms and processing facilities nor did the company respond to our queries or phone calls. Both companies immediately removed their products from the market till they are cleared by the SC after resampling.

But, the fact that PFA cleared these brands in all of its quarterly inspections last year merits exploring what makes them unfit in Sindh.

The devil is in the details ince skimmed milk powder has a tiny share in the market, this report focuses on pasteurized and UHT segments. We have also skipped ‘tea whiteners’ because they are neither an essential food item nor a substitute for milk.

According to the details of the case, samples of Dayfresh pasteurized milk contained Coliform. These bacteria are organisms that are present in the environment and in the feces (waste) of all warmblooded animals and humans. They are unlikely to cause illness, but their presence in the milk indicates that disease-causing organisms (pathogens) could also be present in the sample.

Dayfresh samples contained 80 colony-forming unit per milliliter (cfu/ml), exceeding United States Department of Agriculture (USDA) standards, which restricts its level to less than 10 cfu/ml. However, it falls within permissible limit of another American regulator, Food and Drug Administration. Moreover, according to Punjab Pure Food Regulations, Coliform’s permissible limit is also under 100 cfu/ml.

In other words, the Dayfresh pasteurized milk would have been fit for consumption in Punjab based on the same samples.

Let’s move to the UHT samples of Dayfresh. Based on test reports, the brand’s

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INSIGHT

UHT milk contained aflatoxin level between 0.5 and 1 nanogram per gram (ng/g), exceeding the permissible limit as per national standards.

Aflatoxin is a poison produced by fungus and found in common foods like corn and peanuts. In the long run, high levels of aflatoxin can cause serious health problems including cancer.

Though it failed to meet national standards, the brand’s UHT milk might have cleared PFA, which clears any samples that have aflatoxin levels of less 1 ng/g albeit with a warning to improve its quality even further – the PFA spokesperson also confirmed this to Profit.

Responding to a question, the spokesperson said they divide samples into two categories: ‘dangerous and unfit for consumption’ and ‘not-so-dangerous’. In case of the latter, the brand is warned to improve quality but not banned – we could not obtain details regarding what was wrong in Nurpur samples.

Since the case under discussion comes under the jurisdiction of Sindh, one might ask what is the permissible limit by the provincial standards. There are multiple foods standards in the country but apparently none in Sindh, prompting the SC’s Commission to raise the issue of absence of the Sindh foods standards.

The Sindh Food Department secretary, Sajjad Hussain Abbasi says the provincial food authority will commence operations in March, thanks to the SC pushing the government to expedite the process. But in the absence of Sindh Foods Laws, the PCSIR had to apply other standards, and it chose USDA’s for Dayfresh pasteurized milk and Pakistan standards for UHT. The application of multiple food standards has long been an issue for the industry, and Pakistan Dairy Association (PDA), while lobbying for harmonization, is chal-

Explanation from DayFresh on facebook page lenging compliance with multiple standards. A national council, PDA’s argument goes, should make laws that provinces must implement.

PDA, Overseas Investors Chamber of Commerce and Industry and Pakistan Business Council have all met the prime minister regarding their concerns about harmonization of standards, who promised discussion in the next Council of Common Interest meeting. There hopefully the multiple standards issue will be resolved.

‘Poison’ or a logical substitute for poison? ince high levels of Aflatoxin could cause cancer in the long term, the SC’s decision is plausible. Matters of public health demand zero tolerance, for any milk that contains harmful bacteria extreme measures are justified. If anything, it will make smaller brands, the likes of Dairyland and Fauji Foods, allocate more resources, financial and human, to their quality control. Here one may argue why PFA, with the reputation of being the

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‘MATTERS OF PUBLIC HEALTH DEMAND ZERO TOLERANCE, FOR ANY MILK THAT CONTAINS HARMFUL BACTERIA EXTREME MEASURES ARE JUSTIFIED. IF ANYTHING, IT WILL MAKE SMALLER BRANDS, THE LIKES OF DAIRYLAND AND FAUJI FOODS, ALLOCATE MORE RESOURCES, FINANCIAL AND HUMAN, TO THEIR QUALITY CONTROL 26

most rigorous regulator in the country, would even if informally stretch the permissible limits from 0.5 to 1 ng/g.

Simply, because the substitute, the unbranded loose milk, is far worse.

Adulteration of loose milk, its primitive supply chain and poor hygiene at the dairy farms and retailing facilities, is rather well documented. Profit recently reported how wholesalers check the quality of loose milk by dipping their bare hands in milk containers and adulterate it at various stages of the supply chain.

By contrast, the formal sector conducts up to 30 tests from farm to factory to detect contamination, ensuring high operational standards, also evident from the inspection report of SC’s Commission. From the cow’s udders to consumers, the milk is not exposed to sunlight or human touch, as witnessed by Profit correspondents who visited corporate farms of Nestle and Dairyland in the past. In fact, better quality and hygiene are formal sector’s unique selling points and they proudly advertise it: 100% Australian cow’s milk, and hormonal injection free, reads Dayfresh packaging while a Nurpur Facebook post states they conduct 23 tests and their product is verified by PFA, PSQCA and third-party labs like SGS Pak, Intertek Pal, and Qarshi.

If bacteria can make it to these brands, which have certifications from various labs and are known to observe a high level of vigilance at their farms and factories, it’s anybody’s guess how with no checks how contaminated the loose milk is?

Consider, for example, how the pack-

aged industry has fought tooth and nail with loose milk over the years. According to our sources, Engro Foods, the largest player in the UHT segment, used to collect market samples of loose milk almost on a daily basis for over a decade. The test results showed, not a single one was fit for consumption as per industry standards.

None of these samples were found to have more than 9.5% milk solids and fats.

In other words, they failed to meet the minimum criteria to be considered milk – as per standard definition, milk should have at least 12.5% milk solids and fats. But that perhaps is the smallest of problems.

The test results in Karachi showed, loose milk was full of hormones that came from chemical injections that are meant to increase yield (production) – small wonder then, Karachi’s milk supply decreased to 3.5 million liters a day, down by 30% from 5 million liters, shortly after the SC’s Lahore registry banned the use of these injections last month. It is pertinent to mention here, sustained intake of hormonal injection like oxytocin is linked with early puberty in children.

