The company’s presence in the country is an example of a global multinational creating a hard-fought market for itself from scratch. Its departure will leave a gaping hole
However bad you think Procter & Gamble leaving Pakistan is, we suspect after reading this story, you will see that it is worse. There are no two ways to say it, so we will start with the uncomfortable truth first: P&G is important for Pakistan, but Pakistan is not important enough for P&G.
P&G’s presence in Pakistan is perhaps one of the best examples of how a global multinational started off in the country with a miniscule presence and barely any resources and ended up becoming one of the largest manufacturers in the nation. Indeed, P&G had gone from being mainly an importer, to a domestic manufacturer, and had already begun to be an exporter.
It was one of the best examples of attracting foreign direct investment into the country: allow imports to start with, let them build up their market, and slowly they will start manufacturing, technology transfers, and even exports. It was working.
Until it stopped.
This is one of those stories where there is not one person or party to blame. Did the government’s policies drive away the company? They certainly did not help, and we will explain the specific policies that hurt P&G’s business. But a detailed examination of the company’s financials indicates a much more complex story, one that indicates that Pakistan’s consumer goods market may be a lot smaller, and growing a lot slower, than the headline numbers may indicate.
In this story, we take a look at what P&G built in Pakistan, and how they moved from importers to manufacturers and net exporters. We then examine the recent downturn in the company’s performance in the Pakistani market, as well as its generally sluggish growth globally. Finally, we take a look at reasons why P&G may have made the decision to leave the country.
Procter & Gamble in Pakistan
P&G is one of the largest consumer goods companies in the world and the owner of a set of brands that tend to be among the dominant ones in their respective market segments. It started life in 1837, when two Irish immigrants – William Procter and James Gamble – to Cincinnati, Ohio in the United States met each other through their wives: Olivia and Elizabeth Norris. Prior to meeting, Procter had been a candlemaker and Gamble had been a soap maker. Their father-in-law Alexander Norris persuaded them to become business partners, which is how Procter & Gamble was founded – as is still headquartered – in Cincinnati.
The company owns such iconic brands as Always, Ariel, Gillette, Head & Shoulders, Olay, Pampers, Pantene, and Vicks, in addition to many others. It owns 20 brands that each individually have sales exceeding $1 billion.
It started its existence in Pakistan on August 5, 1991, when it first imported a set of cleaning products into the country for the first time. Since then, for much of its history, Procter & Gamble remained largely a trading and branding presence in Pakistan.
Its Pakistan operations in its early years were mainly a corporate office that would help market its brands to a Pakistani audience, with a handful of employees who helped import the products from manufacturing facilities around the world, and then distribute them through large distribution companies in the country.
Over time, it has consolidated its operations and expanded them, setting up local manufacturing for a variety of products, including Ariel, which was the first product the company started manufacturing locally, and Safeguard. Over the first 25 years of the company’s presence in Pakistan, it invested $150 million into local manufacturing facilities to help localise its revenue streams.
In 2013, the company’s global parent announced a list of top 10 emerging markets on which it would focus over the next decade for investment, and Pakistan was on that list. In an interview with The Express Tribune, P&G Pakistan Country Manager Faisal Sabzwari said: “We have a very clear intention that we will continue to increase localised manufacturing in Pakistan.”
Among the factors he cited for the focus on Pakistan: urbanisation and a youth bulge. “If you compare the urbanisation rate in Pakistan with other developing countries, you will see that we are getting urbanised faster than others,” said Sabzwari back then. “Pakistan is one of the top countries adding 20-year-olds to the world, and these are the people establishing new families and helping market sizes grow,” he added.
In 2019, the company announced that it would invest $50 million in the local manufacturing of Pantene and Head & Shoulders brands of shampoo locally, through a 58-acre production facility located at Port Qasim.
At the time, Sami Ahmed, vice president at P&G Pakistan said, “We are committed to contributing our share in the economic development of the country. Our latest investment is testimony to our long-term commitment to Pakistan. For over 25 years, we have been serving consumers with high quality products and have made significant investments of over $150 million in fixed assets to date while nurturing and developing Pakistan’s finest talent and making them business leaders.”
Later in 2019, the company achieved another milestone: not only had it gone from ceasing its imports of Safeguard from other countries and started local manufacturing of the product, but it also began exporting Safeguard from Pakistan to 20 countries in Europe. For the financial year ending June 30, 2020, total exports of Procter & Gamble Pakistan products clocked in at Rs1,838 million ($11.6 million), the bulk of that being the exports of Safeguard.
That is correct, ladies and gentlemen: Pakistan did a complete 180-degree turn on Safeguard. It went from being an importer, to being a domestic manufacturer, and now to an exporter.
