Market Research India - Imported Edible Oils Market in India 2009

ImportedEdibleOils Imported Edible Oils India December2008
ExecutiveSummary
Edibleoilimportshavebeenliberalizedsincethe1990sandnowattractlowertariffs Noimportdutyoncrudeoilsincontrasttofinishedproducts(refinedoilsandhydrogenatedfat) Indiaistheworldslargestimporterofedibleoilsandmarketdemandisexpectedtosustain Loose or unbranded oil accounts for bulk of sales compared to branded and hydrogenated oils Looseorunbrandedoilaccountsforbulkofsalescomparedtobrandedandhydrogenatedoils
Market
Characteristics
Demandforimportedoilstoremainstrongduetogrowingconsumptionandconstrainedsupplies Organizedsector,earlierdisadvantagedduetosalestaxregime,isnotgrowingitsmarketshare Domesticproductionfacessupplysideconstraintsandinefficienciestherebyensuringthe dependenceonlargelevelsofedibleoilimports
Trends
Rising consumption accompanied by increasing domestic production but large imports are still Risingconsumptionaccompaniedbyincreasingdomesticproductionbutlargeimportsarestill necessarytobridgethegap Palmandsoybeanoilsaccountforbulkofimportsduetotheirlowprices Priceshaverisenat3%p.a.withadipobservedonlyin20052006
IMPORTEDEDIBLEOILS INDIA.PPT
Introduction Market Size and Growth MarketSizeandGrowth Segments MarketCharacteristics Market Characteristics Trends
Edibleoilimportshavecomealongwaytowardsbecoming liberalizedandattractinglowertariffs
1970s Inmid70s,governmentchangedimportpolicyandallowingtheimportofedibleoilunderastatemonopoly
1980s
Inthe80s,governmentadoptedapolicyofselfsufficiencybyincreasingdomesticoilseedproductionunderits TechnologyMissionforOilseeds(TMO)programme,whichresultedinatemporarysurgeinoilproduction
Strongboostinimportsduetotradeliberalizationandfallingdomesticoilseedproduction 1994:ImportsplacedunderOpenGeneralLicense(OGL)systemterminatingthestatemonopolyand eliminatingimportquotarestrictions eliminating import quota restrictions Since1998,theGovernmenthasbeenadjustingthetariffratesto

Protectdomesticoilseedproducersandprocessors Smoothentheeffectoffluctuationsinworldpricesonthedomesticconsumers
2000s
1990 0s
Since2000,thegovernmentmadefrequentpolicyadjustments,whichbringsalevelofuncertaintytooverall importdemandandfordifferentoils
SinceApril2008,crudeoilsarenotsubjecttoimportdutiesincontrast tofinishedproductssuchasrefinedoilsandhydrogenatedfat
Dutystructure
Mostcrudeoils,whichareusedasaninputbydomesticrefineries,donotattractimportdutiessince1stApril2008 Finishedproductssuchasrefinededibleoilsandhydrogenatedfatissubjecttoaspecificdutystructure Unlikemostcountries,Indialevieshigherdutyonoilseedsthanonedibleoils
Type
Product Crude Palm Oil & Crude Olein
Duty 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%
C.V.D. C 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%
Cess on C C CVD 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%
Edu. C Cess 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%
S.A.D. S 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%
Effective ff 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%
Crude Refi ined
Crude Sunflower Oil Crude Rapeseed Oil Degummed Soybean Oil Refined Palm Oil & RBD Palmolein Refined Rapeseed Oil Refined Sunflower Oil & Other Oils Refined Soybean Oil Vanaspati (Hydrogenated Fat)
Indiaisthelargestimporterofedibleoilsandthegrowing economyisexpectedtosustaindemandinthemarket
Overview
Worldslargestnetimporterofedibleoilssince1999 Largepopulationandrisingpercapitalconsumptionare keydriversforthisessentialcommodity Importsaccountfor45%oftotalconsumption Importshaverisenby1%since0405whiletotal domesticproductionhasrisenby3% Palmandsoybeanoilsdominateimports Brandedoilsaccountfor~20%oftotalmarket
SizeandGrowth
000MT
6,000 5,500 5,000 4,500 4,000
+1%
200405
0506
0607
0708
0809
RegionalConsumption
Mustard Peanut Palm Soybean Sunflower Sunflower North,CentralandEast West CentralandSouth NorthandCentral
LargestTradingPartners(20032008)
Others Brazil 5% Malaysia 13% 49% Indonesia
11%
22%
Primarilyinurbanareas Primarily in urban areas
Argentina A ti
Looseorunbrandedoilwithoutproperpackagingaccountsforalarge portionofsalescomparedtobrandedandhydrogenatedoils
LooseOil
Unrefinedoilssoldwithoutanyconsumerready packagingorbrandname Demandislargelydrivenbylowincomehouseholds aswellasinstitutionalcustomers Peanut,cottonseed,sunflowerseedandrapeseed oilsaresoldinthismanner T d Tradersoftenuseblends,legallyorillegally,to ft bl d l ll ill ll t increasemargins LooseOil 70% 10% Vanaspati
BrandedOil
Packagedpurerefinedoilprimarilyusedin households Availableassunfloweroil(foritshealthbenefits) butaswellasrapeseedandpeanutoil Demandisfrommiddleandupperclassurban consumers
20%
BrandedOil
Vanaspati(HydrogenatedOil)
FullyorpartiallyhydrogenatedvegetablecookingoilisknownasVanaspatiinIndia Mostlymanufacturedusingpalmoilandalsofromsoybeanoilbuttypicallymadefromthe cheapestavailableoilsmeetingtherequiredstandards cheapest available oils meeting the required standards Regulationsmandate25%ofproductiontobelocalbutthisruleisnoteffectivelyenforced
10
Demandforimportedoilswillremainstrongduetogrowing consumptionandconstrainedsupplyside
Domesticconsumption Edibleoils
000MT
13,000 12,000 11,000 10,000 12,106 11,574 11,959
DomesticProduction Oilseeds
000MT
40,000 30,000 20,000 6 4 2 0 2
Consumption Growth
12,563
%Growth
13,004 13 004
10,000 0
2005
2006
2007
2008
2009
2000 2001 2002 2003 2004 2005 2006 2007 2008
Low but growing domestic consumption Lowbutgrowingdomesticconsumption

