The Hindu Business Line : Premium edible oil players eye low-end segments

New Delhi, Feb. 24 Spiralling rates of soft oils — sunflower and soyabean — are forcing premium branded vegetable oil makers to expand their product portfolio to include less-upmarket oils from cottonseed, groundnut or even palmolein in consumer packs.

“The way prices are behaving these days, it makes no sense to focus on just premium oils catering to the highly health-conscious market segment. We have to, instead, offer a range of oils at different price points, while assuring consumers of quality through our brands,” said Mr Siraj A. Chaudhry, CEO (Refined Oils) of Cargill India Pvt Ltd.

The $88-billion US food major was till recently selling mostly sunflower and soyabean oil under its ‘NatureFresh’ and ‘Gemini’ brands. “But in the last 3-4 months, we are putting greater thrust on oils such as cottonseed, groundnut and palmolein. We are even looking at refined rapeseed, rice bran and even various blended oil options,” Mr Chaudhry told Business Line.

Retail point

Currently, sunflower oil is retailing at around Rs 100 a litre, while these are in the region of Rs 90 for groundnut, Rs 75 for soyabean and kutchi ghani (expeller) mustard, Rs 70 for cottonseed, and Rs 65 for vanaspati and palmolein. “When prices of any oil touch very high levels, the consumer should ideally move to the next category, while being certain that quality is not being compromised. This need is something that organised players like us should address,” Mr Chaudhry noted.

In the case of oils such as cottonseed, the market was hitherto restricted largely to local (mostly Gujarat-based) brands such as ‘Tirupati’ (N.K. Proteins), and ‘Gulab’ (Gulab Oils & Foods). But now, apart from Cargill, even other biggies like Adani Wilmar (‘Fortune’) and Agro Tech Foods (through ‘Crystal’) are seeking greater presence in this segment.

“The more-than-doubling of cotton output in the last years, courtesy the Bt revolution, has vastly augmented availability of cottonseed oil. There is, therefore, a case for pushing acceptability of this oil beyond just Gujarat, Andhra Pradesh or Maharashtra,” industry sources say.

Levy barrier

But the problem here is the barrier created by State levies. If crude cottonseed oil is bought from ginners or extractors in Gujarat and taken to another State for refining, one has to pay a local sales tax of four per cent on both the crude as well as refined product. So, it is more economical to refine and sell within Gujarat and avail of the set-off from value-added tax.

This is not so, if one were to import, say, de-gummed soya oil at Kandla. “Here, you just pay the customs duty and take the consignment to Delhi, where it can be refined and sold after paying a four per cent sales tax just once,” the sources added.

Some States have, however, sought to address this ‘discrimination’ against indigenous oils. The Rajasthan Government has recently reduced the sales tax on crude mustard oil to 0.25 per cent, thereby making it attractive to move the oil to other States.

Blend combinations

Besides expanding their existing edible oil portfolio, the big players in the past have also sought to cut costs by offering blended oil combinations. Agrotech Foods, for example, has the ‘Nutralite’ (sunflower-soya blend) and ‘Heart’ (sun-rice bran blend) sub-labels within its ‘Sundrop’ umbrella brands.

Similarly, Marico, the leading marketer of kardi (safflower) oil under the ‘Saffola’ brand, also sells ‘Saffola Gold’ (rice bran-kardi blend) and ‘Saffola TastyBlend (kardi-corn) oils.

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