MARKET DEVELOPMENT
Segment Shift in Edible Oil Sales
Segment Shift in Edible Oil Sales
25/02/2016 (Business Standard) - Faced with tremendous margin pressure, edible oil producers have shifted from selling loose oil in container form to value-added and branded products.
The switchover has rescued many small and regional entities from threatened closure and helped large entities such as Ruchi Soya Industries, Adani Wilmar and Cargill to fetch premiums of up to 30 per cent over loose oil in bulk containers. The larger players have also started better prospects in the promotion of value-added products with health benefits.
As a consequence, the share of branded and packaged segments in edible oil sales is now 65–70 per cent from 30-35 per cent five years ago, with a compounded annual growth rate of 15 per cent. “This is a natural transition with the change in consumer preferences. There has been a rapid shift towards packed oil from loose oil in the past few years,” said Siraj Chaudhry, chairman, Cargill India, producer of the NatureFresh, Gemini and Sweekar brands.
The shift has been rapid due to squeezing of producer margins between high oilseed and low oil prices. While the government has continued to raise the minimum support price (MSP) of oilseeds, resulting in a sustained rise in input cost, falling edible oil prices globally have made survival difficult for seed crushers. The MSP of groundnut in shells was raised to Rs 4,030 a quintal for 2015-16 from Rs 2,300 a qtl for 2010-11. For soybean (yellow), it was raised to Rs 2,600 a qtl for 2015-16 from Rs 1,440 a qtl five years before.
Prices of edible oil have slid in the past five years due to a global supply glut and reduced demand from the biofuel sector. After a record of 3,982 ringgit a tonne, crude palm oil (CPO) on the benchmark Bursa Malaysia slumped to 1,800 ringgit a tonne in August last year. It has since recovered, to trade currently at 2,454 ringgit a tonne.
The switchover has rescued many small and regional entities from threatened closure and helped large entities such as Ruchi Soya Industries, Adani Wilmar and Cargill to fetch premiums of up to 30 per cent over loose oil in bulk containers. The larger players have also started better prospects in the promotion of value-added products with health benefits.
As a consequence, the share of branded and packaged segments in edible oil sales is now 65–70 per cent from 30-35 per cent five years ago, with a compounded annual growth rate of 15 per cent. “This is a natural transition with the change in consumer preferences. There has been a rapid shift towards packed oil from loose oil in the past few years,” said Siraj Chaudhry, chairman, Cargill India, producer of the NatureFresh, Gemini and Sweekar brands.
The shift has been rapid due to squeezing of producer margins between high oilseed and low oil prices. While the government has continued to raise the minimum support price (MSP) of oilseeds, resulting in a sustained rise in input cost, falling edible oil prices globally have made survival difficult for seed crushers. The MSP of groundnut in shells was raised to Rs 4,030 a quintal for 2015-16 from Rs 2,300 a qtl for 2010-11. For soybean (yellow), it was raised to Rs 2,600 a qtl for 2015-16 from Rs 1,440 a qtl five years before.
Prices of edible oil have slid in the past five years due to a global supply glut and reduced demand from the biofuel sector. After a record of 3,982 ringgit a tonne, crude palm oil (CPO) on the benchmark Bursa Malaysia slumped to 1,800 ringgit a tonne in August last year. It has since recovered, to trade currently at 2,454 ringgit a tonne.