On the other hand, results of countrywide sampling of loose milk by Engro showed presence of antibiotics, caustic soda, pathogens and various other bacteria, whose count would run in millions. In Punjab alone, Engro Foods got several factories of loose milk closed with the help of the government. For example, the provincial government shut down a factory in Sahiwal, which was producing 70,000 liters of substandard milk per day – that is 20,000 liters more than Dairyland’s daily production.

Punjab’s food regulator is still spilling out thousands of liters of loose milk in Punjab every day, but the unknown producers do not make headlines the same way the branded sector does – because bashing the latter ensures higher ratings for news channels.

Since its inception, according to PFA

Explanation from Nurpur on facebook page spokesperson, it has uprooted 70 factories producing substandard milk in Punjab.

Conducting raids daily on undocumented loose milk from day one, PFA is now taking this fight to the next level.

Sindh needs to take PFA’s cue e have passed the minimum pasteurization law and, in five years, we want to convert the entire dairy segment to packaged milk like rest of the world,” said the PFA spokesperson. Raiding loose milk day in, day out is not the solution, he said. If we can convert it to packaged milk, it will become easy to trace every drop of milk sold in the market, which will make it easier for the regulator to monitor its quality in an efficient manner, he said. It has definitely set itself a tough task, for loose milk accounts for 98% of Punjab’s consumption.

It’s here that Sindh must take a cue from PFA on loose milk. For example, Dairyland’s total production is 1% of Karachi’s market and this includes their UHT milk sold in Punjab. To ensure Karachiites have access to high-quality

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‘THERE ARE MISCONCEPTIONS ABOUT UHT TECHNOLOGY IN PAKISTAN. MAJORITY OF EUROPE IS ON UHT. IN FRANCE, SPAIN AND GERMANY, UHT IS 96% (IN THE FIRST TWO), AND 60% RESPECTIVELY. EVEN IN INDIA, PACKAGED INDUSTRY HAS 40% SHARE’

milk, the Sindh foods regulator has to think beyond the packaged industry. That is, it has to go after loose milk supplies that number in thousands and pass a minimum pasteurization law to eventually convert the whole market to packaged industry.

Tracing source of milk will not be a problem then, nor will be monitoring its quality.

Like everywhere in the world, converting the dairy sector to packaged industry is the only way forward. Unlike loose milk that accounts for 94% of the country’s total consumption, packaged milk is traceable – giving consumers confidence and building their trust in the product. Take for example, customers reaction to the ban on Dayfresh and Nupur.

“Dayfresh was the largest-selling brand at our store, so people are frequently asking about it,” said Fakhar Shah, a teller at TEE-EMM Mart at the upscale DHA Phase VIII. When Dayfresh was removed, the customers switched to higher expense substitutes, the imported MeadowFresh of New Zealand, Emborg of Denmark and Almarai of Saudi Arabia – that despite PCSIR putting Almarai under ‘suitable for consumption’ but ‘not complying with Pakistan Standards’ category. Meanwhile, Dayfresh facebook fans, some having visited their farm, flooded their page with testimonials about the quality of milk, as the alternative is far worse.

The brands (Nurpur and Dayfresh), banned by the SC are infinitely better in quality than the unbranded loose milk, with experts dubbing it as ‘the real poison’.

Particular about hygiene, the formal sector

INSIGHT

Coverage by ARY News shall fix the temporary anomaly and improve its quality, but the regulators must do something about loose milk, they say.

The curious case of Dairy Farmers Association hile PFA has hogged headlines for its rigorous enforcement of hygiene in Punjab, taking both the packaged and the loose milk, it is a recent phenomenon.

Sindh meanwhile lay dormant until the apex court pushed it to establish the Sindh Food Authority – an intervention that the citizens hail for it affects every household.

Before putting Sindh under the microscope, the SC had already made Punjabbased dairies to ensure high quality.

Hearing a petition by Barrister Zafarullah Khan of Wattan Party against milk quality and use of hormonal injections, in September 2016 the SC had ordered chemical examination of all indigenous and international packaged milk brands. The PCSIR, University of Agriculture Faisalabad, and the University of Veterinary and Animal Sciences Lahore conducted tests on 16 UHT milk varieties, declaring just six of

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them fit for consumption, with only pasteurized variety passed muster.

Given its importance, the electronic and social media pounced on it, with news and commentary aplenty – with next to no effort in getting the details right, an irresponsible act as the coverage resulted in the loss of consumer confidence in the packaged milk.

One might argue, if the milk was substandard, why should it not be reported? By all means, but in this particular case the greater public good was undermined as putting people off from the packaged milk was not the right thing, instead more of it was the solution.

The curious thing was the Dairy Farmers Association, the producers body based out of Karachi’s cattle colony where hormonal injections abound, latched onto selective media rants by owning and spreading it. When a noted journalist at a large news network said, “In the name of milk, poison is being fed,” it was music to DFA’s ears, and its ‘value addition’ was: “Tetra Pak milk, bachon ki mot ka saman (Tetra Pak milk, cause for children’s death)?”; “Mulk Bhar Men Zehreelay Doodh Ki farokht jari (sale of poisonous

‘BOTH TECHNOLOGIES ARE SAFE AND DO NOT REQUIRE ANY PRESERVATIVES TO INCREASE SHELF LIFE, OR WHY ELSE WOULD WESTERN COUNTRIES ALLOW THEM IN THEIR MARKETS’ 28

milk continues across the country),” and “Packaged milk or a sip of poison” and so on.

A case of media undermining greater public good by killing consumer confidence in the packaged milk, the only logical step forward?

Consider the example of Haleeb, the only UHT brand declared unsafe by the PCSIR in January 2016. The company says their samples were sent to three labs, with two clearing it as safe consumption while one said it was not good enough. Instead of giving them a chance to defend their position, the media picked up the first report and highlighted it, they said. “The questionable thing was the fact that all 3 labs tested milk from the same batch,so how could the same milk be passed by two labs and failed by one?” said the company spokesperson, speaking to Profit in May 2017.

Likewise, media also reported that heavy metals were found in some samples, these metals were iron and zinc, naturally milk ingredients – even SC is said to have agreed to it later.

In the recent banning of Dayfresh and Nurpur, the media pressed on the news without verifying the facts. “Hormonal injection milk being sold by packaged industry,” read one report. The ruling was part of a case against the use of these injections on farm cows, but in case of Dayfresh the samples contained coliform and aflatoxin, not hormonal injections. In fact, Dairyland publicly states its milk is injection free and

sourced from Australian cows – it doesn’t even make business sense to inject hormones to breeding animals.

