Bangladesh Food Industry – Continuous Growth and Growing Potential for Palm Oil Consumption

Bangladesh has emerged as one of the economic powers in South Asia. According to October 2020 report by International Monetary Fund (IMF), the country has overtaken India in terms of per capita GDP scoring US$ 1,888. Just five years ago, India’s per capita GDP was around 40% higher than Bangladesh. Although the pandemic posed by Covid-19 has resulted in many countries experiencing negative growth economically, Bangladesh is reportedly enjoying positive economic growth that has been the talk of the media in the neighbouring countries.  

As the country progresses in terms of its economic growth, the living standard and food habits have also changed. People in the urban areas are now more inclined towards processed foods and eating out in the restaurants. The type of food consumed by the people in the rural area, who constitute about 70% of the 170 million people have also changed. More oily foods are consumed these days and this has greatly contributed in the increased consumption of oils and fats during the last decade. This is proven to be true when the country’s per capita consumption has increased from 13.8kg in 2015 to 18.9kg in 2019.   

Table 1: Per Capita Consumption of Oils and Fats: 2013- 2019

In kg

Year 2019 2018 2017 2016 2015 2014 2013
Quantity 18.7 18.4 16.4 15.3 13.8 12.8 11.8

    Source: Oil World Annual 2020

Food Processing and Vanaspati/Shortening Industries as Major Palm Oil Users

Palm olein is widely used as cooking oil in the food processing sector as the major consuming sector of palm oil in this country. Vanaspati manufactures are the single largest industrial consumer of palm oil accounting for about 30% of total annual consumption of palm oil in Bangladesh. Consumption of shortening/vanaspati is expected to trend upward in line with the increase of consumption of industrial processed foods and HORECA sector, who are the major consumers of vanaspati/shortening in the country.   

Industrial users, which include giant fast-food companies such as KFC, Pizza Hut, Nandos as well as local fast-food chain and numerous numbers of local bakery items producers, industrial food processors, fried snack food items producers, instant noodles producers and condensed milk producers are the loyal consumers of palm oil. The major users of palm oil with their annual usage are shown in the Table 2 below: –

Table 2: Sector Wise Consumption of Palm Oil: 2015 – 2020

Sectors Annual Uses Quantity (MT)
  2020 2019 2018 2017 2016 2015
Household consumption 720,000 725,000 800,000 758,000 700,000 690,000
Shortening/
Vanaspati Industries
400,000 450,000 440,000 400,000 375,000 350,000
Food Processing Industries 125,000 150,000 160,000 132,000 125,000 120,000
HORECA Sector 155,000 200,000 200,000 160,000 150,000 140,000
Total 1,400,000 1,525,000 1,600,000 1,450,000 1,350,000 1,300,000

Source: MPOC Market Intelligence / Oil World

Note:

  1. Palm oil refers to CPO, CPL and RBD PO/PL
  2. Due to COVID – 19, both, import and consumption experienced a significant decline in 2020 than that of projected growth.

There are three major edible oils, namely, palm oil, soyabean oil and rapeseed/canola oil are consumed in the country. Among these three major edible oils consumed in the country, market potentials for palm oil are wide compared to the other two edible oils mainly due to the price competitiveness. The prices of edible oils are a crucial factor to the manufacturers and also to household consumers. Because of lower price of palm oil, manufactures are able to keep the price of their respective products produced using palm oil at competitive level, while major segment of household consumers of palm oil are from lower and lower-middle income group and price is a major factor to them. Competitive price is a major advantage for palm oil against other competing edible oils in the market. The projected consumption quantity of the three major edible oils for the next 5 years is shown in the Table 3 below: –

Table 3: Projection of Consumption Trend of Three Major Edible Oils in Bangladesh: 2020 – 2025

In Million Tonnes

Year /
Commodity
2020 2021(F) 2022 (F) 2023 (F) 2024 (F) 2025 (F)
Palm Oil 1.40 1.55 1.65 1.75 1.80 1.90
Soybean Oil 1.00 1.20 1.25 1.25 1.25 1.25
Rapeseed/Canola 0.30 0.35 0.35 0.40 0.45 0.50
Total: 2.70 3.10 3.25 3.40 3.50 3.65

   Source: MPOC Projection

Note:

  1. Palm oil refers to CPO, CPL and RBD PO/PL
  2. Due to COVID – 19 consumption of palm oil and CDSBO in 2020 may experience a decline than that of projected quantity.