Lowpercapitaconsumptionof12kgcomparedtoworld averageof18.7kg Yetoverallconsumptionhasgrownatahealthyrateof3%
Low and inefficient production levels of oilseeds Lowandinefficientproductionlevelsofoilseeds

Virtuallystagnantaveragingat28.3mtpa Yieldsarealsosignificantlylowerthantheworldaverage
Economicdevelopmentis likelytoincreasepercapita consumptionandspurthe market
Sinceimportingoilseedsis notpracticaldueto barriers,oilimports becomenecessary
11
Theorganizedsector,whichwasatapricedisadvantageearlier, isnowcompetingeffectivelyandgrowingitsshareofthemarket
PreVATregime
Largeunorganizedsectordominatedoverall salesduetoapriceadvantagederivedfrom:
Evasionofsalestax:4%differenceenjoyedover organizedsector Useofcheapornopackaging Blendingwithcheaperoralternativeoils
IntroductionofVATregimein2006
SinceApril2006,VATmadecompulsoryand enforcedrigorously Salestaxcompulsoryonrawmaterial purchase.Thereforeiffinishedproductwas soldwithoutchargingsalestax,sellerswould loseoutonsalestaxcredit
Typicallyproductsweresoldforcashwithout charginganysalestax Restrictedgrowthoforganizedsector whowereatacompetitivedisadvantage h t titi di d t

