Edible oil players like Adani Wilmar, Vimal Oil and Food, Cargill India are betting on the premium oil variants which give better returns in terms of margins. On an average, profit margins in the premium edible oil category like olive, rice bran and canola are in the range of 25 per cent, compared with 10 per cent in case of conventional oils like mustard, groundnut, cotton, etc.
Jayesh Patel, managing director of Vimal Oil, said, "Lucrative margins attract edible oil producers to jump into the premium segment. Against 5-10 per cent profit margins in regular edible oils, the premium segment is giving 20-25 per cent profit. However, at present the market is limited to upper class and higher middle class."
As such, India's import of premium edible oils like olive and canola oil has sharply increased as consumption of premium oils has grown in the last two years.
According to industry sources, the country has imported about 110,000 tonnes premium oils in 2016-17 as against 70,000-75,000 tonnes two years ago, a growth of 15-17 per cent. Most of the imports are taking place from Spain, Italy and Canada.
Cargill claimed that of the total edible oil market of about 20 million tonnes in India, the share of premium segment is still negligible but is growing rapidly, and is expected to double by 2020. As compared to the 4-5 per cent annual growth rate of conventional oils, the premium oils portfolio is clocking a 17-18 per cent growth rate.
"Albeit slowly, but demand of premium edible oils is steadily growing in India. Most of the consumers are using it because of the health purpose. Companies are also promoting the segment as the profits are higher than normal edible oils business," said Nilima Burra, chief marketing officer of Cargill India.
Most companies are spending more on promotional activities to create a market for premium oils and spend about Rs 7-10 crore every year on this.
Atul Chaturvedi, chief executive officer of Adani Wilmar Limited said, "Indians are getting exposed to international eating habits and this has supported the demand for premium oils to grow in India. We are also spending reasonable amounts on marketing of such oils under our Vivo brand"
Another Gujarat-based company, Vimal Oil and Foods Limited is planning to import from Spain through a joint venture. The company is looking for some foreign partnership and in talks with some players in Spain. Initially, it will import in packaged format and launch it in next two or three months. The company is planning to import about 400-500 tonnes a year and gradually increase the import based on demand. The company will launch it under Vimal brand.