Market Research India - Imported Edible Oils Market in India 2009

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Market Research India - Imported Edible Oils Market in India 2009

  1. 1. Imported Edible Oils ‐Imported Edible Oils IndiaDecember 2008
  2. 2. Executive Summary  Edible oil imports have been liberalized since the 1990’s and now attract lower tariffs  No import duty on crude oils in contrast to finished products (refined oils and hydrogenated fat) Market  India is the world’s largest importer of edible oils and market demand is expected to sustain  Loose or unbranded oil accounts for bulk of sales compared to branded and hydrogenated oils Loose or unbranded oil accounts for bulk of sales compared to branded and hydrogenated oils  Demand for imported oils to remain strong due to growing consumption and constrained supplies  Organized sector, earlier disadvantaged due to sales tax regime, is not growing its market shareCharacteristics  Domestic production faces supply‐side constraints and inefficiencies thereby ensuring the  dependence on large levels of edible oil imports  Rising consumption accompanied by increasing domestic production but large imports are still Rising consumption accompanied by increasing domestic production but large imports are still  necessary to bridge the gap Trends  Palm and soybean oils account for bulk of imports due to their low prices   Prices have risen at 3% p.a. with a dip observed only in 2005‐2006 IMPORTED EDIBLE OILS – INDIA.PPT 2
  3. 3. •Introduction•Market Size and Growth Market Size and Growth•Segments•Market Characteristics•Market Characteristics•Trends IMPORTED EDIBLE OILS – INDIA.PPT 3
  4. 4. Edible oil imports have come a long way towards becoming liberalized and attracting lower tariffs1970s In mid‐70’s, government changed import policy and allowing the import of edible oil under a state monopoly1980s In the 80’s, government adopted a policy of self sufficiency by increasing domestic oilseed production under its  Technology Mission for Oilseeds (TMO) programme, which resulted in a temporary surge in oil production • Strong boost in imports due to trade liberalization and falling domestic oil seed production  • 1994: Imports placed under Open General License (OGL) system terminating the state monopoly and  0s eliminating import quota restrictions eliminating import quota restrictions1990 • Since 1998, the Government has been adjusting the tariff rates to   Protect domestic oilseed producers and processors  Smoothen the effect of fluctuations in world prices on the domestic consumers2000s Since 2000, the government made frequent policy adjustments, which brings a level of uncertainty to overall  import demand and for different oils IMPORTED EDIBLE OILS – INDIA.PPT 4
  5. 5. Since April 2008, crude oils are not subject to import duties in contrast to finished products such as refined oils and hydrogenated fatDuty structure• Most crude oils, which are used as an input by domestic refineries, do not attract import duties since 1st April 2008• Finished products such as refined edible oils and hydrogenated fat is subject to a specific duty structure• Unlike most countries, India levies higher duty on oilseeds than on edible oilsType Product Duty C.V.D. C Cess on C C CVD Edu. C Cess S.A.D. S Effective ff Crude Palm Oil & Crude Olein 0% 0% 0% 0% 0% 0% Crude Crude Sunflower Oil 0% 0% 0% 0% 0% 0% Crude Rapeseed Oil 0% 0% 0% 0% 0% 0% Degummed Soybean Oil 20% 20% 20% 20% 20% 20% Refined Palm Oil & RBD Palmolein 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% ined Refined Rapeseed Oil 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% Refined Sunflower Oil & Other Oils 7.50% 7 50% 7.50% 7 50% 7.50% 7 50% 7.50% 7 50% 7.50% 7 50% 7.50% 7 50% Refi Refined Soybean Oil 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% Vanaspati (Hydrogenated Fat) 7.50% 7.50% 7.50% 7.50% 7.50% 7.50% IMPORTED EDIBLE OILS – INDIA.PPT 5
  6. 6. •Introduction•Market Size and Growth Market Size and Growth•Segments•Market Characteristics•Market Characteristics•Trends IMPORTED EDIBLE OILS – INDIA.PPT 6
