High edible oil prices keep consumer spending in check
Edible oil prices in India, including palm, soya, and sunflower oils, have risen by 10-15% in the past month following a government import duty hike. Festive demand and the extended wedding season, which is set to run until June with 4.8 million weddings in November-December, are keeping consumption firm. India imports 60% of its edible oil needs, but imports dropped 3.09% in 2023-24 due to the duty hike. Companies like Adani Wilmar, Emami, and Marico are implementing phased price increases to manage inflationary pressures while balancing demand.
Prices of edible oils such as palm, soya and sunflower have surged over 10-15% in the last one month after a recent import duty hike by the government. While festive demand was firm, the post-festive demand would have slumped had it not been for the ongoing wedding season.
“Edible oil consumption during the wedding season is significant,” says Angshu Mallick, MD & CEO, Adani Wilmar. “The wedding season is long this year, stretching from November to June. There are nearly 4.8 million weddings between November and December alone, which means edible oil consumption will be firm,” he says.
India meets close to 60% of its oil requirement through imports. A net increase of 22% on both crude and refined edible oil announced on September 13 saw companies not importing enough during the September-October period, experts tracking the market said. As a result, India’s edible oil imports declined by 3.09% to 15.96 million tonne during the 2023-24 oil marketing year (from November to October).
Aditya Agarwal, director, Emami group, while acknowledging the role of the wedding season in aiding edible oil consumption, says higher prices stoke inflation.
“Consumption of edible oils is typically high during the festive season. This year, the wedding season will also aid consumption. But there is a threshold as far as price hikes can go. A sharp rise is inflationary and will hurt demand,” he says. The Emami group manufactures edible oil brand ‘Healthy & Tasty’, which is part of Emami Agrotech.
Most companies, therefore, are taking price hikes in phases, experts said. While the first phase of the hike of around 10-15% has been initiated, the second phase of around 7-10% in terms of price hikes will be done in the coming months.
“The recent hike in import duties has led to a steep increase in vegetable oil prices and we have taken a price increase of at least 15% in response to the same. However, I hope the duty hike does not spark any volatility in the market, which will lead to trade-led headwinds (de-stocking),” Saugata Gupta, MD & CEO, Marico, said, during its recent September quarter (Q2) earnings commentary.
Marico has the Saffola brand of edible oils in its portfolio. While Saffola edible oils delivered flattish volume growth in Q2, the pricing cycle for the brand had turned favourable after eight quarters, Gupta said. The emphasis would be to drive profitable growth and ensure margins in the future.
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Source Link : Financial Express