NEW DELHI: There is another blow for the FMCG industry with Indonesia, the largest exporter of palm oil, announcing a ban on its exports. As it is a key ingredient for food processing industries, the ban is expected to further escalate cost of products and impact margins of consumer companies.
Analysts say FMCG majors like ITC, Britannia, Hindustan Unilever, would be among the firms will be affected directly. This move is likely to cause a price increase in other edible oils like soybean oil, sunflower oil, according to Amnish Aggarwal - Director - Research at Prabhudas Lilladher.
“We believe the impact would be seen most in categories such as biscuits, noodles, cakes, potato chips, frozen desserts etc. QSRs like Westlife Development and Burger King can also feel the pinch given edible oil usage to cook/fry their patties/fries,” said Aggarwal.
Palm oil, which is cheaper as compared to other edible oils, makes for 60% of oil imports and Indonesia is the second-largest seller after Malaysia. India will be affected by the ban as it is the world’s largest importer of the oil. In 2020-2021, India imported 13.13 MT of edible oil, of which palm oil was at 8.18 MT. Pankaj Agarwal, COO, Bikano, said it is a point of worry for all snack majors in India.
“Palm oil is one of the important ingredients in our products. We faced similar issues in the past two years. However, we have not raised the prices of any of our products. With the given situation, we will have to look at some alternative options like rice bran oil and cottonseed oil or might increase the prices of.”
On the other hand, there are reports coming in that the ban excludes crude palm oil and RBD (refined, bleached and deodorized) oil from export.