Edible oil production in India
USD 33 billion. That was the estimated total revenue of India's edible oil market in 2023. A number that's projected to only go upwards.
For any business looking to grow its profit margin in the edible oil industry, India is an important market to keep an eye on - the country generates the highest revenues in the world from edible oil sales.
From tempering curries to cooking vegetables and deep frying snacks, edible oil is a staple in all Indian kitchens. Given the large size and the agro-climactic and cultural diversity across the country, the types of oils used also vary. Coconut oil in the South, mustard oil in the North and the East, sunflower oil, groundnut oil, soybean oil, and more across the Indian landmass.
India is a massive consumer of edible oils but, unfortunately, edible oil production in India does not meet the country's huge demand. On average, Indians consume about 19 kg of edible oil per person per annum. Estimations of edible oil production in India, given the cultivation of largely soybean, rapeseed and mustard, and groundnut on 25 million hectares of land, suggest that India produces only about one-third of the national demand.
This gap between demand and supply is why, in 2019, India imported about 15 million tonnes of edible oils - a quantity worth roughly Rs 7,300 crore. This gap between demand and supply is why there are many opportunities for you, as a potential edible oil manufacturer in India, to maximise your profit margin in the edible oil industry.
Importing edible oils adds a significant burden on the Indian economy, especially during crises in exporting countries which result in fluctuations in price and availability of important edible oils like palm oil and sunflower oil. Let's take the drought in Argentina, for example. It affected soyabean production in the South American nation, which consequently affected exports to India and the availability of soyabean oil to Indian consumers. The same can be said for palm oil in Indonesia and Malaysia due to labour issues and sunflower oil due to the war in Ukraine.
Edible oil production in India hopes to not only make up the supply gap but also become independent of economic, geopolitical and climactic concerns in other countries. An edible oil industry overview will show the changes that are in progress in India. Policy initiatives like the Technology Mission on Oilseeds and the National Mission on Edible Oils are bringing more area under oilseed cultivation.
A global edible oil industry overview
The Indian edible oil market is certainly one to look out for, but it isn't alone in the global landscape.
According to Maximise Market Research, the global edible oils market was worth USD 122.31 billion in 2023. The market report forecasted a CAGR of 7.6% from 2024 to 2030, taking the global market to a value of USD 204.25 billion by the end of this decade.
Just like in the Indian market, growth in the global edible oils market is being driven by increasing demand for processed foods as lifestyles change. On the other hand, the demand for healthy oils is also increasing as consumers become more aware of the connections between diet and chronic diseases. Globally, palm oil and soybean oil lead the market in terms of product type, while the Asia-Pacific dominates market share compared to other global regions.
Lessons from the market: Maximising your profit margin in the edible oil industry
Operationally, there are many ways to improve your bottom line - cutting costs on equipment, rent, labour, and/or raw materials. However, cutting costs often equates to cutting corners. And cutting corners results in poor-quality products, which is not a sustainable way to run a successful business.
Insights into edible oil production in India and the rest of the world offer lessons about how to maximise your profit margin in the edible oil industry.
- Product type
The easiest way to guarantee a market for your product is to tap into already existing demand. Selling in-demand oils like palm oil, soyabean oil, mustard oil, and sunflower oil can help you maximise your sales. It can also help you increase your profits because the prices for these oils are high to account for the massive demand-supply disparity.
- Packaged oils
Over the past decade, edible oil production in India has realigned its focus towards the packaged oils segment. Even a decade ago, the packaged oil segment accounted for almost half of India's total edible oil market. Urban areas led the way, with rural areas close on their heels. Overall, this shift has been driven by convenience, nutrient value-additions, and concerns about adulteration.
Edible oil producers in India have shifted their attention to this market segment not only due to the increasing adoption of packaged oils by modern consumers but also due to packaged products' higher profit margin in the edible oil industry. Compared to 2 to 3% margins on bulk oils, packaged oils offer 5 to 10% margins.
- Premium segment
In addition to the packaged oils segment, edible oils businesses have also been leveraging the premium oils segment. Premium oils like olive oil, rice bran oil, and canola oil have been looked to for lucrative returns - compared to a 5 to 10% profit margin for regular edible oils, premium oils hold the promise of a 20 to 25% profit margin in the edible oil industry.
Shifting towards such premium products will limit your market to wealthy upper and higher-middle-class households. Nonetheless, even though you may be looking at relatively smaller market volumes, you will enjoy a larger profit share.
- Sustainability
Despite the overall increase in demand for edible oils globally, this demand is not indiscriminate. Increasingly, people are becoming aware and committed to sustainability in terms of environmental, social, and governance aspects. People prioritise the ethics of production of the products they use, and they're willing to pay a premium for products that align with their principles.
These ideas translate into the edible oils industry as well. Conscious consumers try to avoid edible oils whose cultivation is associated with deforestation, unsustainable land use, and/or unethical labour practices. While these concerns have always existed in agro-based industries, today, more than ever before, people are willing to put their money where their mouth is. As a business seeking to maximise your profit margin in the edible oil industry, it will be very useful to tap into this consumer sentiment and ensure that your business checks important ESG boxes across the edible oil value chain.
Ultimately, improving your profit margin in the edible oil industry is about giving your customers what they want - healthy, high-quality, ethically produced, and safe edible oils.
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