Similarly, aflatoxin is not adulteration as portrayed by media reports. It comes from fodder (animal feed). The PFA is flexible on this issue because it knows our standards are inspired by European laws, but our environment is nowhere close to theirs.

The lack of research, distorting of facts and sensationalism by media professionals who either do not understand or ignore the larger context only results in loss of consumer confidence. Even loyal customers of these brands were left dumbfounded after how it was reported by the

milk, as indicated by PCSIR report. However, both the brands cleared Punjab standards last year, but not a single report mentioned it. Plus there are other issues regarding the testing. For example, PFA once froze a sample before testing, which caused errors in reading and they had to collect another sample. The industry is also apprehensive of chemicals used for the test, some say it could expired chemical. To solve this issue, Punjab has a protocol where both the company and PFA officers collect samples from the same batch to ensure results are not disputed -- which is not the case in Sindh.

Then there are misconceptions about UHT technology in Pakistan. Majority of Europe is on UHT. In France, Spain, and Germany, UHT is 96% (in the first two), Coverage by ARY News and 60% respectively. Even in India, packaged industry has 40% share. media.

Ultra High Temperature or UHT is “My whole family has been consumpackaging technology whereby milk is ing it for long now but until Supreme Court heated at 135 C for 3-4 seconds followed clears it I’ll not use it now,” a consumer by flash cooling.

The milk is homogenized wrote on Nurpur’s social media page. Anwith increased shelf life, three months in other post echoed similar sentiments: Pakistan, up to nine months in some west“After the SC verdict we are afraid to opt ern countries.

It offers convenience befor any brand. Instead, fresh [loose] milk is cause it does not require cold storage.

On a better option than packed milk with the other hand, pasteurized milk has a preservatives and other acids.”

The explanations by the companies on shelf life of three to four days, with cold storage being mandatory its share is limtheir social media accounts didn’t help beited in Pakistan. Both technologies are cause the way media reported it, damage safe and do not require any preservatives was extensive. to increase shelf life, or why else would That said, there is certainly a margin for improvement, especially in case of UHT western countries allow them in their markets.

Experts are of the opinion that, conforming to the global practice, eventually the entire milk market will be converted to the packaged variety. Media speculation and rumours about the quality of UHT milk only undermines the large public good because undocumented loose milk is the real threat. If converted to packaged milk, which is what Punjab is aiming for, every drop of milk will become traceable to the farm and factory level – making monitoring its quality much easier.

“It is up to the consumer whether he prefers UHT or pasteurized milk, but we want the dairy sector to be converted to packaged milk so their samples can be traced back to distributors and even the farms from where it was sourced because there is no way you can trace the roots of gowalla milk,” said the PFA spokesman.

Coverage by Abb Takk

INSIGHT

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ith clients like the Pakistan Association of Automotive Parts & Accessories Manufacturers, Habib Construction Services, and the government of Punjab, Klockwork positions itself in the category of event managers responsible for signature, highend events. Founded and co-owned by Arif Jalil Paracha, also the co-owner of Smartprep, Naina, and MAP (Muneer & Paraha), Klockwork has secured a strong position in the market in a mere three years.

Not new to event management when commencing on this venture, before falling out with his partner and walking away, Arif was a part owner in another such company, Evenement. Despite being careful in not mentioning his erstwhile partner or the company, Arif was yet vocal on the issues that led him to part ways and sounded happy at founding Klockwork and running it his way, irrespective of what the market may dictate.

“Ideally we gun for big businesses, not because of profitability, and definitely not because it is easier, for actually it is much messier. It’s that when a business scales a peak, and we arrived there quickly, you want challenges.” Arif though is not known to shun projects as small as putting up a Christmas tree for Coca Cola and managing a five-person dinner.

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Nurturing clients, big and small he idea is that those five people will refer us to 25 more clients. But since we have a portfolio where we land big projects, we prefer them.” Klockwork’s forte remains expos, state events, and signature weddings, with 5,000 plus guests. “Such clients come to us because

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‘KLOCKWORK UNDERTAKES WORK AT A MERE SAY-SO, WITHOUT PRIOR A WRITTEN AGREEMENT WHERE GOVERNMENT IS CONCERNED. “WE BLINDLY TRUST PUNJAB GOVERNMENT…” WITH CORPORATE CLIENTS THOUGH, HE’S CLEAR ON NOT WORKING WITHOUT A PO, IRRESPECTIVE OF TIME CONSTRAINTS’ they know none else will be able to manage at this scale and none will take that pain.”

As for competitors, Arif maintains, that in every sector there were different, with no single company operating on as broad a scale as Klockwork.

“When we are working on state level projects, we don’t have any competitors.

There is no other event management business that has under its belt events such as ours and there is none event manager who can take that pain, and most importantly there is no event manager who will work without writing.”

Klockwork undertakes work at a mere say-so, without prior a written agreement where government is concerned. “We blindly trust Punjab government. No sane man will put in Rs15 million rupees without any contract. Though now we are where even that is a minor event for us, our motivation being ‘if we don’t do it, someone else will take it’.”

From experience, he has more faith in the government than the corporates.

“The government does not shy away from formalities, but time is a constraint. When the Turkish President Recep Tayyip Erdogan came to Pakistan, to arrange the event, we had a two day notice. At such instances there is simply no time for documentation.

Similarly when the PM inaugurated Bhikki power plant, we again had just two days for everything.”

With corporate clients though, he’s

‘IN ADDITION TO SMARTPREP, KLOCKWORK, AND NAINA, ARIF IS ALSO RUNNING A TENDER BUSINESS CALLED MAP (STANDS FOR MUNEER & PIRACHA).

THOUGH FOR NOW KLOCKWORK REMAINS HIS HIGH-YIELD ENTERPRISE BUT IN TIME HE EXPECTS MAP TO BECOME THE LARGEST OF HIS VENTURES’

clear on not working without a PO, irrespective of time constraints. “We have been stung by corporations, they commit and ask us to proceed at work, and afterwards they disappear, don’t even pick up phone, but since there is nothing in writing, we can’t follow it up.”

He narrated a story of a project with a multinational. They were congratulated on the contract and were asked to start working. “Time was short so we began only to find out when we asked for a PO that the person who gave us the contract had left the company while the rest were not even willing to acknowledge that a deal was struck with us.”

