Coke Studio Boosts Cola's Marketshare in Pakistan
Coke Studio, sponsored by Coca Cola Pakistan, is a one-hour show that features musicians playing a distinct blend of fusion music that mixes traditional and modern styles. Helped by the media boom in Pakistan, the show has had dramatic success since it was launched three years ago.
A Wall Street Journal story says that Coke Studio is now carried by 27 channels, including regional Sindhi- and Pushto-language channels, where entertainment tends to be more orthodox. The show’s Facebook page has about 200,000 fans and is adding about 10,000 a week. The song “Alif Allah Chambey Di Booty” by Arif Lohar and Meesha Shafi that featured on Coke Studio in June has recorded 531,537 views in just over a month on YouTube. It is popular in both India and Pakistan where the netizens can’t seem to get enough of it.
Here is an except from the Wall Street Journal story on Coke Studio in Pakistan:
Coke and Pepsi's battle in Pakistan shows how some foreign companies remain committed and are expanding here even as others head for the exits because of concerns over terrorism and the country's struggling fiscal position.
Tetra Pak International SA, the Switzerland-based packaging company, is about to complete a €90 million ($116.5 million) factory in Lahore. Metro AG, the German retailer, has invested $175 million to open a string of outlets in the past two years. Adidas AG of Germany has recently ramped up orders of soccer balls from Pakistan, one of the world's largest suppliers.
Others, like U.S.-based Procter & Gamble Co. and Nestlé SA of Switzerland, continue to make healthy profits here. Nestlé, for instance, operates Asia's largest dairy-processing factory in Punjab, Pakistan's largest province.
An upsurge in terrorist suicide attacks and a balance of payments crisis, which led to an $11 billion International Monetary Fund bailout program in 2008, have scared off other businesses. Foreign direct investment in Pakistan fell 39% to $12 billion in the year to July, according to central bank figures. Still, countries like Pakistan continue to matter for consumer-goods companies because they have young populations and growing economies. The economy is set to grow over 4% this year and Pakistan regularly beats out nations in the region, including India, in the World Bank's study on ease of doing business.
Coke said sales volumes fell 2% in North America in the first quarter of 2010 but rose 11% in its Eurasia and Africa division, which includes Pakistan.
Pepsi remains bigger in some Middle East nations, where an Arab League boycott of Coke in the 1970s and 1980s—stemming from its investments in Israel—left the playing field open.
In other emerging markets like China, India and Russia, the two rivals are locked in a close race.
Nestle and Unilever, two of the leading food and drink companies in Pakistan have been reporting strong growth in headline sales, according to BMI. Both companies grew their topline sales revenue by more than 20% year-on-year in the year to December 31 2009. Their annual sales are now approaching US$500m.
Against the odds, demand for beer is strengthening off the back of strong growth posted by Murree Brewery. Despite Muslim's accounting for 97% of Pakistan population and extensive bans on the consumption of alcohol in place, Murree has been reporting strong financials. Q1 (three months to September 2009) after duty and tax sales climb by 16% to PKR539.4mn (US$6.5mn), while net profit after tax increased by 26% to PKR63.9mn (US$0.76mn).
As the sales of cola drinks and tobacco products decline in the West, US companies are targeting developing nations with heavy advertising to increase sales.
Bunge, the third biggest US agribusiness company after Archer-Daniel-Midland and Cargill, has bought Chicago-based Corn Products International Inc. for $4.2 billion in stock to add corn-based sweeteners as demand increases for soft drinks and processed foods in China, India and Pakistan, according to US media reports. This acquisition enlarged Bunge's international footprint in emerging economies to drive its growth.
Corn Products is the fourth-largest maker of high-fructose corn syrup in the U.S. and will give Bunge new customers in Pakistan, South Korea and Thailand, Credit Suisse analyst Robert Moskow said in a note on this deal. Corn sweeteners are used in soft drinks and processed foods instead of traditional cane or beet sugar because of their lower cost and higher concentration. A single 12-ounce can of soda has as much as 13 teaspoons of sugar in the form of high fructose corn syrup, according to San Francisco Chronicle. China, India and Pakistan have all seen double digit annual growth in consumption of soft drinks and processed foods for several years. Last year, the PepsiCo growth in US and Europe was less than 3% but PepsiCo International sales were up 22%, an impressive increase fueled by double-digit growth in China, Russia, Pakistan and the Middle East.
Processed foods and soft drink companies are often blamed in the United States for dramatic increases in obesity and diabetes, particularly among children. Some even accuse them of being merchants of death, not unlike the big tobacco companies. Many health experts argue that the issue is bigger than more calories. The theory goes like this: The body processes the fructose in high fructose corn syrup differently than it does old-fashioned cane or beet sugar, which in turn alters the way metabolic-regulating hormones function. It also forces the liver to kick more fat out into the bloodstream leading to heart disease.
While the presence and growth of Bunge, Pepsi and other food giants are likely to create more jobs in emerging economies such as India and Pakistan, the price for this opportunity is likely to be the danger of greater health problems associated with fats and corn sweeteners in processed foods and soft drinks.
Similar or even greater health threats are coming from the major expansion of tobacco giant Philip Morris in emerging economies. As the smoking rates in developed countries have slowly declined, they have risen dramatically in some developing counties, where PMI is a major player. These include Pakistan (up 42% since 2001), Ukraine (up 36%) and Argentina (up 18%), according to the Wall Street Journal. Philip Morris is currently building a major new plant in Pakistan.
Globalization can potentially bring many benefits, including access to more jobs and improved living conditions in the emerging economies. However, globalization also brings with it all the ills that have been witnessed in the West, including environmental deterioration and life-style diseases such as diabetes, heart-disease, various forms of cancer etc. The challenge for Pakistan, and other countries like it, is to learn from the mistakes of the West. Instead of just repeating such mistakes, Pakistan, India and China must find ways to extract the benefits while minimizing the cost of modernization.
Growing health consciousness across Pakistan is strengthening demand for low calorie carbonate substitutes and bottled water. With concerns about the safety of tap water extensive, demand for bottled water is growing strongly off the back of modest gains in per capita incomes and more importantly, more widespread product investment by leading players.
Here's a video clip of Coke Studio with Arif Lohar and Meesha:
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