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Edible Oil market in India is the 5th largest in the world

India is a potential market for edible oils because of its domestic consumption. However, the deficit between production and consumption of edible oils is increasing rapidly, even after importing millions of tonnes of oil.The government should increase the oilseed production and solve the problems faced by the edible old market.

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Definition / Scope

Edible oils are the dietry source for energy, growth and healthy functioning of human life. In addition, edible oils put high emphasize on tasty food, improving texture of food items, increasing palatability of food, flavor of food maintenance. Thus, edible oils constitute an important component of food expenditure in house-holds. Edible oils comprised an dominant component of food expenditure in Indian kitchens. India comprises 25% of the population suffering from cholesterol and heart related diseases. [1] The inclination of Indian consumers has increased towards edible oils because of the pursuit for low fat and low absorb oil. India is appropriate for growing all major oil seed crops due to its agro-ecological diversity. The major oilseed crops cultivated are ground nut, mustard, sunflower, sesame, safflower and niger. India is one of the largest producers and consumers of edible oils in the world. [2]

Market Overview

India has the fifth largest edible oil economy in the world which accounts for 4% of global vegetable oil production, 12% of global consumption and 21% of globally traded volumes. Even though India occupies a prominent position in the global oilseeds production more than 70% of India’s edible oil demand is met by imports and it is projected that India may need to import 14 million tonnes of edible oil by the year 2020. Indian Oilseed production is about 25-26 million tonnes leading to 10.75 million Ton of edible oil. This deficit of 14 million tonnes in demand and supply is met by imports. India primarily imports edible oil from Indonesia, Malaysia, Argentina and Brazil.[3]

Consumption of major edible oils in India stood at 24.10 million tonnes (MT) in 2017, and was valued at Rs 1.4 trillion. Domestic production met only 30% of that demand; the rest was imported.The demand for edible oils in India has shown a steady growth at a CAGR (Compound annual growth rate) of 5%. [4]

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Key Metrics

Metrics Value Explanation
Base Year 2018 Researched through internet


Market Risks

The incidents of Adulteration of edible oils are quite prevalent in India. The adulteration of mustard oil with argemone seed oil, which causes a disease known as “epidemic dropsy” are major incidences. The most common forms of adulteration of edible oils are mixing costly sunflower and soybean oils with cheap oils like cottonseed oil and castor oil. The lack literacy and consumer awareness in the rural and urban population further augments this problem.[5]

Top Market Opportunities

For edible oil market, there can be major market opportunities in the recent time because the paradigm of health concern for a growing number of Indian consumers has largely shifted.

The oilseed cultivation need to be promoted to under utilized farming locations such as the eastern India, where more than 15 million hectares under low land rice is one of the opportunities for increasing the area under oilseeds. The inter cropping technique can be used in nearly 45 million hectares under widely spaced crops like sugarcane, maize, cotton etc.Extending oilseed cultivation to under utilized farming locations such as the rice fallows of eastern India and in some coastal regions, where more than 15 million hectares under low land rice is one of the opportunities for increasing the area under oilseeds. [6]

Market Drivers

There are several growth drivers in the edible oil market in India; some of them are listed and explained below.

  • Growing awareness for health.
  • Rising affordability of branded products.
  • Shift from vegetable oil to Palm oil and Soy Oil.

Growing awareness of health: The edible oil market is experiencing a considerable growth owing to the rising consumer awareness about health benefits and strong economic growth. Western lifestyle is being increasingly adopted which has credited to be one of the biggest factors driving the market.

Rising affordability of branded products: The global financial crisis, several poor harvests and the reduction in import duties on edible oils forced several small-scale players to close down or be taken over by larger players. Multinational players in the domestic market included Adani Wilmar Limited, which offers a large product portfolio of edible oil variants. The branded products are very widely accepted in India due to their high quality and reasonable price. The competition in the oil industry limits the price structure of different brand structure of edible oils.

A shift from vegetable oil to Palm oil and Soy Oil: The Edible oil market in India has witnessed a growth in recent years on account of rising demand for variants of edible oil fueled by expansion in the production. The surge in growth is majorly originated from growth in palm and soybean as a segment of the edible oil market. The growth in this segment has been largely led by the domestic factors such as growing preference for healthy oils, growth in population base, a shift in consumption pattern towards branded oil and favorable government policies. [7]

Market Restraints

There are some trends in the market that are restraining the growth of the organic agribusiness. Some of them are given as follows.