The bigger the risk, the bigger the return rif is a big-risk, big-return man.

“A standard corporate event would be x million, but a standard government project would be 3x million. Also it is more challenging for my team and we like it that way. So we place our bets on government instead of corporates.”

Proud of his 11-man hardworking team, he credits it for the success of Klockwork. “For the Bhikki event, none of us slept for 48 hours straight. It was killing, yet we delivered. No other company would have been able to pull it off.

Only two people from my team handled the Rs17 million Pakistan automobile exhibition project. My team is that efficient and this is what I meant when I said I am managing people.”

Keeping quiet about his previous company, which is an open secret to the market anyway, he said, “In my previous organization people management was a major issue. But I believe that if you give your people means, tools and responsibility, this empowerment will make them deliver.” Another reason he has faith in his

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ENTREPRENEURSHIP

‘IDEALLY WE GUN FOR BIG BUSINESSES, NOT BECAUSE OF PROFITABILITY, AND DEFINITELY NOT BECAUSE IT IS EASIER, FOR ACTUALLY IT IS MUCH MESSIER. IT’S THAT WHEN A BUSINESS SCALES A PEAK, AND WE ARRIVED THERE QUICKLY, YOU WANT CHALLENGES.’ Arif Paracha, Founder & Co-owner Klockwork ‘Eleven’, “Majority of them left with me when I quit the previous enterprise three years ago. So I feel very strongly for them and I believe that it is rooted in mutual respect.”

Post abandoning his previous partnership, Arif said, the first year was indeed tough. “The market buzz was that since I had left and while the company will fall through, but that I will also go down. That company is doing as well as the skills of the owner allow it to, but nowhere close to where we are.

“Then everybody in the market, my former partners included, went out of their way to block our vendors, using every single dirty tactic in the book and then some to bring me down. But I am thankful that people for making a fair judgment on our integrity.” He reiterated how important his employees were for his success and added that he makes it a point to treat everyone from top, mid level to bottom with respect, as equal. “That is the way to go. When you respect others, they return that respect.”

Klockwork not only keeps itself available on as short a notice as two hours, it has cultivated vendors and suppliers to follow similar out-of-the-blue call. “Every event has different requirements and different challenges, so we have caterers etc. on board who are as time conscious as we are.” Talking about challenges he got into a long list of small mishaps here and there.

“In state events, with bureaucracy involved, every new official comes and tries to have his say. Then there are issues with

security steps, especially the jammers putting a spanner in the works, and power outages have their own threat factor, especially when VVIPs are in attendance in big numbers. We have to have contingency plans for all this.”

“We’re a Monday to Friday, 10.30 to 6 company with weekends off. I believe that family time is important and if I want them to be motivated, they need to take care of their own lives too. But when there are events, we are there.” The work environ-

‘KLOCKWORK NOT ONLY KEEPS ITSELF AVAILABLE ON AS SHORT A NOTICE AS TWO HOURS, IT HAS CULTIVATED VENDORS AND SUPPLIERS TO FOLLOW SIMILAR OUT-OF-THE-BLUE CALL’ ment in Klockwork office appeared to be rather relaxed.

Arif said he is running a fully tax compliant business, adding in jest, that since he mostly works with the government he doesn’t have much of a choice anyway. We are totally tax compliant – regardless of government or private projects

‘BEING AN AITCHISONIAN AND LUMINITE, ARIF HAS NETWORKED WELL AND USED THOSE CONNECTIONS TO OPTIMISE GAINS, TO THE EXTENT THAT BY HIS OWN ADMISSION HE DIDN’T REQUIRE TO DO MUCH MARKETING FOR ANY OF HIS PROJECTS EITHER’ 32

– and open to auditors.”

Satisfied at his success, he has plans to turn Klockwork into a public limited company once the venture starts generating revenue well upwards of half a billion rupees. “We are already in the process of registering as a private limited company.

I’m not too sure when will that transpire, but since we are not too far from the half a billion milestone, so we are on the right track. That said, such things take time.”

In addition to SmartPrep, Klockwork, and Naina, Arif is also running a tender business called MAP (stands for Muneer & Piracha). Though for now Klockwork remains his high-yield enterprise but in time he expects MAP to become the largest of his ventures. “Good education, good luck and right contacts in the right places” remain his watchwords for success, and, for good measure, “parents’ blessings” too.

Being an Aitchisonian and Luminite, Arif has networked well and used those connections to optimise gains, to the extent that by his own admission he didn’t require to do much marketing for any of his projects either. And he continues to enter into new projects and expand his operations.

Alongside his work, he has also been able to manage the same variety and quality in his personal life. “We go to a new place every year for vacation. Last year we went to Scotland, the year before to Spain, and prior to that to France and for Umrah. So we keep trying new things, new places even when on vacation. My five or six things [businesses] keep happening in rotation, the mess is only in Klockwork. The rest have a routine that runs smoothly.”

ENTREPRENEURSHIP

What’s the secret behind successful companies these days? A strong sense of purpose is good for their business

BY Sherry Hakimi herry Hakimi is the founder and CEO of Sparktures, an organizational development company focused on purposeful workplaces that improve individual satisfaction and overall business performance. What makes some companies wildly successful while others flop? Starting and surviving in today’s economy is hard, but the companies that figure it out have something in common: the pursuit of purpose, alongside the pursuit of profit. A purpose mobilizes people in a way that pursuing profits alone never will. For a company to thrive, it needs to infuse its purpose in all that it does.

An organization without purpose manages people and resources, while an organization with purpose mobilizes people and resources. Purpose is a key ingredient for a strong, sustainable, scalable organizational culture. It’s an unseen-yet-ever-present element that drives an organization. It can be a strategic starting point, a product differentiator, and an organic attractor of users and customers.

Here’s how a few organizations have used purpose to achieve great results, and what other organizations can learn from their success.

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BE AUTHENTIC, NO MATTER WHAT sk a group of college graduates their plans after graduation, and chances are none will say: “I want to work for a household goods company.” Yet Seventh Generation, a household goods company, is a top employer of millennials. They manufacture seemingly unexciting products—dish soap, fabric softener, and toilet paper—but the company’s products are authentically

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imbued with a higher purpose: to inspire a consumer revolution that nurtures the health of the next seven generations.

A company’s purpose cannot simply be a pretty set of words. As the adage goes, actions speak louder than words.