  7. 7. India is the largest importer of edible oils and the growing economy is expected to sustain demand in the marketOverview Size and Growth• World’s largest net importer of edible oils since 1999 ‘000 MT• Large population and rising per capital consumption are  6,000 +1% key drivers for this essential commodity 5,500• Imports account for 45% of total consumption 5,000• Imports have risen by 1% since ’04‐05 while total  domestic production has risen by 3% 4,500• Palm and soybean oils dominate imports 4,000• Branded oils account for ~20% of total market 2004‐05 05‐06 06‐07 07‐08 08‐09Regional Consumption Largest Trading Partners (2003‐2008) OthersMustard North, Central and East Brazil 11% 5%Peanut  West Malaysia 13%Palm  Central and South 49% IndonesiaSoybean North and Central 22%Sunflower Sunflower Primarily in urban areas Primarily in urban areas Argentina A ti IMPORTED EDIBLE OILS – INDIA.PPT 7
  8. 8. •Introduction•Market Size and Growth Market Size and Growth•Segments•Market Characteristics•Market Characteristics•Trends IMPORTED EDIBLE OILS – INDIA.PPT 8
  9. 9. Loose or unbranded oil without proper packaging accounts for a large portion of sales compared to branded and hydrogenated oilsLoose Oil Branded Oil• Unrefined oils sold without any consumer‐ready  • Packaged pure refined oil primarily used in  packaging or brand name households• Demand is largely driven by low income households  • Available as sunflower oil (for its health benefits)  as well as institutional customers but as well as rapeseed and peanut oil• Peanut, cottonseed, sunflower seed and rapeseed  • Demand is from middle and upper class urban  oils are sold in this manner consumers•T d Traders often use blends, legally or illegally, to  ft bl d l ll ill ll t increase margins Branded Oil 20% Loose Oil 70% 10% Vanaspati Vanaspati (Hydrogenated Oil) • Fully or partially hydrogenated vegetable cooking oil is known as Vanaspati in India • Mostly manufactured using palm oil and also from soybean oil but typically made from the  cheapest available oils meeting the required standards cheapest available oils meeting the required standards • Regulations mandate 25% of production to be local but this rule is not effectively enforced IMPORTED EDIBLE OILS – INDIA.PPT 9
  10. 10. •Introduction•Market Size and Growth Market Size and Growth•Segments•Market Characteristics•Market Characteristics•Trends IMPORTED EDIBLE OILS – INDIA.PPT 10
  11. 11. Demand for imported oils will remain strong due to growing  consumption and constrained supply side Domestic consumption – Edible oils Domestic Production ‐ Oilseeds Consumption % Growth ‘000 MT ‘000 MT Growth 12,563 6 40,000 13,004 13 00413,000 4 30,000 12,106 11,95912,000 11,574 2 20,00011,000 0 0 10,00010,000 ‐2 0 2005 2006 2007 2008 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 • Low but growing domestic consumption Low but growing domestic consumption • Low and inefficient production levels of oilseeds Low and inefficient production levels of oilseeds  Low per capita consumption of 12 kg compared to world   Virtually stagnant averaging at 28.3 mtpa average of 18.7 kg  Yields are also significantly lower than the world average  Yet overall consumption has grown at a healthy rate of 3% Economic development is  Since importing oilseeds is  likely to increase per capita  not practical due to  consumption and spur the  barriers, oil imports  market become necessary IMPORTED EDIBLE OILS – INDIA.PPT 11
  12. 12. The organized sector, which was at a price disadvantage earlier, is now competing effectively and growing its share of the marketPre‐VAT regime Introduction of VAT regime in 2006•Large unorganized sector dominated overall  •Since April 2006, VAT made compulsory and  sales due to a price advantage derived from: enforced rigorously  Evasion of sales tax: 4% difference enjoyed over  •Sales tax compulsory on raw material  organized sector purchase. Therefore if finished product was   Use of cheap or no packaging sold without charging sales tax, sellers would   Blending with cheaper or alternative oils lose out on sales tax credit•Typically products were sold for cash without  charging any sales tax Restricted growth of organized sector  Effectively the 4% differential  who were at a competitive disadvantage h t titi di d t disappeared levelling the playing field disappeared levelling the playing field +8% 19% 18% 18% 16% 13% Share of  13% organized  sales  g growing g 2002 2003 2004 2005 2006 2007 IMPORTED EDIBLE OILS – INDIA.PPT 12
