Marketing Edible Oil Industry


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It describes the Edible oil Industry from marketing perpective.

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Marketing Edible Oil Industry

  1. 1. Group - 01 Kalpesh Agarwal - PGPM508_01 Sivaram Gunavel - PGPM508_12 Chetan Mahindra - PGPM508_23 Manish Raj - PGPM508_35 Jaspal Singh - PGPM508_47
  2. 2. <ul><li>India – fourth largest edible oil consuming economy after USA, China and Brazil </li></ul><ul><li>India accounts for 9.3 % of world oilseed production </li></ul><ul><li>Production of oilseeds and edible oil is far below the requirement </li></ul><ul><li>In 2007-08, the country could produce only about 8.2 million MT of edible oil, 35-40% of the demand had to be met by imports, implying heavy reliance on imports </li></ul><ul><li>High penetration of 90% in India </li></ul>Edible Oils Vanaspati National Dairy Development Board (Anand) Hindustan Lever (Mumbai) ITC Agro-Tech (Secunderabad) Wipro (Bangalore) Marico Industries (Mumbai) Rasoi (Kolkata) Ahmed Mills (Mumbai) Avi Industries (Mumbai Adani Wilmar (Mundra Port)
  3. 4. <ul><li>Extreme variation in consumption. The country’s top 10% of the population consumes 20 kg per capita and the bottom 30%, less than 5 kg per capita </li></ul><ul><li>Strong regional preference for ‘first press’ oils with natural flavour – mustard, groundnut, coconut oils </li></ul><ul><li>Erosion of self-reliance in edible oils and rising dependence on imports. </li></ul>Per capita consumption of edible oil (year wise)
  4. 5. Edible Oils 12.7 million MT Oils 11.2 million MT Vanaspati 1.5 million MT
  5. 6. <ul><li>Semi-Processed and Processed </li></ul><ul><li>Ready to Eat and Snack food </li></ul>Competitors Players National Dairy Development Board – Dhara Adani Wilmar Ltd – Fortune Agrotech Foods Ltd – Sundrop Hindustan Lever Limited – Flora Panak Foods – Gemini Ruchisoya – Soyum Marico Indus. – Saffola Kaneria Oils – Rani Geepee Ceval – Chambal NK Proteins Ltd – Tirupati Aravali – Aravali Cargill – Nature Fresh
  6. 7. <ul><li>Highly fragmented industry </li></ul><ul><li>Over 600 oil extraction units, 166 Vanaspati manufacturing units - only 10 edible oil units and 8 Vanaspati units have national reach </li></ul><ul><li>Over 50% of the units - sick or  under utilised due to surplus capacity </li></ul><ul><li>Idle capacities among these units due to shortage in feedstock supply </li></ul><ul><li>Major oil brands - Sundrop, Dhara, Saffola, Sweekar, Fortune </li></ul><ul><li>Vanaspati brands - Dalda, Rath </li></ul><ul><li>Market Size </li></ul><ul><li>Edible oils and Vanaspati markets – 12.7 million MT </li></ul><ul><li>Oils market growing at 8.7% CAGR </li></ul><ul><li>Installed CAPACITIES and Production – In MT / Year </li></ul>Vanaspati Edible Oil Capacity Production 2,720,000 990,534 30,368,000 6,250,000 Utilization 36% 21%
  7. 11. <ul><li>Inputs </li></ul><ul><li>Edible Oils - Oilseeds (such as Groundnut, Sesame, Mustard, Sunflower), oil cakes and bran </li></ul><ul><li>Vanaspati  - Minor (solvent extracted) edible oils - Sunflower oil,  Soybean oil,  Ricebran  oil </li></ul><ul><li>Raw Material </li></ul><ul><li>Comprises 70% of the production cost </li></ul><ul><li>Oilseeds - the largest cash crop </li></ul><ul><li>Poor productivity - 873 Kg/ hectare (global average of 2000 kg/ hectare) </li></ul><ul><li>Though oilseeds have 14.5% share in gross cropped area, only 25% of  it is under assured irrigation </li></ul><ul><li>Technology </li></ul><ul><li>Refining technology freely available indigenously </li></ul>
  8. 12. <ul><li>Oils: primarily a commodity market - price sensitive </li></ul><ul><li>Effective distribution chain - through a complex network of C&F agents, wholesalers / stockists & retailers (kirana shops, supermarkets) </li></ul><ul><li>Oil sold in bulk (tin, HDPE containers) to institutions; In retail packs (PET bottles, cans, jars, pouches) to small customers </li></ul><ul><li>Most vegetable oil is purchased by household or industrial buyers, food processors, restaurants and hotels. </li></ul><ul><li>Seasonal demand for oils & Vanaspati - September to November (peak season) </li></ul><ul><li>Regulation : Under the Edible Oils Packaging (Regulation) Order, 1998,  edible oils cannot be sold ‘loose’ but can be sold only in ‘packed’ form  </li></ul><ul><li>Oil consumption - North is largest market, followed by South, West & East zones </li></ul>