Seventh Generation walks the talk of its purpose—and its employees and customers notice.

The company encourages consumers to line-dry clothes instead of machine drying, at the risk of cannibalizing its dryer sheet product. They are using their business to start a movement that will change an industry. This authenticity, potentially at the expense of their bottom line, inspires loyalty that no lip service will create.

As a company, it’s important to think about why you are in the business you’re in. What drives you? If your business succeeds, what would your ideal world look like?

When a company demonstrates an authentic purpose, consumers feel a connection to the products and company.

They will choose the authentically purposeful company’s products, even if it’s not the cheapest offering.

BRING IN THE RIGHT PEOPLE ou can’t force employees to share your purpose. If they don’t, customers will know. It’s better to hire people with a shared sense of purpose. That gives everyone in the organization a common starting point.

Acumen, the non-profit investment fund, has designed a recruitment process that enables it to identify potential employees who share the organization’s purpose. The organization doesn’t simply ask interested candidates to submit a résumé and cover letter; Acumen also asks candidates for responses to a series of short-essay questions that relate to the position.

For instance, “How would you describe your interest in ‘impact investing’ (which is what Acumen does) versus regular private equity or venture capital investing?” Anyone who doesn’t have a good answer for that probably would do better elsewhere.

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A PURPOSE MOBILIZES PEOPLE IN A WAY THAT PURSUING PROFITS ALONE NEVER WILL Spend some time thinking about the range of values and purposes that fit into your company, and create a process that allows you to gather that data before making a hiring decision. Hiring is difficult; firing is even more difficult.

CREATE SHARED VALUE conomic value and social value are not mutually exclusive.

Today’s sophisticated business leader recognizes the concept of shared value: creating economic value while addressing social needs and chal-

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IT’S BETTER TO HIRE PEOPLE WITH A SHARED SENSE OF PURPOSE lenges. As Michael Porter and Mark Kramer wrote in Harvard Business Review in 2011: “Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success.”

There are many ways that today’s purpose-driven companies can incorporate shared value into the core of the business. One example is New Yorkbased Etsy.

Among its initiatives as a certified B-Corp, Etsy has collaborated with governments in Rockland, Illinois, as well as in New York to offer free entrepreneurship courses for underemployed and unemployed residents.

Though it’s not mandatory, the course also includes assistance in setting up a store on Etsy’s platform. This is shared value at its best; Etsy adds more artists and artisan sellers to its platform while empowering underemployed and unemployed participants with the ability to generate supplemental income—or even a full-time job.

With out-of-the-box thinking, any company can move the needle on social challenges while creating economic value.

COMPOSE A CLEAR, COMPREHENSIVE NARRATIVE compelling narrative eliminates a lot of the ambiguity that accompanies normal business functions—everything from creating a new product to onboarding a new hire.

While much has been written about Google’s perk-driven culture, a more significant ingredient of the company’s success is its clear mission: to organize the world’s information, and make it universally accessible and useful. Every product that Google has developed is intended to get it one step closer to fulfilling its purpose.

This purposeful narrative propels experimentation in new products, technologies, and services. In Google’s case, it also presents a continual challenge that talented Googlers strive to create solutions for. Information is power, and making information universally accessible is one way to achieve greater equality in the world. Seen through that lens, Google’s purpose is simultaneously a driver of strategy, a recruitment tool, and a way to make a difference in the world.

Given the success of these and other organizations, it’s clear that purpose is not a fluffy, new-age term. In the book Corporate Culture And Performance, John Kotter and James Heskett show that over a decade-long period, purposeful, value-driven companies outperform their counterparts in stock price by a factor of 12. In the absence of purpose, a company’s leadership is likely to have greater difficulty in motivating employees and putting the company on the course to success. Customers are likely to have difficulty connecting with the company. With purpose, a company can create positive value that is far greater than the sum of its parts.

In today’s technology driven, rapidly evolving economy, successful companies are built not from the ground up, but from the purpose up.

Courtesy: Fast Company

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STRATEGY

Or, the way the trend is catching up, it may even gallop past the landmark sooner

By Afreen Naz n today’s digital world where the West is positioned firmly in the e-commerce market, the Asia-Pacific region (APAC) no longer lags that far behind. In 2015, APAC constituted $877.6 billion or 10.1 percent of the total retail sales of the global e-commerce market, according to a report by emarketer.com, an independent market research firm focused on digital marketing.

Pakistan stands at the second largest in terms of e-commerce industry in South Asia with about $75 to $100 million currently, while India leads with a whopping $33 billion while Bangladesh and Sri Lanka follow at number three and four, with $44 million and $25 million worth of e-commerce market in 2015 respectively.

“It is the first time, Asia Pacific region has extended outright dominance in the world market,”

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the report said. “The rally is on the back of extensive growth by economies like China and India, which led the region followed by South Korea, Indonesia, and Japan.”

Pakistan subsequently forms a part of APAC and is in international limelight currently for its rapidly growing e-commerce market – with Alibaba and Rocket

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Internet gazing at the potential. However, where other Asian economies are credited for APAC’s e-commerce growth, international research firms do not recognize Pakistan as a heavy contributor as such.

The brighter side he research also forecasts that APAC’s e-commerce market will grow by 12.6 percent and will have 52.5 percent share in the global digital retail in 2016.

For Pakistan’s e-commerce, local gurus predict that it will hit the $1 billion mark by 2020 – or maybe earlier. Profit decided to find out how.

How big is the size of Pakistan’s e-commerce market currently?

Though relatively new in the business, online shopping trend is catching up faster than ever. The size of the e-commerce market of the country is debatable as documentation is difficult, but the e-commerce market is esti-

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mated to be $75 million in its current scenario, though some experts paint a far better and brighter picture. “The local e-commerce market stands at almost $100 million,” said Badar Khushnood, Co-Founder, Brammerz – a digital media agency.

This explains that e-commerce is spreading its talons across the country.

Though many say it took us too long to

embrace the digital boom as compared to similar economies within the region, local experts have hopes for a brighter future, as they predict the market to likely surpass $1 billion by 2020.

“The target is not far-fetched. With growth this steady, it can be achieved even before the given time,” says Zain Ali Sheikh, Country Manager of Kaymu.pk.

The e-commerce market is not only doing well in urban centers but has progressed swiftly in the rural hinterland too.

