As prices drop, branded edible oil makes inroads in rural areas

Health concerns drive sales of big companies such as Ruchi Soya , Adani Wilmar, Cargill

After years of buying cooking oil sold in plastic bags at a village store, farmer Kisan Pawar has made the jump to branded packs of soyabean oil from a retail chain.

Falling prices of imported oil and a marketing drive that often plays on health concerns over unbranded sales are prompting more Indians like Pawar to switch to products sold by big companies such as Ruchi Soya , Adani Wilmar, Cargill and Bunge.

India's top edible oil importer Ruchi Soya sees the country's $8 billion branded oil market growing by up to 15% in 2015.

That's good news for overseas suppliers to the world's biggest edible oil importer, with shipments of palm oil from Indonesia and Malaysia, as well as soyoil from Brazil and Argentina, making up over half of branded sales.

"The quality of branded edible oil seems to be better. People also say it is healthier," Pawar said after buying Adani Wilmar's Fortune soyoil, sold in bright green plastic cartons with the words 'soya health' prominent on the label.

With international prices for palm oil, sunflower oil and soy oil dropping this year on bumper harvests, major edible oil companies have cut prices for their higher-margin branded products, hoping to tempt buyers at a time when incomes are rising.

Farmer Pawar, in the small town of Satara 250 km south of Mumbai, this month paid Rs 70 for a litre of Fortune soy oil that would have cost Rs 88 a year ago.

The push on branded oil also comes as companies look to shake losses at their Indian refining units after Indonesia and Malaysia started offering refined palm products at discounts over crude palm oil.

A TOUCH OF BOLLYWOOD

Companies are spending big on marketing and setting up sales networks in rural areas, said a Mumbai-based analyst, who declined to be identified as he was not authorised to speak with media.

"We're investing only in branding and marketing. We don't want to build any more refining capacity," said Dinesh Shahra, managing director at Ruchi Soya.

The company recently roped in Bollywood actress Madhuri Dixit to star in a TV advert featuring a mother happily preparing a family meal using the Mahakosh brand of soybean oil.

Such campaigns follow findings from food research companies that said some unpacked edible oil was tainted with substances like oil from argemone, a species of poppy that resembles rapeseed but can be harmful. That stoked more general concerns over the content of unlabelled oil products.

"All this is helping the shift towards consumers picking more and more brands in the edible oil category," said Aseem Soni, a director in Cargill India's consumer packaging team.

India's edible oil consumption is expected to rise 5.6% to a record 19.3 million tonnes in the 2014/15 marketing year that began this month, estimates Govindbhai Patel, a widely respected trade expert and managing director of GG Patel & Nihil Research Co.

In India, choice of edible oil often varies with region, with soyoil and sunflower oil typically favoured in the west, and rapeseed oil popular in the east.

And industry officials and analysts say India's countryside offers huge potential growth for branded goods.

Only 9% of rural India consumes branded oils compared to 31% in urban areas, says Angshu Mallick, chief operating officer of Adani Wilmar, a venture between the Adani Group and Singapore's Wilmar International Ltd .

"I have stopped selling unbranded edible oils," said Jitendra Kadam, who owns a grocery shop in a village in the western state of Maharashtra.

"Due to television people are becoming brand conscious. They ask for particular brands. I have to stock according to what they want."

($1 = 61.7150 rupees)