Profit margins draw edible oil makers to the premium segment

Premium oils category margins are around 25%, compared with 10% for conventional oils

Edible oil companies Adani Wilmar, Vimal Oil & Foods and Cargill India are betting on premium variants like olive, rice bran and canola for better returns. Jayesh Patel, managing director of Vimal Oil, said, “Lucrative margins are attracting edible oil producers to jump in to the premium segment. As against 5-10 per cent profit margins in regular edible oil, the premium segment is giving 20-25 per cent profit. However, the market is limited to the upper class and higher middle class.”

India’s import of premium edible oils in the past two years has increased sharply, with rise in consumption. According to industry sources, the country imported 110,000 tonnes of premium oils in 2016-17, against 70,000-75,000 tonnes two years ago, growth of 15-17 per cent annually. Most of the import is from Spain, Italy and Canada.

Cargill, a major player in the segment, say the premium segment's share in the Indian edible oil market (20 million tonnes) is still negligible but growing rapidly, and is expected to double by 2020. As compared to the four-five per cent annual growth rate of conventional oils, the premium portfolio is rising at 17-18 per cent.  “Demand for premium edible oils is growing steadily, albeit slowly. Most consumers are using it for health. Companies are also promoting the segment, as the profits are higher than the normal edible oil business,” said Nilima Burra, chief marketing officer of Cargill India. Most companies are spending more on promotional activities to create a market for these oils. 

Atul Chaturvedi, chief executive officer of Adani Wilmar, said, “Indians are getting exposed to international eating habits and this has supported the demand for premium oils. We are also spending reasonable amounts on marketing of such oils under our Vivo brand”.

Vimal Oil and Foods, a Gujarat-based company, is planning to import from Spain through a joint venture. The company is looking for foreign partnership. Initially, it will import in the packaged format and launch it in another two-three months. The company is planning to import 400-500 tonnes a year and gradually increase this, based on demand.

Premium League

• The premium edible oils segment is growing at a rate of 17 per cent annually
• Industry is expecting the market size of this segment to double to 2 lakh tonne in 3 years
• Change in cooking habits, health reasons boost the demand of premium edible oils
• The premium segment gives 20-25% profit