“This is an important milestone for our local operations. Our plant in Pakistan is one of the few locations in the P&G world where Safeguard is manufactured and exported from and it is the only site from which P&G is acquiring Safeguard for export to Europe,” said Sami Ahmed at the time. “Since the establishment of our soap manufacturing facility in Hub over 20 years ago, this facility has served Pakistani consumers with high quality products that has improved everyday life which has now become a lucrative export item as well.”
The manufacturing juggernaut
Over the past decade and a half, Procter & Gamble has completely turned around its business strategy with respect to imports versus local manufacturing. In 2010, more than 75% of the company’s revenues came from imports and less than 25% from local manufacturing. By 2024, the latest year for which financial statements are available, those numbers had been more than reversed: more than 98% of its revenues now come from local manufacturing and less than 2% from imports.
And unlike, for example, the automotive industry in Pakistan, which imports more than 50% of the price of the car, P&G’s manufacturing really was almost entirely local: less than 5% of the total cost of production involved imported raw materials. If you bought a P&G product, you were paying employees and suppliers almost entirely within Pakistan.
And the size of the business is nothing to sneeze at either. In 2023, the company clocked in Rs51 billion in revenue, which would make it comfortably one of Pakistan’s top 50 manufacturing companies. Revenue then declined in 2024 to Rs44.5 billion, but this remains a sizeable company, and one that was beginning to export some of its production.
Unfortunately, the plant that was engaged in the exports – the soap manufacturing unit in Hub, Balochistan – was sold to Nimir Industrial Chemicals in September 2024, for Rs816 million. So what happened?
Financials: weaker than they look
When Profit last did a deep dive into P&G Pakistan in January 2021, the company was coming off a 5-year period where its revenue essentially did not grow at all. And while we do not have the financial statements for 2021 and 2022, the data from 2023 and 2024 indicate that the company did eventually break out of its performance slump, with revenue growing 53% between 2020 and 2023. That sounds impressive until you realise it is a 15.3% annual average growth rate at a time when inflation averaged 19.8% per year.
And the numbers must look absolutely abysmal to P&G’s holding company, which is based in the United States and hence measures its revenue and profits in US dollars. On that metric, P&G’s revenue in Pakistan peaked in fiscal year 2017 at $321 million, and since then have declined every single year, and hit $153 million in 2024, the latest year for which numbers are available.
That number is especially abysmal when one considers the fact that it is lower in USD than the company’s revenues in 2009, when it made $158 million in revenue. Effectively, all of the gains made in building up its market from 2009 through 2017 was wiped out over the next seven years.
(Note: Profit’s convention for converting income statement figures into US dollars is to divide the rupee number by the average exchange rate over the year in question, using the open-market exchange rate, as published in Business Recorder every trading day.)
What caused this slump?
Could it be competition from other brands? This one can be ruled out. Gross margins during this whole time were remarkably steady, which means that the company did not face enough competition to feel the need to cut prices in order to grow.
Could it be that P&G made a mistake in not cutting prices and was therefore losing market share? It is possible, but unlikely when you consider the fact that it maintained gross margins while growing revenue by less than inflation, because that combination of data points represents two things:
That second point may be the key to understanding what happened: P&G’s brands have enough strength that they do not need to engage in a price war with other companies, but they cannot defy economic gravity. The consumer’s ability to withstand high consumer prices was declining substantially, and that got reflected in P&G’s financial results in the form of declining revenue, as measured in USD.
Is P&G overreacting to a cyclical economic slowdown in Pakistan? Possibly, but look at the data from P&G’s perspective. They invested about $94 million in Pakistan starting around 2019, shortly after their best year in the country. But then after that, their revenue – as measured in their home currency – keeps declining every single year for the next eight years.
That feels like an investment that just is not working out. How long can a company wait for the returns on its investment? Eight years is not a hasty decision. It seems like a measured response to what the data indicates, which is that Pakistan may have demand for P&G’s products, but likely not enough to continue investing in the country.
P&G’s global struggles
As tempting as it might be to look at just the local context, the fact of the matter is that the decision to pull out of Pakistan was likely made by someone looking at P&G’s global financial performance, not at Pakistan in isolation. And on that front, the news is rather clear. Over the past 10 years, P&G’s revenue growth has come entirely from its home market in the United States, while its revenue from the rest of the world – as measured in US dollars – has declined.
The numbers are rather stark: US revenue for the 10 years ending June 30, 2025 grew by about 4% per year, but overall revenue grew by only 1% per year during that same period, meaning that the US was carrying the weight of the non-US markets as they declined.
