Small-packaged oil will become a new profit growth point for the grain and oil industry
Under the dual pressure of falling soybean prices and sluggish consumer demand, small-packaged oil at retail terminals has nevertheless been one of the few success stories. Xiwang Foodstuffs' recently launched sunflower seed oil and olive oil have seen rapid sales growth, with outstanding results. As consumption levels rise, the consumption of small-packaged oil will gradually develop toward segmentation.
Annual reports released by a number of grain and oil enterprises show that the grain and oil market is in a state of depression. On March 26, COFCO Holdings released its 2014 annual report, showing that last year's revenue was 93.239 billion Hong Kong dollars, down 1.38% year on year. Dongling Grain and Oil's losses were equally severe, with losses amounting to 471 million yuan, down 423.89% year on year.
Regarding the downturn in the grain and oil industry, COFCO Holdings attributed it to "the slowdown in macroeconomic growth" and "sharp fluctuations in commodity prices," which ultimately hit the oilseed processing business. Dongling Grain and Oil also said that the low sales prices of soybean oil and soybean meal created a price inversion, causing serious losses.
Sun Zhong, an analyst at China Grain Network, told the Beijing News reporter that the grain and oil industry, constrained by weak commodity prices and the downturn in the catering industry, is indeed at a low point, but this does not mean that grain and oil enterprises can only "sit and wait for death."
The Beijing News reporter noted that although performance declined across the board, Xiwang Foodstuffs' annual report also contained no shortage of "surprises." In 2014, operating revenue from the new sunflower seed oil and olive oil products reached 36.36 million yuan and 20.6 million yuan respectively, with gross margins of 33% and 54% respectively. Public information shows that the two new products, sunflower seed oil and olive oil, were launched by Xiwang Foodstuffs successively in the middle of last year.
Qilu Securities analyzed that the new products have entered a stage of rapid distribution and volume ramp-up, and sales revenue from sunflower seed oil and olive oil will rise from the current 5% of small-packaged oil to 20%-30% this year.
Regarding the sudden rise of the new products, Xiwang Foodstuffs analyzed in its annual report that the consumption structure of edible oil as a whole has undergone further adjustment, and mid-to-high-end edible oils such as corn oil, sunflower seed oil, olive oil and tea seed oil are increasingly becoming consumers' "new favorites."
Sun Zhong also believes that after brand packaging and marketing investment, small-packaged oil has more stable prices and is less affected. The consumption of small-packaged oil is also gradually developing toward segmentation, and enterprises can absolutely find new profit growth points from it.
Liu Xiaoran, deputy secretary-general of the Corn Branch of the China National Association of Grain Sector, told the Beijing News reporter that the entire grain and oil market is expected to remain lackluster in 2015, but some high-end small-packaged oils such as sunflower seed oil and palm oil do indeed have a certain market and are worth developing by enterprises.