An interview with Fahad Ashraf - GM, The Coca-Cola Export Corporation, Pakistan & Afghanistan Region
Consistency and longevity of policies crucial for improving investment climate
Fahad Ashraf is the General Manager of The Coca-Cola Export Corporation, Pak & Afghanistan Region, responsible for bringing the company’s purpose to life and driving long-term sustainable growth.
He joined Coca-Cola from Reckitt Benckiser where he has spent most of his career in various local and global marketing roles in Pakistan, UAE, South Africa & United Kingdom, before taking on his recent assignment as Chief Executive for Pakistan & Afghanistan. Over the years, Fahad has driven his teams to deliver strong business performances while setting up multiple global best practices on brands like Dettol, Veet, Strepsils, Finish, and Vanish.
In his last role as the Chief Executive of RB Pakistan, he led the restructuring of the organization and portfolio to drive better focus, achieved highest ever market share for Dettol, championed a significant improvement in D&I scores and set into action a purpose-led agenda called 'HogaSaaf Pakistan' in collaboration with the Government of Pakistan.
Fahad holds an MBA in marketing from the Institute of Business Administration, Karachi. He is an astute business leader & a passionate marketer at heart who believes in the power of insight, intuition and simplicity, and has 18 years of proven performance across multiple geographies & FMCG categories.
Following are the edited transcripts of an interview with Fahad Ashraf:
BR Research: Coming straight to the current situation, can you quantify how COVID-19 has impacted your sales, operations, workforce? And how has it affected the CSD and beverages sector in general?
Fahad Ashraf: As we know, the COVID-19 pandemic has caused an economic slowdown globally, impacting some industries like travel and tourism much more than others. But the overall impact of the pandemic on the beverage industry and on our business in particular has been limited. We as a company, responded to the evolving situation rapidly and adapted to the change in a way that we were able to mitigate the negative impact to a large extent. Many companies and industries were forced by the pandemic to adopt technology in their operations for the first time, but we had embedded technology across all our operations for many years already, and as such for us the adapting to change was not such a big challenge.
Another insight that I can give you is that in a crisis, people tend to turn more to brands which they trust, whether it be beverages or anything else. Peoples’ trust for Coca-Cola has been built up over several decades, indeed generations, and yes, while lockdowns and closure of hotels and restaurants did impact our sales, home consumption remained steady and in some places it increased.
BRR: But the economy was slowing down even before COVID-19. Could you explain how the carbonated soft drink market/beverages sector has been doing over the last two years? We have been hearing that Coca-Cola’s CAGR has been around 15-16 percent in the last 6 years?
FA: Yes, the beverage industry had been growing very strongly over the past decade, but honestly the last 2 years have been a bit soft. Key reasons for the stagnation are like most other industries including economic slowdown, inflation driven by currency devaluation and increased cost of doing business due to the monetary policy. This industry was further burdened by an increase in FED.
BRR: How has COVID-19 hit or altered your marketing and ad spend? How would you describe your marketing strategy now?
FA: The onset of the pandemic was quite sudden and its spread exponential. It immediately created fear and uncertainty, and great human suffering. As a responsible company in such circumstances, we decided to completely stop advertising for a few weeks and focus instead on how we as a caring employer and a caring corporate citizen should respond to the situation and be there for those who needed our support. Also, we felt that pre-COVID commercials would be completely irrelevant and out of character for our brands, while shooting new commercials was not possible due to social distancing requirements.
Now that Pakistan is slowly but steadily coming out of the pandemic - according to the figures and trends released by the government - we have resumed our marketing activities, including TV advertising that acknowledges the difficult time we’re all going through and communicates relevant messaging.
BRR: Coming back to COVID-19 impact, how does it affect the trade ecosystem?
FA: Trade ecosystem has indeed been very disturbed due to the social distancing restrictions; from government orders around timings and types of stores that could operate, shift of shopper footfall from small stores to supermarkets and then back to smaller stores and pure cash flow issues. However, we believe things are getting closer to normalcy for most trade channels.
BRR: What is corporate sector's role in providing support during the global health emergency? What has been Coca-Cola’s response?
FA: First of all you have to remember that the corporate sector too has been a victim of the global pandemic and there is hardly any business sector that has not been impacted, some much more than others, as I said earlier. Many businesses had to close, and many others had to suffer huge losses while still carrying on. Businesses which had resilience and were organized to respond quickly to the changing environment have fared better.