In other words, P&G can grow faster by getting rid of its non-US businesses. So that is exactly what they are doing. P&G has been publicly disclosing to its shareholders for several quarters now that it is undertaking a review of its global portfolio and would be shedding assets as a means of focusing its energy and resources on its strongest markets.
Pakistan is simply one of the many markets from which it will be exiting.
What comes next for P&G’s assets in Pakistan
This then leaves the big question: having already invested in setting up manufacturing facilities in Pakistan, what happens now? Will P&G simply shut them all down and leave? Will Pakistan have to begin importing products it was previously manufacturing domestically?
Luckily, given the fact that P&G has already sold its soap manufacturing plant in Pakistan to Nimir, we have a reasonable estimate of what is likely to come next, which is – in some ways – less catastrophic than the news might appear at first glance.
In the case of the Nimir deal, P&G sold the factory as an asset to Nimir. It then gave a contract to Nimir to keep manufacturing the same product (Safeguard soap) and even label it the same name, with P&G retaining ownership of the brand.
Here is how Safeguard is working right now: Nimir manufactures the soap in the plant that was previously owned by P&G. It then sells the finished product to P&G’s exclusive distributor in Pakistan – which is the Pakistani subsidiary of the Abu Dawood Group of Saudi Arabia. Abu Dawood will then distribute Safeguard all throughout Pakistan, same as it did while P&G directly owned and operated the factory in Hub.
As part of its cost, Nimir will pay a licensing fee to P&G for the brand, and for technical assistance in manufacturing the product should any future changes be needed to the production process. Everything else stays the same.
This is the most likely formula for how P&G’s other two factories. The one in Port Qasim manufactures Pantene and Head & Shoulders, its best-selling shampoo brands, and the one in Korangi, Karachi, manufactures Pampers (diapers) and Always (feminine hygiene products). It is unclear who the buyers will be at this stage and P&G has about a year to find suitors. But when it does, Pampers, Always, Pantene, and Head & Shoulders will continue to be manufactured in Pakistan, largely with local raw materials and labour, the same as it is right now.
What changes then? The P&G Pakistan headquarters staff in Karachi will either be laid off or moved to Dubai, as brand management and technical supervision moves entirely off shore. The actual job loss will be less than it appeared at first glance from the announcement.
One more substantive thing will change: while P&G’s factories are currently working at between 40% and 50% capacity utilization rates, when they start reaching their limits and need expansion, the capital for the expansion will not come from P&G but rather the local company who owns the plant (such as Nimir for Safeguard). In other words, P&G’s financial risk for these business lines is going to be much lower, since it will not be the one putting up the money to expand them.
If, at this point, you are tempted to think that this may not be so bad, hold that thought. The core set of reasons that compelled P&G to leave still say something bad about Pakistan, the fact of the company leaving will still hurt the country, and while the government of Pakistan is not the main cause, it certainly did make matters worse.
Why the departure matters for Pakistan
The broadest possible way to summarize the data we presented above is that Pakistan’s middle class grows in fits and starts, and is not a linear progression upwards. The government’s obsession with trying to control inflation through the exchange rate has created a highly distorted economy and one that is prone to extreme shocks. Our economic booms are followed by very sudden, and very sharp, recessions, and they seem to have gotten worse over the past two decades.
That means that the number of middle class consumers that would be customers of companies like P&G expands and shrinks, meaning that the risk associated with setting up a factory in Pakistan is higher than in an economy where growth might be slower, but more steady. This is why P&G is not leaving the Pakistani market, but it is taking measures to shift the risk of setting up a factory in Pakistan.
That, more than anything else, is the worst thing about this departure. It says that Pakistan is a market you want to sell to, or maybe buy from, but one where the risk of investing serious amounts of capital in setting up productive capacity is too high. That even a company with decades of in-market experience cannot make it work.
So even though Head & Shoulders and Pampers will still be locally made, the next stage of the leap beyond this level of productive capacity is now uncertain. Will whoever buys these factories have the capital and risk-taking appetite to grow them? Will they have the appetite to seek P&G’s cooperation in taking these factories to the next level and try to compete for P&G’s regional production goals, meaning making the product fully export-worthy?
Maybe, but the uncertainty around the answer is greater than it would have seemed had P&G never left.
And finally, while these are factors not entirely in the government’s control, it really would be nice if the government were able to come up with a better way to control inflation than messing with the currency exchange rates, which cause wild gyrations in the purchasing power of ordinary Pakistanis. We do not expect them to change their behaviour, so we will not dwell on this point too much.
The British economist Charles Robertson once told Profit that Pakistan needs to graduate from being a trade to becoming an investment. A trade being a short-term transaction, and an investment being a long-term place to park one’s money.
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