The annual oilseed production of the country is faced with a high degree of variation, as nearly 76% of the oilseeds area is under rainfed conditions and therefore subject to uncertainties of moisture availability.

Availability of quality seeds of improved varieties and hybrids is grossly inadequate and is one of the major constraints in enhancing the oilseed production. Although there is enough breeder seed production of most oilseed crops, further seed multiplication through foundation and certified stages are the key constraints for availability of quality seed material.[8]

Industry Challenges

Some of the challenges crucial to the growth of the edible oil sector today are:

There are energy-rich crops but in India, they are mostly grown under energy-starved conditions. No use or low use of plant nutrients is one of the most important factors for low productivity of oilseeds. The nutrient requirement of oilseeds in general is high. All the nutrients need to be supplied in adequate quantities for attaining high yields.

Oil seed crops are prone to damage through 64 major diseases. This indicates the tack of genetic insulation against the majority of the diseases. Cultivars with a high level of resistance are available for rust and downy mildew in sunflower; powdery mildewin rapeseed-mustard; rust in linseed; wilt and root rot in castor and mosaic disease in soyabean. [9]

Technology Trends

Through technological means such as refining, bleaching and de-odorisation, all oils have been rendered practically colourless, odourless and tasteless and, therefore, have become easily interchangeable in the kitchen. Newer oils which were not known before have entered the kitchen, like oils of cottonseed, sunflower, palm or its liquid fraction (palmolein), soyabean and ricebran.

These tend to have a strong and distinctive taste preferred by most traditional customers.The share of raw oil, refined oil and vanaspati in the total edible oil market is estimated at 35%, 55% and 10% respectively. [10]

Pricing Trends

Over the near term, edible oil prices are expected to remain firm, considering the strong demand for alternative sources of energy like bio fuels in view of the continued rise in crude oil prices. The Indian edible oil industry is highly fragmented, with the presence of a large number of participants in the organized and unorganized sectors. This has resulted in severe competition and inherently thin profitability margins.

Further, the raw material availability and change in government policies determine the pricing strategies which influence the edible oil industry.[11]

Other Key Market Trends

Other key market trends also include domestic factors such as growing preference for healthy oils, growth in population base, shift in consumption pattern towards branded oil and favorable government policies.[12]

Market Size and Forecast

The Edible oil market in India has witnessed a growth in recent years on account of rising demand for variants of edible oil fuelled by expansion in the production.

The surge in growth is majorly originated from growth in palm and soybean as a segment of edible oil market.India’s vegetable oil consumption has grown at a 5% CAGR over the past decade to reach 23.1 million tonne in 2017 as compared to 13.5 million tonne in 2007. Future Growth of India Edible Oil Market is expected to be led by palm and soya bean oil segments. India’s vegetable oil imports will rise to 25 million tonne in 2030 from 15.5 million tonne in 2017 due to increasing demand and stagnant supply.

India’s Soybean production has increased in the last 10 years at CAGR of 1.41 percent. Groundnut production is estimated to be 8.22 Million Tonnes in 2017-18 as compared to 7.46 Million Tonnes in 2016-17 showing a growth of around 10%. [13]

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Market Outlook

The Indian edible oil market is the world’s fourth-largest after the USA, China and Brazil. The long-term outlook of edible oil demand in India is favorable on expectation of increasing population, increase in per capita consumption which in turn would be driven by changing lifestyles, growing urbanization, and increasing proportion of middle-class population and steadily rising affluence levels. The Indian per capita consumption for edible oil is expected to grow from the current consumption levels of about 16kg to about 24 kg’s by 2020 with a conservative CAGR of about 6%.

India imports substantial amount of edible oils for its domestic consumption. Among all edible oils importation into India, Palm oil importation share is around 60 percent. [14]

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Competitive Landscape

It’s expected the various national and multinational players to dominate the edible oil market due to the increasing import dependence of the country in the near future. Rice bran and blended oil market are expected to be the fastest growing categories in the entire edible oil segment with Oils such as Mustard, Sunflower, Groundnut and Cottonseed tend to remain region specific in the near future with a moderate fluctuation in their prices.

Between 2008/09 and 2016/17 domestic production increases by 4.41 ml T (+58.97%), consumption increased by 10.04 ml T (171%) and import increased by 5.82 ml T (171%) to match the rising consumption.[15]

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Key Market Players

The competition in India edible oil market is highly fragmented owing to the presence of a large number of organized as well as local and unorganized players. The major players are Cargill, Adani Wilmar, Ruchi Soya, Agrotech Foods, and others.