“Different cities in Pakistan are showing interesting e-commerce trends,” said a former spokesperson for Uber, an international ride-hailing company that landed in Pakistan a year ago. “Tier two cities of Pakistan are showing better growth instead of tier one cosmopolitans like Lahore and Karachi,” the Uber spokesperson told Profit in a past interview.

The tilt of the trend pproximately 35 percent of the country's monthly 70,000 cash on delivery (COD) shipments are delivered to cities outside the three main urban centers – Karachi, Lahore, and Islamabad.

Startups like StationeryX and just4girls.pk –

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which deal in niche segments of stationery and cosmetics, respectively – vouch for the trend as reflected in their monthly orders.

“Over 50 percent of our sales are from the rural areas,” said Sheikh, Country manager of Kaymu.pk also validated. “We currently cater to 240 cities in Pakistan, and many of them are tier two cities,” he added.

Though indicators show a positive trend, Pakistan’s e-retail market is still nowhere near the global one due to its late adoption of e-commerce and lack of trust among people at large.

“People initially assumed that since we are an online startup, we are supposedly expensive than the market,” said Naveed Azhar, Director Marketing at just4girls.pk – a startup that has recently started to uptake with the growing e-retail trend.

Accent on cash-on-delivery eing a cash-based economy, Pakistan’s e-commerce industry structurally differs from developed countries. “About 97 percent of our economic transactions are cash-on-delivery,” says Nauman Mirza, CEO of EatOye and foodpanda, the largest online food portal.

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“Pakistan remains a largely underserved market in terms of digital access and digital payment,” according to a Global System Mobile Association report.

“In Pakistan, there are one million credit and 27 million debit cards but debit cards are not eligible for online transactions. So, these are inoperational as far as e-commerce is concerned,” Mirza said. Experts are of the opinion that there are about 5,000 online shops with only 50 of them having integrated methods of online payment currently.

Some argue that the lack of digital system is keeping Pakistan’s e-commerce from moving ahead. While others believe the online payment hurdles might have changed the mode of the transaction but it has not slowed down the e-commerce sales.

The change of transaction mode is apparently irrelevant and ineffective on the online sales, as these are showing an uptake on their own pace.

All said and done, despite hurdles, ecommerce in this country is likely to grow as the mistrust gradually withers away – even if to a very large extent the reliance remains on cash-on-delivery.

WHILE OTHERS BELIEVE THE ONLINE PAYMENT HURDLES MIGHT HAVE CHANGED THE MODE OF THE TRANSACTION BUT IT HAS NOT SLOWED DOWN THE E-COMMERCE SALES’

E-COMMERCE

By Usman Hanif

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‘TO HIGHLIGHT HOW INAPPROPRIATE MEDICINES CAN DESTROY SOMEONE’S HEALTH, DR SHORO PRESENTED THE EXAMPLE OF ONE OF HIS PATIENTS WHOSE KIDNEYS HAD FAILED OWING TO USING SPURIOUS MEDICINE. A SO-CALLED HAKIM HAD PRESCRIBED HIM CARDISAN – AN ANTI-INFLAMMATORY DRUG FOR SEXUAL PERFORMANCE WHICH IF USED WITHOUT CONSULTANT’S ADVICE, CAN DAMAGE BONES, KIDNEY, AND CAN ALSO AFFECT LIVER’

ld furniture scrap and dried leaves scattered on the floor welcome whoever enters this worn-out Raj era building that houses an important department in the province – the Drug Control Administration. In the room inside, six men sit working clumsily, surrounded by heaps of cartons of either spurious or substandard drugs marked ‘court property’ in the office, which itself requires regulation to begin with.

Substandard, spurious, falsely labeled, falsified, and counterfeit (SSFFC) medical products commonly known as ‘fake medicines’ are either harmful for the user, or prove to be useless in curing the disease they are taken for.

The minimum harm such SSFFC’s could do is confidence lost in medicine and healthcare system, leading people to succor at ‘faith healers’. And the maximum falls in the realm of death, for such medicine could indeed kill.

Ronald Noble, Interpol's secretary-general in his opening remarks to an anti-counterfeiting conference in Africa, said: “Fake drugs are more deadly than terrorism.

Forty years of terrorism, has killed 65,000 people globally, compared with 200,000 in one year alone in China from counterfeit medicines.”

Closer to home, Dr Abdul Ghafoor Shoro, senior family physician at the Agha Khan Hospital, narrates how owing to fake drugs TB, eradicated worldwide, is still rampant in Pakistan. “With many unregistered and some registered companies manufacturing these, we see hundreds of untested by any authorised lab homeopathic, herbal, and alternative medicine,” said Dr Shoro.

Citing Tuberculosis (TB) as a case in point, Dr Shoro said, it had been eradicated worldwide, owing to substandard medicines, the scourge is on the rise. “The virus is becoming stronger day by day. We are observing increase in the number of drug resistant TB patients. Initially we saw Multiple Drug Resistant (MDR) patients, now

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XDR and XXDR cases are being reported,’’ said he.

The reason, according to Dr. Shoro, are the substandard drugs that not only fail to fight the disease, but in some ways intensify it too. Curable in six months otherwise, TB is becoming incurable in Pakistan.

One million deaths, WHO reports ccording to the World Health Organization (WHO), one million people die every year due to SSFFC that affect every region in the world. In 2010, former Pakistani Interior Minister Rehman Malik revealed to the National Assembly that the Pakistani pharmaceutical market contains 40 to 45 percent SSFFC drugs. Two years later, at least 120 heart patients at the Punjab Institute of Cardiology (PIC) died after they were allegedly given spurious heart medicine.

“Falsified medical products may either contain no active or the wrong active ingredient, or the wrong amount of the correct active ingredient,” says WHO, adding, “they are also found to commonly contain corn starch, potato starch or chalk.”

SSFFC can sometimes be toxic and even lethal due to wrong active ingredient or other toxic chemical. These are also often produced under poor hygiene conditions by unqualified workers.

According to WHO website, both generic and innovator medicines are

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falsified including very expensive products for cancer to very inexpensive painkillers found in illegal street markets, unregulated websites, pharmacies, clinics, and hospitals. It also states that anti malaria and antibiotics are amongst the most commonly reported SSFFC medical products along with medical products from all the main therapeutic categories including medicines, vaccines and in vitro diagnostics.

