Highlights of the Issue

Chapter 1: Introducing SnappRetail Index

SnappRetail Index (SRI)

The SRI measures the performance of retail on a quarterly basis. This is a KPI metric designed by SnappRetail to measure the trends in the retail industry on a quarter-to-quarter basis. The SRI comprises of:

• Number of Stock Keeping Units sold in a quarter
• Total Value of Sales in a quarter
• Total quantities sold in a quarter
• Total number of retail transactions (invoices) in a quarter

 For each of the above measures, our team analyses the growth and decline rate. Each measure has been assigned weights based on its proportionate importance. Based on assigned weights & amp; rate of change, we calculate a score for each measure that we describe as the performance indicator of the measure. The aggregate of score of each measure is described as the SnappRetail Index.

 SnappRetail Index (SRI)

We have taken Q1-2023 as the base quarter, which means its SRI was 100, as each measure in the first quarter of this year is taken as 100. For Q2-2023, the SRI stands at 94, as we see a decline in retail activity. Our data shows a decline in 3 of the 4 measures of the SRI, with only growth being visible in the number of SKUs sold in Q2 vs. Q1, indicating significant changes in SKUs sold.

In Q3-2023, we see retail activity bouncing back, as the SRI stands at 114. The key driver of this figure compared to the last quarter is the total Sales Value, with a slight increase in the value of SKUs sold, sales volume, and transactions.

Our assessment of the change captured in both quarters is that its primarily driven by inflation. In Q2, we see an increased number of SKUs, indicating changes in the barcodes due to price increases. Post price increases, all other measures, i.e., value, volume, and transactions, saw a decline. However, this trend normalizes in Q3.This can be assessed from the fact that the Sales Value Index is 109, whereas the volume index is 101, and the Number of Invoice Index is 103. This highlights the impact of inflation, where a slight increase in volume and transactions has had an increasing impact on the sales value.

Chapter 2: Category Insights: Recipe Mixes

Understanding Recipe Mixes - Cooking Essentials

The recipe mix category belongs to the family of cooking essentials. Cooking essentials are part of the food and beverage category which has the highest value sales. Within this category, food staple essentials, including rice, sugar, all- purpose flour, pulses, dry fruits, and vermicelli, have the highest value sales followed by the sale of beverages.

We can see that the cooking essential category has a percentage share of 3% among the entire food and beverage category. When we dig deeper into the cooking essentials  category,  we can see that recipe mix sales (45%)   account for almost half of the entire cooking essential sales. Before we further understand recipe mix category and it's consumption patterns though sales trends, let us present to you how this category is defined.

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 Monthly Value Sales Trend Within Recipe Mixes

Recipe mixes refer to combinations of blended spices or herbs. When  a recipe calls for a specific mix of herbs or spices, it is convenient to have these ingredients pre-blended and mixed in prescribed ratios to make a unique, ready-to-use masala. Ingredients used in recipe mixes are responsible for giving food its aroma, flavor, preservation, and color. To understand recipe mix buying patterns, we look at its month-on-month sales trends. The figures represent absolute value sales trends for recipe mix packs, expressed as percentage changes. Each percentage value indicates the month-to-month growth or decline in sales.

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We can see that sales have consistently increased with a significant rise from May to June & July to August. This can be attributed to Eid ul Fitr and Eid ul Adha where recipe mixes are highly consumed. The sales figures normalize again in September. It is thus safe to assume that demand rises during festive seasons due to increased cooking and entertaining and targeted marketing during these seasons. Our data also reveals that growth in the number of SKUs has increased significantly. An overall growth in the no SKUs of 8% was observed in Q2.

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Pricing Analysis 120GM Recipe Mixes

For a 120g pack (value pack) of recipe mixes, there were quite a few pricing fluctuations observed throughout the months, as seen in the chart below. These fluctuations were a result of price increases and trade discount activities. The first instance of a price increase was observed in June, where the median prices moved up to 190. This was also the month of Eid ul Adha, where the demand for recipe mixes was high, as observed in the sales trend chart.

During July and August, the post-peak demand period after Eid, although median prices improved further, we observed discounting activity by key brands, indicated by a wider difference in the lower and upper quartiles. Overall, prices had fallen, whereas discounting from the manufacturers' end to the retailers had increased, as seen by the increase in the upper and lower quartiles. We see relatively stabilization in prices in September and October.

