Pakistan: Global diversification: Engro acquires US-based food company

By Farooq Tirmizi / Mobin NasirThe Express Tribune

KARACHI: Engro Corporation is all set to enter the halal food business in North America as the company has signed an agreement with US-based Al Safa Halal to purchase its food business, Engro announced in a communique to the Karachi Stock Exchange on Tuesday.

The precise size of the transaction was not disclosed, though the company stated that its acquisition, inventories and brand-building efforts would cost up to $15 million (Rs1.3 billion). The transaction is still subject to regulatory approval in the United States and Canada.

The move comes as part of Engro Corporation’s goal to become the largest Pakistan-based multinational company. Engro Corporation Vice President Ali Akbar told The Express Tribune that the deal, which was signed on January 20, will help the company tap large and profitable markets abroad.

“When Engro Foods Limited (EFL) started, our vision was to make our mark in Pakistan and then go international, which I believe our brands have achieved,” he said.

Once acquired, the company will be managed under EFL, which is a subsidiary of Engro Corporation. However, the business will be independent of Eximp, another subsidiary of the company that concentrates on wholesale trade of rice and other grains.

“We want to focus on the total value chain,” said Akbar. He explained that the company’s growth strategy had involved acquiring and building a brand. “Owning a brand is where real profitability lies,” he added.

Akbar declined to comment on reports that Engro Foods had a mandate to earn up to 20 per cent of its revenues from overseas sales. Nevertheless, the acquisition of Al Safa would be the first step the company has taken to geographically diversify its revenue sources outside Pakistan.

Akbar revealed that the company will set up a head office in Toronto, Canada, once approvals are received from the State Bank of Pakistan. Akbar will travel to Toronto to help establish the company’s headquarters.

The official said that the company is conducting feasibility studies to gauge possible exports from Pakistan. “As we are an agrarian economy, the raw material required for a food business can be utilised from Pakistan, which will in turn help our economy also,” said Akbar.

He expressed hope that the acquisition will be the first in a series of expansive moves that will gear the company towards its goals of going global.

Al Safa Halal is a relatively small food company based in New York. However, its products are distributed throughout North America, primarily in supermarkets catering to the seven million-strong North American Muslim community.

The company’s products primarily involve meat-based frozen foods, such as chicken, turkey, beef and pizza though it also has vegetarian fare such as falafel products. Meat is a new line of products for Engro Foods to be entering, since the company’s Pakistani operations are focused on dairy products such as milk and ice-cream.

Globally, the halal food market is estimated at $640 billion, according to Halal Journal, an industry magazine. Most of that market is concentrated in countries with large Muslim majorities.

Engro Foods, however, is the first Pakistani company to actively target the North American halal food market and may be one of the first companies from a Muslim-majority nation seeking to establish an active presence in marketing to Muslim minorities in the West.

Published in The Express Tribune, January 26th,  2011.