+8% 16% 19% 13% 13% 18% 18%
Effectivelythe4%differential disappearedlevellingtheplayingfield disappeared levelling the playing field
Shareof organized sales g growing g
2002
2003
2004
2005
2006
2007
12
Domesticproductionfacessupplyconstraintsandinefficiencies therebyensuringthedependenceonlargelevelsofedibleoilimports
Governmentpoliciesencouragegrowingofcropscompetingwithoilseeds Lackofirrigatedlandinoilseedproducingareas Lowproductivityofagriculturalsectorasawhole Inefficient transport and handling infrastructure Inefficienttransportandhandlinginfrastructure Barrierstoimportingoilseeds Lowyields and production ofoilseeds
Domesticedibleoils industry
Inefficiency andlackof scale
Dependenceon
Longterm relianceon largelevelof g imports
ProcessingoftraditionaloilseedsrestrictedtoSmallScaleIndustries(SSI)sector, whichishighlyinefficient Mostprocessingunitscapacitiesareverysmallat10%ofUSorEuropeanaverage Lowcapacityutilizationthroughoutthesupplychain
13
14
Riseinconsumptionisaccompaniedbyincreasingdomestic productionbutlargeimportsarestillnecessarytobridgethegap
Domesticconsumption&supply
000MT
14,000 14 000 12,000
100%
Importsvs.domesticproduction
Production Totalin 000MT Total in 000 MT
Consumption Production Imports Imports 10,713 11,226 11,705 12,457 11,099 10,187 12,139 11,957 13,080
10,000
8,000 6,000 4,000 2,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009
90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
46%
54% 47% 59% 53% 58% 54% 56% 55%
54%
46% 53% 41% 47% 42% 46% 44% 45%
2001 2002 2003 2004 2005 2006 2007 2008 2009
15
Palmandsoybeanoilsaccountforbulkofimportsisprimarily duetotheirlowpricesandpricesensitivityofIndianconsumers
Totalin000MT 5,700 3% 0% 36% 4,906 3% 2% 35% 5,530 3% 3% 25% 5,488 4% 0% 13% 5,955 4% 2% 13% SunflowerseedOil Others SoybeanSoyabeanOil PalmOil
83% 62% 59% 69%
82%
200405 2004 05
0506 05 06
0607 06 07
0708 07 08
0809 08 09
Product Palmoil Soybeanoil Sunflowerseedoil Others
Shareofimport 83% 13% 2% 2%
Importgrowth 9% 21% 134% 10%
Growthindomesticproduction 6% 13% Nil Nil
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Priceshaverisenat3%p.a.withadiponlyin20052006
EdibleOilWholesalePriceIndex1
WPIofedibleoil
200
150 100 50 0 0304
Domesticpriceofimportedoil
%
175 8
6 4 2
Inflationrate
158 156
146 155
INRpertonne
50 40 30 20 10 0 2003 2004 2005 2006 2007
RBDPalmolein CrudeDegummed g SoybeanOil (ExMumbai) CrudePalmOil(5%) (ExKandla)
0405
0506
0607
0 0708
1 BaseYear:199394=100
Product
GingellyOil Rapeseed/MustardOil Rapeseed/Mustard Oil CoconutOil GroundnutOil CottonSeedOil SoybeanOil
Average%VariationinWPI
19981999to20022003 7.08 8.64 0.94 6.97 5.78 7.22 20032004to20072008 6.17 6.79 3.89 7.29 5.60 3.23
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Thankyouforyourtime
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ImportedEdibleOils Imported Edible Oils India December2008

Demandforimportedoilstoremainstrongduetogrowingconsumptionandconstrainedsupplies Organizedsector,earlierdisadvantagedduetosalestaxregime,isnotgrowingitsmarketshare Domesticproductionfacessupplysideconstraintsandinefficienciestherebyensuringthe dependenceonlargelevelsofedibleoilimports

Strongboostinimportsduetotradeliberalizationandfallingdomesticoilseedproduction 1994:ImportsplacedunderOpenGeneralLicense(OGL)systemterminatingthestatemonopolyand eliminatingimportquotarestrictions eliminating import quota restrictions Since1998,theGovernmenthasbeenadjustingthetariffratesto

Product Crude Palm Oil & Crude Olein

Duty 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%

C.V.D. C 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%

Cess on C C CVD 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%

Edu. C Cess 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%

S.A.D. S 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%

Effective ff 0% 0% 0% 20% 7.50% 7.50% 7.50% 7 50% 7.50% 7.50%

Crude Refi ined

Primarilyinurbanareas Primarily in urban areas

2000 2001 2002 2003 2004 2005 2006 2007 2008

Low but growing domestic consumption Lowbutgrowingdomesticconsumption

Low and inefficient production levels of oilseeds Lowandinefficientproductionlevelsofoilseeds

Economicdevelopmentis likelytoincreasepercapita consumptionandspurthe market

Sinceimportingoilseedsis notpracticaldueto barriers,oilimports becomenecessary

Typicallyproductsweresoldforcashwithout charginganysalestax Restrictedgrowthoforganizedsector whowereatacompetitivedisadvantage h t titi di d t

Effectivelythe4%differential disappearedlevellingtheplayingfield disappeared levelling the playing field

Shareof organized sales g growing g

Longterm relianceon largelevelof g imports

ProcessingoftraditionaloilseedsrestrictedtoSmallScaleIndustries(SSI)sector, whichishighlyinefficient Mostprocessingunitscapacitiesareverysmallat10%ofUSorEuropeanaverage Lowcapacityutilizationthroughoutthesupplychain

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

54% 47% 59% 53% 58% 54% 56% 55%

46% 53% 41% 47% 42% 46% 44% 45%

2001 2002 2003 2004 2005 2006 2007 2008 2009

83% 62% 59% 69%

Product Palmoil Soybeanoil Sunflowerseedoil Others

Shareofimport 83% 13% 2% 2%

Importgrowth 9% 21% 134% 10%

Growthindomesticproduction 6% 13% Nil Nil

RBDPalmolein CrudeDegummed g SoybeanOil (ExMumbai) CrudePalmOil(5%) (ExKandla)

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