  13. 13. Domestic production faces supply constraints and inefficiencies thereby ensuring the dependence on large levels of edible oil imports• Government policies encourage growing of crops competing with oilseeds• Lack of irrigated land in oilseed producing areas• Low productivity of agricultural sector as a whole• Inefficient transport and handling infrastructure Inefficient transport and handling infrastructure• Barriers to importing oilseeds Low yields  and  production  of oilseeds Long‐term  Domestic edible oils  reliance on  Dependence on industry large level of  g imports Inefficiency  and lack of  scale• Processing of traditional oilseeds restricted to Small Scale Industries (SSI) sector,  which is highly inefficient• Most processing units’ capacities are very small at 10% of US or European average• Low capacity utilization throughout the supply chain IMPORTED EDIBLE OILS – INDIA.PPT 13
  14. 14. •Introduction•Market Size and Growth Market Size and Growth•Segments•Market Characteristics•Market Characteristics•Trends IMPORTED EDIBLE OILS – INDIA.PPT 14
  15. 15. Rise in consumption is accompanied by increasing domestic  production but large imports are still necessary to bridge the gap Domestic consumption & supply Imports vs. domestic production ‘000 MT Consumption Production Production Total in  000 MT Total in ‘000 MT14,00014 000 Imports Imports 10,713 11,226 11,705 12,45712,000 11,099 10,187 12,139 11,957 13,080 100%10,000 90% 80% 46% 8,000 54% 47% 59% 53% 58% 54% 56% 55% 70% 60% 6,000 50% 40% 4,000 30% 54% 46% 53% 41% 47% 42% 46% 44% 45% 2,000 20% 10% 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2001 2002 2003 2004 2005 2006 2007 2008 2009 IMPORTED EDIBLE OILS – INDIA.PPT 15
  16. 16. Palm and soybean oils account for bulk of imports is primarily due to their low prices and price sensitivity of Indian consumers Total in ‘000 MT 5,700 4,906 5,530 5,488 5,955 Sunflowerseed Oil 3% 0% 3% 2% 3% 3% 4% 0% 4% 2% Others 13% 13% SoybeanSoyabean Oil 36% 25% 35% Palm Oil 83% 82% 69% 62% 59% 2004‐05 2004 05 05‐06 05 06 06‐07 06 07 07‐08 07 08 08‐09 08 09 Product Share of import Import growth Growth in domestic production Palm oil 83% 9% 6% Soybean oil 13% ‐21% 13% Sunflower seed oil 2% 134% Nil Others 2% 10% Nil IMPORTED EDIBLE OILS – INDIA.PPT 16
  17. 17. Prices have risen at 3% p.a. with a dip only in 2005‐2006Edible Oil Wholesale Price Index1 Domestic price of imported oil WPI of edible oil % INR per tonne RBD Palmolein  Inflation rate200 175 8 50 Crude Degummed  g 158 156 155 146 40 Soybean Oil 150 6 (Ex‐Mumbai) 30100 4 Crude Palm Oil (5%) 20 (Ex‐Kandla) 50 2 10 0 0 0 03‐04 04‐05 05‐06 06‐07 07‐08 2003 2004 2005 2006 20071 – Base Year: 1993‐94 = 100 Product Average % Variation in WPI 1998‐1999 to 2002‐2003 2003‐2004 to 2007‐2008 Gingelly Oil 7.08 6.17 Rapeseed/Mustard Oil Rapeseed/Mustard Oil 8.64 6.79 Coconut Oil 0.94 3.89 Groundnut Oil 6.97 7.29 Cotton Seed  Oil 5.78 5.60 Soybean Oil 7.22 3.23 IMPORTED EDIBLE OILS – INDIA.PPT 17
  18. 18. Thank you for your timeFor an updated report or any customized research requirements, please contact:Gaurav KumarE‐Mail: gaurav.kumar@netscribes.com; sales@netscribes.comPhone: +91 33 4064 6214; +91 983 030 9715Netscribes’ Services:RESEARCH & ANALYTICSRESEARCH & ANALYTICS MARKET INTELLIGENCE MARKET INTELLIGENCE CONTENT SOLUTIONS CONTENT SOLUTIONSInvestment Research Market Monitoring & Competitive  Social Media MarketingEnterprise Market Research Intelligence Marcom Support ServicesPatent Research Sales & Prospect Intelligence Content Management ServicesSyndicated Market ResearchS di t d M k t R h Listening & Media Monitoring Li t i & M di M it i Book Packaging Services B kP k i S i Brand SurveillanceFor further details, visit us at: www.netscribes.comAbout NetscribesNetscribes supports the organic and inorganic growth objectives of global corporations through a combination of Enterprise Market, Investment & Patent Research, Market & Sales Intelligence, Social Media Monitoring & Management and Custom Publishing solution.Disclaimer: This report is published for general information only. High standards have been used for preparing this market research report; Disclaimer: This report is published for general information only High standards have been used for preparing this market research report;however, Netscribes, Inc. or “Netscribes” is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes and prior permission is required for guidelines on reproduction. IMPORTED EDIBLE OILS – INDIA.PPT 18

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