Changing face of cooking oil business in India-Shift from loose vending to branded products

Cooking oil is an essential component in the budget of every hold in India. Unlike in western countries most Indians consume home fried snacks in stead of depending on the products offered by the industry. Depending on the region preference varies and some of the commonly used oils include that extracted from groundnut, coconut, sunflower seed, sesame,  rice bran, maize germ, soybean, etc but critical shortage of domestic oils during the last 3 decades set a trend of importing palm oil from Malaysia and Indonesia in sizable quantities. To day the number one cooking oil is Palm oil and its fractionated version Palmolein with most people switching over to it for economic reasons. till 1990 oil was packed in square tins of 18 liter size for retail dispensing in consumer's container. Due to development high function plastic packing materials loose vending started declining and to day more than two third of the oil sold in the market is in plastic unit packs under different brands. Probably Indian consumer embraced plastic packed oils because of rampant adulteration of cooking oil on a massive scale by unscrupulous traders and fraudsters trying to make a fast buck. Here is a report on Indian oil market as it is being developed by a few national players and some strong regional brands. 

"There has been a surge in consumer preference for branded and packed edible oil, as compared to the traditional loose-sold variety. In 2012-13, sales of the former category in the country overall rose 30 per cent. And, the share of branded and packed oil in the overall cooking oil segment shot up to 60 per cent from 45 per cent in the previous year. The packed/branded category has a strong presence among regional companies. The share of national brands continue to remain between 10 and 12 per cent. Consumer awareness of the benefits of using packaged oil from a known brand and the ability to afford the higher price for this (termed 'increased financial scalability' in trade jargon) appears to be the reasons for the shift. Also, the difference in prices has narrowed. "The attraction towards branded and packed products is increasing rapidly. Branded and packed edible oil has replaced the loose commodity in urban areas," said Siraj Choudhary, chairman of Cargill India, producer of edible oil brands, such as Gemini and Sweekar and the Indian arm of the US commodity giant, Cargill International. Manufacturers have also started retailing the commodity with value additions, such as promises of various health benefits over the loose ones. Ruchi Soya Industries, the biggest in the branded category, with Sunrich, Nutrela and Mahakosh as leading brands, has posted 17.4 per cent growth in branded edible oil sales, at Rs 5,413 crore in 2012-13. In the fourth quarter, it registered 10.75 per cent growth in branded edible oil sales at 2.1 million tonnes (mt) as compared to 1.9 mt in the corresponding quarter of the previous year. Says Dinesh Shahra, managing director, "We witnessed a staggering growth in branded sales in the last two quarters. Our focus on the growth of these has helped in achieving better margins." A recent paper presented by Dorab Mistry, director, Godrej International, estimates India's edible oil consumption at 17.6 mt in the oil year of November 2012-October 2013, as against 16.6 mt in the previous year. He forecasts per capita edible oil consumption at 13.9 kg in 2012-13, up from 13.4 kg in the previous year. "Shifting is happening very rapidly from loose to branded and packed edible oil, which can be attributed to a combination of factors, including growing prosperity of the middle class and narrowing of the premium over loose products," said Atul Chaturvedi, chief executive officer of Adani Wilmar, producer of the 'Fortune' brand. The premium for branded and packed products has been narrowing in recent years, with the difference between packed and loose varieties now Rs 10-15 a kg and Rs 15-20 a kg between the loose and branded ones. Branded edible oil was earlier Rs 30 - 40 a kg costlier."

The cooking oil prices are escalating practically every day in spite of galloping imports of palm oil products and there is no sign that this trend is showing any abatement. Imagine some of them like Coconut oil and Sesame oil costing more than Rs 200 per liter, almost 100% increase in 1 year, reasons for which are not clear. Though from the health angle experts frown on too much consumption of oils like Palm oil, the failure of the country to increase the production of oil seeds commensurate with demand has given this sector a golden opportunity to reap higher and higher  each passing day! Annual per capita availability of 13.9 kg of oil working out to about 45 gm per person per day is not bad considering that the recommended fat intake is 50 gm per day per person. After all a significant part of fat needs are met through invisible fat present naturally in the diet. The only worrying fact is that every Indian citizen is forced get 50% of his daily requirement oil through imports! A pathetic situation indeed and shame to the Government of India!

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

FOOD INDUSTRY TO GET LEAN? SHIFTING THE FOOD PRIORITIES

Global trends vis-à-vis food industry developments is a window for any country to understand the trend in various countries regarding the future of this sector. Of course each country has its own specific food preferences and purchasing power which may not be strictly comparable but still some lesson can be gleaned from the experience of others. Look at the UK food industry trend being projected by the concerned government agency, predicting a marked shift from processed foods based on animal sources because of various factors.

"These are the three priorities identified in a report by the government's independent advisory body on sustainability, the Sustainable Development Commission (SDC), which calls for radical changes in patterns of consumption.The report – which will dismay many in the livestock and processed food industries – will feed into all government departments and procurement agencies. Well-placed sources say it has created tension between Whitehall departments and advisers over its potential impact. The study acknowledges that cutting processed food and reducing consumption of intensively-produced meat and dairy foods could lead to a shrinking of the UK food and drink industry. The UK's retail supply system would also be affected – the SDC report recommends that people reduce energy consumption by shopping more on foot or over the internet and that they replace bottled water with tap water. While about 18% of the UK's greenhouse gas emissions are related to food and drink consumption and production, the industry is the single biggest manufacturing sector in the UK, accounting for 7% of GDP and employing 3.7m people".

How, the desire to expand food processing which is considered crucial in the economic landscape of the country and the need to reverse the present scenario regarding deteriorating health status of the population, is going to be balanced remains the biggest challenge. Can India learn a lesson or two from the experiences of the UK and take appropriate course correction in the development chart of the food industry to prevent a similar situation developing in future?. It is time the National Planning Commission(NPC) spares a thought on the issue for evolving necessary guidelines for the "healthy" development of food industry in the country.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

CONSUMER TRENDS-CONVENIENCE FACTOR TO THE FORE

Convenience factor has been the driving force for the development of food processing industry and most of the consumers do not mind paying "add on" to the basic cost of processed foods provided it is not unreasonable. Of course other factors like culinary quality, health and nutrition, good shelf life and attractive packaging also do contribute to consumer decision to buy products at prices higher than the intrinsic cost. In spite of great strides made by the food industry, convenience seems to be the over riding factor that assures even growth for the processed food sector.

"While these are nothing new, portable foods continue to be a food industry trend. Providing convenience for our 'on-the-go' society is a must and consumers continue to spend their cash on handy packaging that allows them to skip portioning themselves and simply grab something out of the kitchen, throw it in their bag and go. The cost of the packaging drives up the cost of these pre-portioned gems, however the convenience continues to beat out the cost and consumers keep this food industry trend going".

What is causing alarm is the run away escalation in the cost of foods that are processed and packed making the consumers wary of the motives behind the high profile, mass promoted food products, especially those with low caloric density. One wonders whether consumers will revert back to lesser convenient products that require some preparation in the kitchen if the upward trend in food product prices continue to gallop with practically no relation to the basic cost of raw materials that go in making these foods by the manufacturer. Industry will regret in the long run if affordability of their products to consumers is ignored and if it thinks that saturation promotion of products will drive consumers in hordes to buy them, same may prove to be fool hardy!

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com