To highlight how inappropriate medicines can destroy someone’s health, Dr Shoro presented the example of one of his patients whose kidneys had failed owing to using spurious medicine. A socalled hakim had prescribed him Cardisan – an anti-inflammatory drug for sexual performance which if used without consultant’s advice, can damage bones, kidney, and can also affect liver.

The Pakistan Pharmacist Association acknowledges nearly 4,000 pharmacies registered in the country, but 100,000 illegitimate producers are selling pharma products.

The quacks and the rip-off report by the Pakistan Medical Association (PMA) Anti Quackery Committee mentions existence of 80,000 quacks only in Karachi, whereas the number of doctors registered with the Pakistan Medical and Dental Council (PMDC) in the megapolis is 170,000. Who are these quacks claiming to be doctors and why have they been allowed to stay in business?

The most prescribed antibiotic among quacks is Ceftriaxone – given to almost every patient be it a child or an adult, for every disease from fever to pain in abdomen or chest. The unregistered companies provide it for Rs40 a gram to medical stores while in retail it is sold for Rs230 a gram, compared to the Rs200 per gram by registered companies which can be sold with only Rs40 margin in retail.

The quack clinics have their own stores too, so if a quack sees an average of 50 patients a day, this one fake medicine alone earns him Rs9,500.

Asma Jehangir, a housewife, can relate to the matter. Upon receiving the same syrup prescription by her family

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‘THE WHO GUIDELINES SUGGEST THAT FALSIFIED PRODUCTS ARE ALMOST IDENTICAL TO THE GENUINE STUFF, MAKING IT HARD TO IDENTIFY SSFFC. SO HOW TO DIFFERENTIATE? EXAMINE THE PACKAGING FOR CONDITION, SPELLING MISTAKES OR GRAMMATICAL ERRORS, CHECK THE MANUFACTURING AND EXPIRY DATES AND ENSURE DETAILS ON THE OUTER SIDE MATCH THE ONES ON THE INNER PACKAGING’ physician to every member of her household for all kinds of diseases, Jehangir questioned the usefulness of the medicine – and it turned out it was more beneficial to the doctor than the patient.

This one-remedy-for-all syrup has either vitamin or calcium ingredients which might be good for health, but not for the patients pocketbook. Such syrup of a famous company is supplied to stores between Rs150 to Rs200 whereas the patients buy it anywhere between Rs500 to Rs800. The doctor gets 40 percent commission from the local companies.

Another method of local companies to increase the sale is to incentivise doctors with gifts, share in percentage, foreign trips etc. All the doctors need to do is prescribe the substandard drug.

Another common medicine is Augmentin made by Glaxosmithkline (GSK), and its manufacturer, Abbott, markets it for Rs130 with the pharmacist passing it on to the patient for Rs150, at around 15 percent margin. Medical stores The same formula made by Zafa National, Ceforal3, is supplied at Rs50 a pack to pharmacists and retailed with Rs75 profit, at Rs125.

A medical store worker in a Karachi suburb, Shahnwaz Manzoor, says that his pharmacy takes products from the local companies as they supply on credit, while the multinationals want cash up-front.

Multinational companies do not get registered their expensive drugs meant for cancer and kidney ailments etc, for as it does not have a sizable market while the registration process is extremely cumbersome. These are imported under the guise of ‘personal use’ by vendors who then sell it for Rs100 to Rs500.

Another example of unregistered medicine sold in the market is Viagra

which is prescribed worldwide by doctors for heart diseases and is also used for enhanced sexual drive. However, Pakistan’s government is not willing to register the drug – perhaps because it could promote sexual activity. Now the Pfizer’s product is smuggled from China and India, who along with other countries have the drug registered.

Illegitimate pharmaceutical vendors take advantage of SSFFC due to presence of a dozen local manufacturers who produce famous medicines with identical names, slightly-altered spellings, similar packaging etc.

Septran – a GSK product – is one such medicine which is sold under multiple names having substandard quality.

The Germany based company Merck produces iron containing medicine Neurobion and B12; their Pakistani version by Merck Pakistan produced for export purposes is more efficient. Though the price of exported product is seven to eight times higher than its value in Pakistan, the quality is superior too.

So lucrative is this SSFFC business that even an American-Pakistani along with other local vendors is involved in selling Merck’s local product in the guise of export quality.

“One Pandol tablet my brother inlaw brought from Dubai was instantly helpful in backache relief. Its local version though has to be taken in twos otherwise the pain stays”, said a consumer.

Weak regularization turning it into a menace

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ue to weak regularization, substandard, spurious, falsely labeled, falsified and counterfeit (SSFFC) medical products have

become a menace for Pakistani pharmaceutical market.

To regulate the drug market, there are two main organisations – one federal, and the other provincial: the Drug Regulatory Authority of Pakistan (DRAP) and the Drug Control Administration (DCA) respectively.

Post the 18th Amendment, the Drug Control Administration oversees the supply chain from stocks to medical stores.

Its drug inspectors, as the procedure goes, should take samples from retailers and on-pass to the Sindh Drug Testing Laboratory (SDTL) for authenticity-check, and should take action, if so proposed.

Located in a portion of Police Surgeon’s Office, the SDTL doesn’t have an office to itself till now. To cap it, the lab facility is limited to testing oral dosage, and injectable or sterile medicines cannot even be tested, when about half of pharmaceutical market comprises of injectable or sterile medicines.

Pakistani pharmaceutical market is also flooded by homeopathic or herbal medicines. Though, in May 2014, the Drug Regulatory Authority made laws and registered more than 150 alternative, herbal medicine and health products, no laboratory in the entire country exists to check the content. In public perception, herbal and homeopathic remedies contain no side-effects and can be bought and used off the counter.

Unclear and mismanaged officials of different institutions provide ample opportunity to manipulators in the pharmaceutical market. In Sindh, the District Health Officers (DHO) give license to medical stores while the drug inspectors examine the drugs. Both of them lack coordination.

The DHOs do not take report from

the DCA before issuing licenses to suppliers, and once the license is issued, medical stores do not bother to get their products checked from drug inspector.

This explains mushroom growth of the unregistered stores where even the mandatory air conditioning too is not available, resulting in decreased drug efficiency.

A matter of trust n condition of anonymity, an officer said, now when DCA gets information about presence of fake drugs they avoid seizing the medicines as they don’t have enough space to store it.