The steady economic growth during the last couple of years has contributed greatly in change of lifestyle and increasing the purchasing power of the general consumers in Bangladesh which has resulted in the significant increase of consumption of oils and fats. In line with the projected increase of major edible oils usage in the country, the imports of oils and fats as well as oilseeds are expected to escalate in order to meet the increasing demand.

Although import of edible oils in the country is expected to increase in the coming years, import of crude degummed soyabean oil (CDSBO) in the country may experience a gradual slowdown/decline due to the increasing trend in import of soybean, which is contributing in increased supply of soyabean oil at competitive price. Soybean is used to produce feed meal for poultry and simultaneously contributing to the availability of crude soybean oil locally as by products @ 20% on an average.  Import of soybean is exempted from payment of 15% Value Added Tax (VAT), while imported crude soybean oil is subject to 15% VAT and accordingly, locally obtained crude soybean oil from imported soyabean is cheaper compared to imported crude degummed soyabean oil. The projected import quantity of the two major edible oils for the next 5 years is shown in the Table 4 below: –

Table 4: Projection of Import of Two Major Edible Oils in Bangladesh: 2020 – 2025

In Million Tonnes

YearCommodity 2020 2021(F) 2022 (F) 2023 (F) 2024 (F) 2025 (F)
Palm Oil 1.40 1.50 1.65 1.75 1.85 2.00
CDSBO 0.80 0.80 0.70 0.70 0.75 0.80
Total: 2.20 2.30 2.35 2.45 2.60 2.80

   Source: MPOC Projection

Note:

  1. Palm oil refers to CPO, CPL and RBD PO/PL
  2. Due to COVID – 19 import of palm oil and CDSBO in 2020 may experience a decline than that of projected growth.

With the projections of both consumption and import of palm oil trending upwards, the future usage of palm oil, especially in shortening/Vanaspati and food processing industries remains favourable. The projected sectoral usage of palm oil for the next 5 years is shown in the Table 5 below: –

Table 5: Sector Wise Projection of Consumption of Palm Oil: 2020 – 2025

  Sectors Annual Uses Quantity (MT)
  2021 2022 2023 2024 2025  
Household consumption 720,000 785,000 810,000 825,000 860,000  
Shortening/Vanaspati Industries 450,000 450,000 475,000 480,000 500,000  
Food Processing Industries 150,000 180,000 215,000 225,000 255,000  
HORECA Sector 200,000 235,000 250,000 270,000 285,000  
Total 1,550,000 1,650,000 1,750,000 1,800,000 1,900,000  

Source: MPOC Market Intelligence

All the sectors are using refined palm olein except for the household sector which is using super olein as the cooking oil. The consumption growth of super olein for household sector however is expected to be in a slower pace due to the increasing availability of refined soybean oil at a competitive price. At the same time, competition can be expected from the availability of refined soybean oil from the local seed crushing plants which is expected to increase significantly in the coming years.    

Nonetheless, considering all the factors as the above, it is most likely that import of palm oil in the country would continue to grow in the coming years in line with the projected increase in the consumption vis-a-vis import of oils and fats. Import of palm oil into Bangladesh is expected to touch the 2 million tonnes mark by 2025 (Table – 5.

Challenges and Opportunities for Malaysian Palm Oil Industry

Palm oil is the leading edible oil in Bangladesh since 2003. However, if there is one thing that Malaysian palm oil companies need to know; there is an urgent need for a product development. Palm oil brand has not been able to create any significant influence on mass consumer’s perception who are still influenced by pre-conceived perception developed decades ago. Brand communications, which have been undertaken by various palm olein brands have resulted in the increase of brand awareness. However, it did not succeed in changing the perception of general consumers, especially the educated middle-income segment, who is the opinion driving force of the society.

Palm oil consumers in the country are still mostly dependent of loose oil. As a result, brand loyalty has not really developed and most users are not getting enough motivation to recommend their consumer brands. Palm oil is considered less expensive with no high expectation from the consumers. Most consumers consider palm oil as ‘fair value’ only. Current palm oil brands in the market do not command enough value in the consumer’s mind to be considered as a driving force behind palm oil.

Consumers are indirectly having palm oil through different processed/packaged/fried foods. But while purchasing edible oils, the consumers are always inclined towards soybean oil. This scenario can be changed through proper branding and communications. Bangladeshi consumers did not always depend on soybean oil previously. However, due to large production and communications, the habit of using soybean oil as the cooking oil has been adopted. With a proper strategy of branding, Malaysian palm oil will have similar acceptability and further consumption among the consumers.

Prepared by Fakhrul Alam with Azriyah Azian,

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