Edible oils shampoo their way into sachets

Edible oil makers are gearing up to replicate the satchet revolution in the shampoo market in the 1990s, which increased the product's penetration in rural and semi-urban areas.

Following in the foot steps of Bunge India, owner of Dalda vanaspati, which introduced sachets for its blended edible oil brand, market leader Adani Wilmar plans to roll out Rs 5 sachets of Fortune, its edible oil brand, in a couple of months.

While Bunge's offering in sachets is a blend of palm and soybean oil, Adani Wilmar would be offering only soybean oil. Both claim that their blend is superior to others. The latter feels this step would enable growth of Fortune in non-urban areas.

Adani Wilmar, which recorded a turnover of Rs 2,900 crore last year, is a joint venture between Ahmedabad-based Adani Group and Singapore-based Wilmar International. It had entered the edible oil market with Fortune in 2000.

"Soybean oil made up just 7 per cent of the total edible oil market in India in 2000. Now, it has grown to form 40 per cent of the Rs 75,000 crore market," says Angshu Mallick, assistant vice-president, sales and marketing, Adani Wilmar.

The soybean oil segment is followed by sunflower oil, which makes up 25 per cent of the total market. Mallick explains,

"Soybean oil prices are 30 per cent lower than sunflower oil. Therefore, we observed that packaged soybean oil offered the optimum combination of lesser price and higher quality, the combination most desired by Indian consumers."

Adani Wilmar, is the market leader with nearly 25 per cent share, followed by Ruchi Soya at 13 per cent and ITC Agrotech, owner of the Sunflower brand, with 8 per cent.

Adani Wilmar has a distribution base of 8 lakh outlets and wants to penetrate India's central and southern markets by adding 2 lakh more outlets in the next one year.

The company faces some competition from Bunge, which has a distribution base of 3 lakh outlets and is pushing distribution in northern India. For Adani, the strategy is clear. It aims to be a mass market player and does not want to enter the top-end segment, a domain of health brands.

This segment is a stronghold of beauty and wellness firm Marico with the Saffola edible oil brand. With the market being niche, it entails extensive advertising expenditure, say analysts. Adani Wilmar has invested only Rs 150 crore in the last 7 years on brand building.

The branded edible oil category is growing at the rate of 20 per cent per annum in India. Industry players found that lower income groups made frequent purchases of edible oil in 100 ml packs.

This prompted the manufacturers to introduce sachets with small quantities. The margins, however, in this category are much lesser at one per cent compared with to 3-4 per cent internationally.

Edible oil in India is consumed more as a commodity, with more than 70 per cent of the total market consisting of loosely sold oil and only 30 per cent forms branded oil. The per capita consumption of edible oil in India is 11.5 kg per annum, compared with 18 in Pakistan, 16 in China and 40 in the US.