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Pricing Analysis 60-70GM Recipe Mixes

For single packs, we observe that prices do not fluctuate much within months despite an increase in median prices. We observe price increases in May, August, and September. The increase in the gap between the upper and lower quartiles in October indicates higher discounting  activity by key brands, causing some variation in average prices as well as  higher and lower pricing instances.

For a 60-70g pack (single pack) of a recipe mix box, there was overall price stability observed from April to September for the upper price border, with the price falling from PKR 75 to PKR 70 in October. This is quite different when compared with the lower border of the prices of family packs, which varied frequently. On the other hand, the upper border prices fluctuated on a month-on-month basis.

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Basket Analysis of Recipe Mixes

Our analysts have used data mining techniques to support retailers in increasing their store sales by better understanding customer purchasing patterns. It involves analyzing large datasets, such as purchase history, to reveal product groupings, as well as products that are likely to be purchased together. This is known as basket analysis. The bar chart below shows the subcategory basket analysis of the top 12 goods sold alongside recipe mixes. The graph indicates a strong association with spices and seasoning, reaffirming the connection between recipe mixes and flavor- enhancing ingredients.

The association with cleaning products(soaps, detergents) may indicate that consumers prefer to consolidate their shopping for cooking and household essentials.

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Highly Associated Subcategories: Spices & Seasoning (7.1%): This is the most strongly associated subcategory, suggesting  that consumers often buy spices and seasoning when purchasing recipe mixes, reinforcing the idea of a common theme in cooking-related purchases.

Pulses (6.5%): Pulses, which are a staple in many cuisines, show a strong association, indicating that consumers tend to buy them together with recipe mixes. It was also observed that personal care and home care subcategories, such as soaps and detergents, were also purchased alongside.

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Recipe Mix - Expert View

Learnings from Humayun Shaikh

Q1) How would you define the recipe mix category?

The recipe mix category can  be defined by its two core components. The first component is the  'taste.' Every recipe mix category has  a defined taste that has been picked up by the customers. The taste of the certain category is 'consistent  in flavor.' The birth of Shaan, the brand, actually came into being when  a person traveled and needed consistency in flavor. The idea thus arose, and the categoryof  recipe mixes was developed. The second component is the 'hassle' component, whereby a recipe mix comes with pre- portioned ingredients and clear cooking instructions, reducing the time and effort required for measuring and chopping, creating convenience.

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Q2) Who is source of business for the recipe mix category?

Like many Southeast Asian cultures, Pakistani women have traditionally played a central role in meal preparation and household management. Therefore, the primary target market for the recipe mix category is the woman of the house. In our culture, it is expected of women to prepare meals for the family, which they 'pride' themselves in when the family compliments them – that is considered her achievement. The woman thus also acts as the advocate for the brand because they are independently responsible for the cooking. In terms of age, our primary target market is women of ages 21 and beyond. When young girls  are  in charge of the kitchen, they usually consult/follow their mothers, who act as advocates for us. In advertising, The brand is always the partner, but the woman is the hero. Shaan, as a brand, also considers mid-aged/slightly mature men beyond the age bracket of 30 as the secondary  source  of business, as you may have also seen in many of our advertisements.

Q3) What are choice drivers for consumers in this category ranking each factor such as pricing, taste, convenience, tradition, loyalty etc.

Taste matters the most; the recipe mix box is almost 5% of the entire cost of cooking a dish, so price is not such a big factor; it's actually the taste that matters most. Brand Loyalty/Consistency is a huge factor for being a choice driver, as the consumer trusts that the taste is consistent. Quality matters, but it's important to note that determining quality is tough in the food industry– if anything seems odd in the recipe mix, it's considered bad quality.

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Q4) How have category trends evolved over the years?

To be honest, category trends  have not changed to a large extent in Pakistan. However, globally, retort + frozen items + pastes + sauces categories exist and are highly demanded. But from a format perspective,  this  hasn’t  happened  in Pakistan yet because we are still in the phase of moving from scratch cooking to recipe mixes. What has evolved over time is more delegation, a fast lifestyle, and slightly less focus on food defining a woman. This has therefore increased the demand for the overall spices and seasonings category, but this evolution is taking its sweet time. This includes their large vegetable- consuming population demanding these products. On the other hand, Pakistan, comprising a huge meat- consuming population, has lagged behind because keeping meat fresh for long is tougher than preserving vegetables.

Q5) How has pricing and inflation effected the overall category?.

Inflation hits recipe mixes when prices of other commodities increase, e.g., that of meat, rice, or oil. When prices of these complementary products increase, the general trend is that consumption of other  products, such as meat, will decrease, and this will impact consumption of recipe mixes.

