Look around the shelves at your local grocery store – and you’ll find a wide variety of edible oils- vegetable, coconut, soya bean, rice bran, olive, rapeseed, and many others. These oils are used for cooking or garnishing, and can also be flavoured with herbs, garlic or chilli. While selecting oils, it’s wise to look for those that enhance the flavor of your food and support good health. The fact is that some of the less expensive oils are heavily processed and high in trans-fat. Consuming these regularly is said to increase incidence of hypertension and coronary heart disease, whereas the more expensive ones are healthier – rich in nutrients and which nourishes the body.
he global demand for edible oil is rising due to consumer demand, especially for the oils that contain low cholesterol and fat. This is a direct fall out of health awareness among consumers. Alongside, there’s also been a great improvement in the retail network and increasing yields of crops that form the raw material for edible oils. While the retail segment is drawing on a strong supply chain, vegetable oil consumption has increased in households due to an overall rise in their income. Increase in consumption of fried foods is also driving demand. Furthermore, the growing popularity of canola oil, trans-fat free soybean oil, and emerging preference for olive oil will drive the global market for edible oil. While manufacturers are opting for advanced processing techniques to offer healthier and affordable oils, they are yet to fulfill the current global demand.
The vegetable oil market alone [was] valued at 81 billion USD, according to a report published by Market and Markets, way back in 2012. A CAGR of 2.5 per cent was estimated between 2012 and 2017, with the Asia-Pacific leading the global oil market, followed by Europe and North America, according to consumption patterns. It hit 91.4 billion USD in 2017.
In terms of types of oils, the market can be segmented into palm oil, canola oil, olive oil, sunflower oil and corn oil. Further, the vegetable oil market itself is divided into food, non-food and bio-diesel segments. This bio-diesel category is the fasted growing segment. In terms of geography, again, the market is segmented into Europe, Middle East and Africa, Latin America, North America and Asia Pacific. Two of the major markets for edible oils is China and India.
Edible oil producers are both national and international. A changing trend is seen in the U.S. and Europe, with the focus is gradually shifting to palm and palm kernel oils, given insufficient availability of soyabean and rapeseed, which are now servicing the bio-fuel industry.
In India, oils such as mustard, sunflower, groundnut, cottonseed and coconut show region-specific consumption with moderate price fluctuations. A new entrant to the edible oil market is rice bran oil, of which China is the largest producer, followed by India. While still in its nascent staage, it reports a high growth rate of nearly 14 per cent. Adani Wilmar is the largest producer, while local and regional players also hold a high stake. The sunflower oil market in India is showing steady growth too, surging at a healthy CAGR of 3.2%. Overall, the blended oil (a mix of various oils) segment has reported consistent growth.
Every edible oil segment is subject to a variety of factors that impacts their revenue – such as government policies and price hike. In India, for example, the highly fragmented market is populated with a large number of organized and local players. The new consumers belong to the SEC C, D and E- which are the middle and low income categories. This is because people are converting from loose oils to branded ones. There is also a constant trend of existing users upgrading to premium oils.
“With fast changing lifestyles and health awareness, demand shift to premium oils will increase at a faster pace”, says Sudhakar Desai, CEO of Emami Agrotech, which recently launched ‘Emami healthy and tasty’ brand.
In simple terms, digitization is about extracting insights out of data and taking action on them.
Every step of this would involve different types of collecting and processing data, and taking decisions based on them. These new technologies have helped executives gain unique perspectives. While quality assurance is of prime importance, digitization of several operations can greatly boost efficiency, as companies are constantly looking for solutions for better management and profitability, especially in an industry where margins are low. Digitization makes it possible for manufacturing companies to streamline their processes. Starting at any point in the value chain from product design at one end to service on the other, digitization of operations can take care of a company’s current requirements while gradually extend to other operations. Some of the ways in which digitization can help are:
Traditionally, the edible oil industry has not been one of those sectors that jumped on the bandwagon of digitization.
Rather, it has been slower than many other industries that quickly embraced the change. But this is soon likely to turnaround, triggered by the decline in oil prices since mid 2014. Companies whose cash flows shrunk and had their orders dried up began looking for a way to return to profitability. This soul searching helped digitization become part of the answer, ushering in a new efficient model.
In the new format, companies are willing to consider digitally driven commercial relationships between themselves and the suppliers as well as markets. This can raise capital efficiency, lower production costs and reduce the time to ‘first oil’. However, it does upset the traditional value chains by redefining roles: while the new models empower some companies, it makes others redundant.
Towards this, a structure approach works best, as companies often struggle with the complex process of change to the digital.