Coca-Cola Pakistan’s response first focused on its people, devising and implementing policy to ensure the health and safety of all our employees, even as we adopted a work-from-home practice. Next, we donated emergency supplies in the shape of Ration bags and PPEs to the communities and to government hospitals. Our next priority was supporting people and businesses in our supply chain, as we have a moral responsibility to do so. We particularly focused on the small shopkeepers and have implemented a campaign titled Open Like Never Before or OLNB. Under this campaign we supplied product of a certain value free of charge to about 10,000 small neighborhood shopkeepers throughout the country so that they could generate cash flow for themselves and keep their shops running. Also included in the campaign was supporting the government’s SOPs messaging through our own communication materials placed at these shops, and through TVCs.
BRR: Carbonated drinks are highly taxed in Pakistan. What regulatory hurdles do you face and how was the Federal Budget FY21?
FA: Carbonated beverages is a significant industry in Pakistan, not only providing employments to tens of thousands of Pakistanis, but also contributing significantly to the national exchequer. Unlike most other snacking categories, the carbonated beverage industry is subject to an additional 13 percent Federal Excise Duty (FED) on retail pricing, which not only puts a pressure on the company’s P&L but also increases the end consumer prices. Also, it encourages counterfeiters and tax evading local brands by giving them a significant cost advantage, thus risking the consumers health as well as potentially reducing the governments tax revenue.
BRR: FDI has been dwindling long before COVID-19. What are your recommendations for improving the investment climate for MNCs?
FA: I think the most important measure for improving the investment climate must be consistency and longevity of policies. When an MNC makes a sizeable investment, it is for the long-term and it could be 10 years or even more before the investment starts to pay off. But if the rules and regulations are frequently changed, the original premise on which the investment was made no longer remain valid. Thus, it is vital that foreign investors are assured that investment policy, especially relating to taxation is consistent over the long-term.
The other major area for improvement is in protecting the business of foreign investors against unfair and even illegal competition. If you take our business for example, it is extremely disheartening to see that counterfeit and spurious carbonated soft drinks are easily available all over the country. Not only do the manufacturers and sellers of such products not pay any taxes, their products are a serious health hazard for the public. Sporadic raids on such illicit production facilities are only a stopgap solution and the authorities for once and for all should end this. Similar is the case as I understand in many other industries like food products and medicines.
However, in several other respects the investment climate in Pakistan has indeed improved substantially over the years, like in terms of law and order and security, infrastructure, communications network and general ease of doing business.
BRR: How much has your company invested in Pakistan in the last five years? Any future Greenfield or Brownfield investment plans?
FA: Coca-Cola has led the largest Company-Bottler collaboration in Company’s history by setting up the Greenfield Plants in Multan and Faisalabad, with an investment of over $300+ million since 2017. In total there are 11,000 direct and indirect employees and another 100,000 jobs are supported through the Coca-Cola allied industry. The company has already invested over $500 million during the last 10 years on the up-gradation of the existing plants in the country, but plans to further expand Coca-Cola’s production and distribution capacity in Pakistan are currently on hold due to the unfavorable global economic environment.
BRR: Given the changes due to COVID-19, what is your long-term view on Pakistan's market?
FA: We remain quite bullish about the Pakistan market. With the fifth largest population in the world, a growing middle class and a huge potential for economic growth, Pakistan in the long-term promises to be a growing market for us. Of course, there will always be challenges, but Coca-Cola came into Pakistan 67 years ago and has stayed the course, as from the very start it has always been here for the long run. Over more than 6 decades that we have been in Pakistan, our business has grown substantially, as have our contributions to the economy in terms of duties and taxes paid, employment generated, several vendor industries supported, and the positive social and environmental impact made through our CSR interventions. It will not be out of place to mention here that for the past 2 years or a little more, we are actually water-positive in Pakistan; that is, through our water conservation and replenishment projects, we have saved more water in nature than we use in our business operations.
BRR: As a corporate thought-leader, what is your holistic advice to companies for the post-COVID new normal?
FA: It is obvious that the world post-COVID will not be the same as it was before. Businesses and companies must evolve and perhaps even re-invent themselves to be able to survive and grow in the new normal. And for this the one holistic thing that companies should do is to ask themselves a key question – what is our ‘Purpose’? Yes, the business objective will remain making a fair profit. But over and above this, a company must have a well-defined purpose for existing. It is the purpose which will give direction, shape all policies and drive the business. In the Coca-Cola Company for example, the ‘Purpose’ is defined as “To Refresh the World; Make a Difference”. And under this purpose we have then gone on to define our vision, how we are following our purpose, the behaviors we are focusing on, and the conscience we follow, which is basically about doing the right thing. So that is my closing message – define your Purpose!