  9. 13. <ul><li>Oils and Vanaspati substitutes can be freely imported under OGL  </li></ul><ul><li>Large scale imports of oils and Vanaspati substitutes  - primarily to check price rise and meet supply shortages </li></ul><ul><li>Imports during 2007-08 is 5.46 million  MT  </li></ul><ul><li>Estimated imports by 2010 is 7 million MT  </li></ul>
  10. 14. <ul><li>Demand </li></ul><ul><li>Macroeconomic factors: Population; per capita income; purchasing power; oilseeds </li></ul><ul><li>Other factors: Prices – domestic/international, Availability - oil, oilseeds </li></ul><ul><li>Influence of branded products – ‘ health ’ message </li></ul><ul><li>Growing preference for convenience foods </li></ul><ul><li>Key Success Factors </li></ul><ul><li>Raw material sourcing:  focus on improving yields,  getting better quality oilseeds, ensuring regular supplies - through symbiotic relationship with farmer </li></ul><ul><li>Branding essential for success (Oils – Sundrop/Dhara/Sunflower, Vanaspati – Dalda) </li></ul><ul><li>Better distribution network to improve reach </li></ul><ul><li>Efficiency in operation - to become price competent and withstand competition </li></ul><ul><li>Proposed future trading in edible oils will help curtail price volatility and lend knowledge-based assistance to farmers to eliminate unofficial markets </li></ul><ul><li>Future </li></ul><ul><li>This industry is a high volume, medium growth sector characterized by excess/idle capacities owing to in efficient operations. Imports have been influencing prospects, leading to domestic industry crisis </li></ul>
  11. 16. <ul><li>Social: </li></ul><ul><li>Consumers </li></ul><ul><li>Increase in per capita income and population </li></ul><ul><li>Change in tastes and preferences </li></ul><ul><li>Increased Health consciousness and low-cholesterol cooking medium </li></ul><ul><li>Industry </li></ul><ul><li>Industry players – 60% - 70% are small refining units and so are unable to import huge quantities and may be forced to close down </li></ul><ul><li>Low capacity utilisation. The installed capacity is only 36 million tonnes annually but utilization is only 40%. </li></ul><ul><li>One of the most polluting industries in India </li></ul><ul><li>Technological: </li></ul><ul><li>Low productivity in the domestic oilseed sector </li></ul>
  12. 17. <ul><li>Political </li></ul><ul><li>Liberal policies for edible oil imports </li></ul><ul><li>Imports of all edible oils were also placed under Open General License (OGL) since April 2004 </li></ul><ul><li>The period from 1994 can broadly be divided into two distinct phases: </li></ul><ul><li>First between 1994 and 1998, when customs duty on edible oils progressively came down to reach a low of 15% in July 1998, </li></ul><ul><li>Second after 1999, when such duties witnessed a general upward trend to reach a high of 92.2% for refined palm oil in April 2005 </li></ul><ul><li>Free imports, low import duties & slump in global prices lead to dumping </li></ul><ul><li>Economic </li></ul><ul><li>Annual Rainfall in time and area under oilseed crop </li></ul><ul><li>Increase (decline) in Tariff increases the price and depresses (increases) the consumer surplus </li></ul><ul><li>Global oil prices fluctuations </li></ul><ul><li>While tariffs can increase producers’ revenue the actual impact on profit depends on oilseeds prices (which also increases) </li></ul><ul><li>Cost of raw materials. Raw materials cost is 70% of Sale price </li></ul>
  13. 19. <ul><li>Oil accounted for one of the highest monthly cash outlay in a typical household </li></ul><ul><li>Consumer was extremely price sensitive </li></ul><ul><li>Brand loyalty low </li></ul><ul><li>Desired tangible attributes: Taste, Quality, Health and Value For Money </li></ul><ul><li>Intangible promises: Healthy Family, Affection, Loving Mother, Great Cook </li></ul><ul><li>Target Consumer: 21-44 years old, modern, aware, educated housewife using refined branded groundnut oil, concerned about family well being </li></ul>
  14. 20. <ul><li>Most brands positioned on taste </li></ul><ul><li>Shots of “Happy family enjoying food” used across advertising </li></ul><ul><li>New oils such as Saffola, Flora positioned on health </li></ul><ul><li>Saffola had strong franchise of consumers with heart problems : seen as an oil for the unhealthy </li></ul><ul><li>Flora offering a promise of ‘light’ food </li></ul>
