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Edible oils: Slip n’ shine…

Aug 24, 2002

India is the 4th largest oilseed producing country in the world, after USA, China, and Brazil, with a harvest of about 25 m tonnes per annum. It produces the largest number of commercial varieties of oil seeds over nearly 28.4 m hectares of land. The major edible oils produced in India are groundnut, rapeseed, soya, cottonseed, sesame seed, castor seed, sunflower, safflower etc. In 1996, the Government set up a Technology Mission on oil seeds, to increase production of other oil seeds and oil, and to reduce dependence on imports. The strategy revolved around increasing productivity and encouraging winter (Rabi) crops. This led to a sharp increase in oilseed production driven mainly by rapeseed, sunflower, castor seed and soya. Oil seed production jumped from 6.1 m tonnes in the mid 80's to the current levels.

Groundnut is the most widely consumed and traded edible oil. India is the world’s second largest producer of groundnut, next only to China. But groundnut being primarily Kharif (monsoon) crop is vulnerable to vagaries of monsoon and also speculative activities. Soya bean is the third largest oilseed crop in India next to groundnut and mustard, and accounts for 25% of the annual total oilseeds and about 10% of total vegetable oils produced in the country. India is also the 3rd largest producer of rapeseed and cottonseed and the largest producer of castor seed globally. The 3 oil seeds - groundnut, soya bean and rapeseed - together account for over 80% of aggregate cultivated oilseed output. Cottonseed, copra and several other oil-bearing seeds too contribute to the domestic vegetable oil pool.

Edible oil: Vital stats…
(m tonnes) FY00 FY05E FY10E
Demand 10 14 19
Per capita consumption (Kgs) 10 12 15

The edible oil sector is a large employer with an average turnover of about US$ 10 bn per annum. Added to that the sector earns US$ 90 m as foreign exchange amounting per year. On the flip side, edible oil processing is one of the most polluting industries in India. It generates substantial water pollutants, toxic gases and solid waste.

In the mid-nineties, India had achieved near self-sufficiency in edible oil production. However, over the last few years, rising consumption (11 m tonnes) and a dip in oil seed output has forced India to become the largest importer of edible oil, with imports touching nearly 5 m tonnes in recent times from 0.1 m tonnes in 1993. Edible oil consumption has been rising at around 5-6% pa.

Edible oil has nearly 100% penetration in urban as well as in rural areas. Other popular cooking mediums are Vanaspati (hydrogenated edible oil) and ghee (home made butter). Vanaspati penetration stands at nearly 25% at an all India level, significantly higher at 40% in urban areas and 15% in rural areas.

However, out of the total oil consumption of 11 m tonnes, refined oil accounts for only around 2 m tonnes. Even out of this, only 30% is sold as branded refined oil. Major players vying for this pie are Agrotech, Marico Industries, Ahmed Mills, Godrej Foods, HLL and NDDB. The market is highly fragmented among various brands. ‘Sundrop’ refined sunflower oil of Agrotech is the largest sunflower oil brand with around 13% market share. Marico’s ‘Sweekar’ and ‘Saffola’ together account for another 13-15% share of this market. Other leading edible oil brands are NDDB's Dhara rapeseed oil, Godrej Foods (Godrej Cooklite, Sunflower) with 11% market share and Postman with around 6% market share. In Vanaspati HLL's Dalda is the oldest and largest brand with a 29% market share. Other major vanaspati manufacturers are Wipro, Amrit Banaspati, IVP, Madhusudan Industries, Rasoi and Pioneer Agro.

Though consumption is increasing at a steady pace, it is still skewed towards unbranded products. Even among branded products, loyalty is not very high. Going forward, the industry will sooner or later need to consolidate, as only then the economies of scale will come into play.

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