Company Profiles

Adani Wilmar's Fortune: Adani Wilmar Limited (AWL) was establisehd in January 1999 as a joint venture between Adani Group with Wilmart international. AWL introduced ‘soybean oil’ in India and promoted health awareness. Adani Wilmar has the varieties of edible oil spanning across the categories of Soya, Sun, Mustard, Rice bran, Groundnut, Cottonseed and Fortune Vivo for diabetes care. Fortune is the most prestigious brand in the Adani Wilmar portfolio and India's number 1 Edible Oil Brand in terms of Volume and Revenue. Most Fortune brands are under premium category of their respective Oil category due to its quality standards and brand pull.

Agro Tech Foods Ltd: Agro Tech Foods Ltd (ATFL) is a public limited company engaged in the business of marketing food and ingredients to consumers. ATFL introduced edible oil in the form of the brand name of Sundrop in the year 1989. Heart Lite, NutriLite and Slimlite are some of the variants of Sundrop Oil. Sundrop offers edible oils that contain Oryzanol, Vitamins and Fatty Acids , helping in lowering the cholesterol level.

Cargill's Nature Fresh and Dhara refined oil: Cargill Foods India began operating in India in the year 1987. It refines and markets a wide range of indigenous and imported edible vegetable oils, fats and blends for the food industry. Some of the products of the company Gemini, NatureFresh, Sunflower Vanaspati, Sweekar, Leonardo and Rath are clamed to be suitable for mental and physical health.

Marico: Marco was started in the year 1991 in Mumbai. The edible oil of the company is sold under the brand name of Saffola, three variants Active, Gold and Total. It is the most selling edible oil brand in the Premium oil category.


Patanjali: Patanjali is the relatively newer entrant as Pan India Edible Oil Brand. Patanjali edible oil range includes Sunflower Oil, Rice Bran Oil, Groundnut Oil, Soybean Oil and Raw Mustard (Kachi Ghani) oil. [16]

Strategic Conclusion

Edible oil industry happens to be the key player in the economic development of the country. The global edible oil market is anticipated to witness a substantial growth owing to increasing popularity of unrefined healthy, and organic oil.India happens to be the leading company in the production, consumption and marketing of edible oils. The oil industry is not only industry economic support but also the agricultural support. The use of innovative and scientific method of oil production is one of the basic aspects of oil industry.

The government is also taking good number of steps for better promotion of domestic oil industry. The scientific research has given the country many edible oils free from cholesterol and good for heart. The government should increase the oilseed production in the country through improvement in productivity of oilseed crops, improving the processing efficiency of oilseeds and oils and solving the problems facing domestic marketing of oils.

References

  1. http://www.iaset.us
  2. https://www.statista.com/statistics/620815/oilseed-production-india
  3. https://www.entrepreneurindia.co/Document/Download/pdfanddoc-856239-.pdf
  4. http://www.agricoop.gov.in/sites/default/files/Edible%20Oil%20profile-July%2C%202018.pdf
  5. http://www.dnaindia.com/india/report-beware-your-branded-edible-oil-may-be-adulterated-1645506
  6. http://www.shodhganga.inflibnet.ac.in/bitstream/10603/44536/11/11_chapter4.pdf
  7. http://www.icra.in/Files/ticker/Indian_Edible_Oils-note11072011
  8. http://www.agrioutlookindia.ncaer.org/events/india-edible-oil-sector-mar.pdf
  9. http://www.shodhganga.inflibnet.ac.in/bitstream/10603/44536/11/11_chapter4.pdf
  10. http://www.agrioutlookindia.ncaer.org/events/india-edible-oil-sector-mar.pdf
  11. http://www.agrioutlookindia.ncaer.org/events/india-edible-oil-sector-mar.pdf
  12. http://www.agrioutlookindia.ncaer.org/events/india-edible-oil-sector-mar.pdf
  13. http://www.agricoop.gov.in/sites/default/files/Edible%20Oil%20profile-July%2C%202018.pdf
  14. https://www.entrepreneurindia.co/Document/Download/pdfanddoc-856239-.pdf
  15. http://www.agricoop.gov.in/sites/default/files/Edible%20Oil%20profile-July%2C%202018.pdf
  16. http://www.trendingtopmost.com/worlds-popular-list-top-10/2017-2018-2019-2020-2021/india/edible-oil-companies-india-world-best-famous-revenue-market-cap-largest/

Further Reading

Appendix

  • ATFL Agro Tech Foods Ltd
  • AWL Adani Wilmar Limited
  • CAGR Compound annual growth rate


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