  15. 22. <ul><li>Income </li></ul><ul><ul><li>High – catering to highly health conscious market segment. Eg. Premium branded vegetable oils like sunflower oil, soya bean oil, PUFA oils </li></ul></ul><ul><ul><li>Medium – blended oils like sunflower & soya blend. Eg. Raag refined soya bean oil </li></ul></ul><ul><ul><li>Low – oil sold in loose. Eg. Bulk oil manufactured by local players </li></ul></ul><ul><li>Region </li></ul><ul><ul><li>North – Mustard, rape </li></ul></ul><ul><ul><li>South – Groundnut, coconut </li></ul></ul><ul><ul><li>East – Mustard, rape </li></ul></ul><ul><ul><li>West - Groundnut </li></ul></ul>
  16. 23. <ul><li>Taste & Odor </li></ul><ul><ul><li>High pungency mustard oil. Eg. Kachi Ghani </li></ul></ul><ul><ul><li>Nutty flavor - Eg. Groundnut oil </li></ul></ul><ul><ul><li>Coconut oil </li></ul></ul><ul><li>Usage </li></ul><ul><ul><li>As salad oil – used in Mayonnaise, salad dressing. Eg. Fortune refined cotton seed oil </li></ul></ul><ul><ul><li>For deep frying - Eg. Refined groundnut oil </li></ul></ul><ul><ul><li>For preservatives and traditional flavor – Eg. Mustard oil </li></ul></ul><ul><ul><li>For frying – Eg. Fortune Fryola especially used in hotels </li></ul></ul>
  17. 24. <ul><li>“ Sehat se jeena hai” </li></ul><ul><li>Positioned on a “preventive platform” </li></ul><ul><li>Saffola had always focused on the heart. The brand's image had suffered a setback in the early 2000s with the ambulance commercial, which portrayed that one had to rush to the hospital if he did not use Saffola. </li></ul><ul><li>As the overall health positioning failed, Saffola moved from the family health positioning, once again to the original heart care positioning in 2004 </li></ul><ul><li>In February 2004, Marico launched a fresh advertising campaign for Saffola after a gap of two years </li></ul><ul><li>Target Customers </li></ul><ul><li>Engage the young adults. “World Heart Day” used to appeal to them to bring their parents for a check up. This programme also gave us an opportunity to talk to these young adults about the preventive heart care for themselves. </li></ul><ul><li>Direct to Office Initiative : The busy executives and professionals all are looking for lifestyle interventions necessary to counter the stresses of personal and professional life </li></ul><ul><li>Direct to Consumer Programme, the low cal recipe demo and the lottery leveraging house wives interest areas </li></ul>
  18. 25. <ul><li>“ Healthy Oil for Healthy People” </li></ul><ul><li>Competitor Saffola (Safflower oil) used the health platform but was associated with heart patients and less taste. But Sundrop promised health without compromising taste </li></ul><ul><li>‘ Sundrop’ name chosen to cue category and purity </li></ul><ul><li>Finding the middle ground between ‘tasty’ oils and ‘healthy’ oils </li></ul><ul><li>Young, modern, premium feel </li></ul><ul><li>The Message of ‘Health’ </li></ul><ul><li>Was related to maintenance of good health </li></ul><ul><li>Was applicable to all members of the family </li></ul><ul><li>Was characterized by lively energetic people </li></ul><ul><li>Growth </li></ul><ul><li>Within 6 months, Sundrop became the largest selling refined sunflower oil </li></ul><ul><li>Redefined the category and expanded the Sunflower oil segment from 2.71% to 23% in 6 months, and 42% in 1997 </li></ul><ul><li>Still the largest selling sunflower oil brand holds 15% of branded oil market. </li></ul><ul><li>The ad was shown for over 10 year </li></ul>
  19. 26. <ul><li>“ Fortune Hai Light. Thoda Aur Chalega” </li></ul><ul><li>Products </li></ul><ul><li>Fortune (sunflower, kachi ghani) & Raag </li></ul><ul><li>Target </li></ul><ul><li>Different brands for different customer types - Fortune & Raag </li></ul><ul><li>Vitamin–E fortified sunflower oil to target Health conscious customers </li></ul><ul><li>What did they do? </li></ul><ul><li>Provided a mix of all elements like product differentiation, backward integration and entered market at the right time </li></ul><ul><li>Set up its oil refinery at Mundra, Mumbai </li></ul><ul><li>Decreased logistics & transportation cost </li></ul><ul><li>Decreased the time to market edible oil </li></ul><ul><li>The above factors helped shave off a rupee from the selling price of a litre of oil </li></ul><ul><li>Conducted health check-up programs for health conscious people </li></ul>
  20. 27. <ul><li>http://www.a </li></ul><ul><li>http://www.n </li></ul><ul><li>http://www.e </li></ul><ul><li>http://www. </li></ul><ul><li>Report on oilseed and edible oil sector in India from TAER </li></ul><ul><li> </li></ul><ul><li> </li></ul>