Q6) How do you see dinning out habit changing and its impact on recipe mixes?

Not really, sales and demand have consistently increased because, no matter what, a meal is always cooked at home. On the other hand, restaurants use recipe mixes, and we sometimes customize mixes for them. Overall, demand for the category has only gone up.

Q7) What are barriers to entry today for branded players?

Customers are accustomed to a certain taste, so moving to another brand is very tough. The biggest barrier  to entry is, therefore, earning trust from the consumer. Blind tasting vs. live tasting experience is very different. For a customer to switch to a new brand, bad experiences are required.

Q8) What is the export potential for Pakistani brands?

There is huge export potential because global competition in recipe mixes is very limited. Abroad, you will find that most Indian and specialized stores keep Shaan mixes, and these are highly demanded. Indian recipe mixes have a stronger taste, but the equity of Shan is very strong. However, Indian brands are much stronger in other categories; they are more forward- looking and have more product lines. There is, therefore, huge export potential, and local brands should capitalize on this.

Export Potential of Recipe Mixes:

This newsletter deep dives into the recipe mix category and its potential and wide preference in consumer buying. When we talk about recipe mixes, despite numerous constraints, Pakistan has witnessed growth in spice mix exports over the past five years. In 2017, a record quantity of 14,000 tons of recipe mixes were exported by Pakistan. Almost 50 percent of the total spice mixes were exported to Saudi Arabia and the UK. In 2021, the total spice mixes imports of Saudi Arabia were over 40,000 tons,  of  which  Pakistan’s  share  was 40 percent(over 15,000 tons).

According  to  the  Pakistan  Business Council, the popularity of Pakistani recipe mixes surpasses that of competing brands, thanks to the convenience and quality of the end product. The primary international markets for these recipe mixes are the Pakistani and North Indian diaspora. The inclination towards Pakistani recipe mixes, as opposed to rival brands, can be attributed to businesses' investment  in  research and development aimed at creating innovative recipes.

At the moment, China, India, and Pakistan are the market leaders in the recipe mixes category. Pakistan was the 3rd largest exporter of recipe mixes in 2021 with exports of USD 80.8 million and a growth rate of 8.1 percent between 2012 and 2021. Pakistan’s     exports     constitute     13 percent of global exports. European countries had around a 44 percent share in global imports of spice mixes in 2021, valued at around USD 305 million.

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Pakistan's Export Markets

Almost 50 percent of the total spice mixes exported from Pakistan are destined for Saudi Arabia and the UK. The top five importers of Pakistani spice mixes imported almost 77 percent of the total spice mixes exported, valued at almost $61 million in 2021. The chart shows the shares of the top export markets for Pakistan in 2021.

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SKU Tail - Exports:

Products that Pakistani brands export abroad have longer SKU tails than what they have in the domestic market. On average, around 40% of SKUs contribute  to almost 80% of the profit earnings in the sector. Pakistani spice mixes that are most popular abroad include biryani ranges, BBQ ranges, and curry ranges, including karahi masalas.

Chapter 3: Trends in Retail Categories

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About the Company

SnappRetail is a retail fintech startup, focusing on digitalizing traditional trade in Pakistan. Our Micro ERP empowers retail owners to digitalize Sales, Inventory Management, Credit Management, Stock  Ordering, Analytics, Micro-lending, Digital payments, and Ecommerce for  both B2B and B2C. Through SnappRetail's systems, traditional retailer scan optimize their functions strategically. Over the last decade, groundbreaking advancements have revolutionized all sectors, enhancing their capabilities. The retail industry also has under gone a technological revolution. Modern trade has utilized technology to enhance efficiency across the value chain. While these player shave benefited from better access to tech, capital, and resources, traditional trade remains significant in developing economies like Pakistan, India, and Indonesia. The potential impact of SnappRetail on the retail sector  is huge, creating value that extends to millions of lives across Pakistan.

Automation out of data darkness - Capability of SnappRetail

SnappRetail devices, which include a E-POS, hardware& software,  are placed across each of the Snapp stores. When a customer walks  in- store and makes a purchase, the transaction is recorded. This helps the SnappRetail track customer purchase journey through the SnappRetail system, allowing us to better understand shoppers and consumer behaviors. Our team of data analysts and data scientists review this data to identify key insights for all categories in stores. We are sharing this information across stakeholders and partnered organizations, customized to their needs.

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