Fauji Foods witnesses significant growth in sales
Aftab Ahmed
Islamabad: The Covid-19 turned out to be positive for the processed milk industry. Fauji Foods Limited–FFL–has witnessed significant sales growth as people across the country avoided buying loose milk due to precautionary measures and preferred packaged milk due to nationwide lockdown.
Sources told Newztodays.com that the FFL company had witnessed significant sales growth. People across the country avoided buying loose milk due to precautionary measures and preferred packaged milk due to nationwide lockdown during most of the June 2020 quarter.
Due to increased demand processed milk companies including Fauji Foods have increased their prices by an average of 10% for their UHT milk brands. Fauji Food has witnessed the majority of growth in UHT milk sales.
Due to the outbreak COVID-19, loose milk prices have declined by 25% from Rs60 per litter to Rs45 per litter in rural areas in June 2020 quarter due to less demand and disruption in the supply chain. Processed milk companies remained able to grab this opportunity and increased their utilization in order to build inventory for the next quarter. The company has also benefitted due to delay in axle load regimes and a decline in fuel prices as distribution cost is a major cost component for the company.
Fauji Foods has also done some financial restructuring in recent days and has successfully converted an Rs2.63 billion loan from its parent company (FFBL) into equity investment and has issued 274 million new shares to FFBL. Due to debt conversion along with a 6.25 percent policy rate cut by the State Bank of Pakistan Fauji Foods aims to save Rs927 million interest expense annually.
Company business has remained volatile since Noon Pakistan Limited’s acquisition due to economic slowdown and company focus on product development. During this time company has undertaken intensive marketing campaigns and launched Dostea in the tea whitener segment, Nurpur original in the UHT market, and Nurpur pasteurized milk.
However, on the restructuring front, a senior official of the company has said that “Fauji Foods is constantly looking to reduce costs, improve efficiencies, increase reliance on automation, and adopt changes in supply chain models to achieve long-term sustainable growth rate.
The company would do well to continually invest in bringing more popular products with customers to the market. Doing so does not necessarily mean that Fauji Foods has to revamp its brand portfolio. It could also choose to reinvest in its brands that are already household names but update them for the 21st-century consumer.