The Pakistan Pharmaceutical Association (PPA) president, Qalb-e-Hassan

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‘A REPORT BY THE PAKISTAN MEDICAL ASSOCIATION (PMA) ANTI QUACKERY COMMITTEE MENTIONS EXISTENCE OF 80,000 QUACKS ONLY IN KARACHI, WHEREAS THE NUMBER OF DOCTORS REGISTERED WITH THE PAKISTAN MEDICAL AND DENTAL COUNCIL (PMDC) IN THE MEGAPOLIS IS 170,000. WHO ARE THESE QUACKS CLAIMING TO BE DOCTORS AND WHY HAVE THEY BEEN ALLOWED TO STAY IN BUSINESS?’

Rizvi has a valid suggestion: the government should provide warehousing space where the drug inspectors can submit the court property and get rid of the liability.

Once record keeping is not an issue, inspectors would be more active in seizing SSFFC medicines.

Then the drug inspectors are provided neither conveyance nor security to raid a store even on a tip-off, so for the hapless officers it’s not easy to step out of the comfort zone. The DCA have only 6 drug inspectors in Karachi, all waiting for their promotions. Drug Inspector Abdul Sattar Somroo joined service 30 years ago, and has not been promoted even once since. Other inspectors face similar circumstances, which explains the lack of enthusiasm amongst officers.

A drug inspector likely to be promoted intends to seek retirement on his elevation. According to him, higher post brings greater responsibility and liabilities outweigh advantages. “Not unlike my predecessors, I know I would have no powers to deal with difficult situations.

We inspectors are blamed by everyone for everything that goes wrong in pharmaceutical industry without realising our lack of empowerment,” he said.

The DCA also has six key posts vacant. Currently it does not have a Chief

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Drug Inspector or a director for provincial laboratory, and three regional drug inspectors for Karachi, Larkana, and Sukkur are waiting to be administered by a senior. It has also five vacant posts in grade 18 and 14 in grade 17.

The coordination between DRAP and DCA also seems missing. DRAP issues operational license, import/export license, and registers the price of any drug without consulting or informing DCA. Fake Abbott and Indus companies can be found in Khyber Agency near Torkham Border. Another company that produces SSFFC medicines can be found in Mardan. Gul Zaman, a medicine exporter to Afghanistan, says that the SSFFC destroyed Afghan market for Pakistani medicines.

Now Afghans don’t trust Pakistani brands and have started importing medicines from elsewhere – the UAE, India and Russia.

Panadol CF and Reltus C&F tablets are being smuggled to Iran as it is used for crystal methamphetamine (crystal meth). One packet containing 100 tablets that costs Rs150 is sold in Iran for Rs2,200. Another medicine, Xanax is being smuggled to Saudi Arabia.

Government thus loses millions in potential revenue; Qalb-e-Hassan Rizvi suggests doctors to give duplicate prescriptions, which will make it easier for shopkeeper to maintain his record, and for government to keep a check on counterfeit products and increase its revenue.

It is not difficult either; pharmaceutical companies provide the prescription pads and doctors can demand pads which contain carbon paper. This practice can be initiated in government hospitals and eventually the duplicate prescriptions will help the market.

The WHO guidelines suggest that falsified products are almost identical to the genuine stuff, making it hard to identify SSFFC. So how to differentiate? Examine the packaging for condition,

‘OUR RESEARCH FOR THE YEAR 2016, AFTER EXAMINING 73,000 DRUGS PICKED UP FROM VARIOUS AREAS, PUTS THE RATIO OF SUBSTANDARD SUBSTANDARD MEDICINE AT 2% WHILE ANOTHER 0.3% WERE FAKE DRUGS. IF THERE IS A DISCREPANCY, AS THERE ALWAYS IS SOME IN STATISTICAL DATA, IT MUST BE MINOR, SAID THE DRUG REGULATION AUTHORITY OF PAKISTAN CEO’ spelling mistakes or grammatical errors, check the manufacturing and expiry dates and ensure details on the outer side match the ones on the inner packaging.

And it can also be ensured by checking the medicine itself, whether it looks correct, is not discolored, degraded, or has an unusual smell. The guidelines also suggest discussing with pharmacist or doctor as soon as one suspects that the drug is not ineffective or spawns an adverse reaction.

Prevalence of fake drugs overstated he business of SSFFC medicines can be halted with strict regulation. SSFFC manufacturers order packaging material identical to legitimate products in large quantities; if suppliers keep a record of their deals, the government officials can easily catch the fraud.

“People should not buy medicine on their own. One must only take stuff prescribed by a doctor and insist on a proper receipt,” Dr. Qaiser Sajjad, Central Treasurer of Pakistan Medical Association recommends, adding, “The chemist would not sell something that can be traced back to him. For its part, the government should introduce hallmark on medical products which should only be printed at official institutions.”

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‘THE PAKISTAN PHARMACIST ASSOCIATION ACKNOWLEDGES NEARLY 4,000 PHARMACIES REGISTERED IN THE COUNTRY, BUT 100,000 ILLEGITIMATE PRODUCERS ARE SELLING PHARMA PRODUCTS’ 42

“We buy medicine only from registered companies who also give advantage of return if any product is going to expire within six months. And we avoid buying from the wholesale market because there we don’t know if the product is real or not,’’ said Noman Khan at Malik Medical Store near JPMC. He suggested, people should buy medicines from stores situated on prominent places.

Meanwhile, Mohammad Aslam, CEO, Drug Regulation Authority of Pakistan (DRAP) said that he doesn’t think that the ratio of supply of spurious or fake drugs in Pakistan is as huge as it is claimed.

“Our research for the year 2016, after examining 73,000 drugs picked up from various areas, puts the ratio of substandard substandard medicine at 2% while another 0.3% were fake drugs. If there is a discrepancy, as there always is some in statistical data, it must be minor”, he said.

To him, the headline news that substandard or fake drugs were about 50% in Pakistan was overstating. “We confronted Rehman Malik, the then interior minister, for quoting this bizarre figure. He also confessed that he made a mistake by giving an incredible figure,” said he.

“The fake and spurious drugs may be found in small pockets around the country. However, it’s ratio is not as large as it is said to be. Since quacks are more involved in it, so we can control [prevalence of] fake drugs by reducing their number”, said he.

To him, the news was politically motivated, to dent our image and hurt our pharma exports to 31 countries. Though he didn’t name India specifically, the hint was clear. To Aslam, Pakistan’s archenemy was behind this scandal.

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