China's Edible Oil Market Presents a New Landscape in 2015
An overview of our country's edible oil market: after many years of development, it has gone through an industry growth process from a proliferation of small brands to a landscape dominated by major brands, where the big fish eat the small fish. Today, the domestic edible oil market continues to advance toward branding, standardization, and health consciousness. As for the current state of the edible oil market, with a consumption scale of 26 million tons, among which soybean oil, peanut oil, blended oil, and rapeseed oil occupy a dominant position and are the mainstream edible oils purchased; camellia oil and olive oil are secondary purchase products; specialty raw material oils such as flaxseed oil and grape seed oil have opened up a segmented market as specialty oils.
However, in 2014 the domestic grain and oil market was affected by the overall economic environment and showed a weak performance overall. The prices of major domestic vegetable oil varieties, driven by the sharp decline in international crude oil prices, hit new lows for the year, and well-known domestic oil enterprises lowered the prices of their small-packaged oils one after another in order to expand market share. In addition, the sluggish sales momentum in the domestic edible oil raw material market made the edible oil market even more severe. In stark contrast, the non-GMO edible oil and specialty edible oil markets were indeed in full swing, with market momentum rising all the way in 2014. Under a market situation driven by dual factors, domestic edible oil in 2015 is bound to experience relatively large fluctuations.
Trend One: Supply exceeds demand, soybean oil prices will continue to decline
In December 2014, domestic soybean oil futures and spot prices continued to fluctuate and hit the lowest point of that year. Market sales and purchases were neither hot nor cold, and terminal consumption was extremely sluggish, resulting in insufficient market profitability. Domestic soybean oil product inventories piled up in large quantities, with both bulk oil and small-packaged oil concentrated in oil mills. International crude oil prices fell, soybean oil industrial demand declined, and fundamentals were bearish. In order to achieve market sales and solve the problem of inventory backlogs, oil mills adopted price reduction measures one after another, intensifying the downward trend of the soybean oil market.
It is expected that in 2015, due to ample domestic soybean oil spot supply, the market will experience relatively large fluctuations. On the one hand, since the new soybean crop came to market, the strong export pace of U.S. soybeans has been far higher than the historical level for the same period, while domestic U.S. soybean crushing profits are at historic highs, stimulating increased domestic demand. The U.S. Department of Agriculture forecasts that total U.S. soybean exports in 2015 will increase by 6.9% year-on-year; domestic crushing consumption will increase by 2.6% year-on-year. However, most of the domestic soybean oil market relies on imports, which will greatly increase the inventory of domestic soybean oil products. In addition, with monthly soybean imports near 15-16 million tons, increased arrivals of imported soybeans will raise port soybean inventories, and oil mill operating rates will remain at a high level. It is expected that new domestic soybean oil supply will still be relatively large in 2015.
Market demand is limited, and supply far exceeds demand. This makes the situation for soybean oil, which dominates the domestic edible oil market, even more severe.
Trend Two: Cost support and pressure, rapeseed oil prices show range-bound fluctuations
Because domestic temporary storage rapeseed oil purchases in 2014 were nearly 1 million tons less than the previous year, and imported rapeseed increased by 1.44 million tons year-on-year, equivalent to nearly 600,000 tons of oil, directly offsetting the decrease in imported rapeseed oil. Although rapeseed oil sales prices are at historically low levels, which is conducive to stimulating market purchases, domestic rapeseed oil supply is very sufficient, prices are severely suppressed, and the situation of declining market profitability continues. By the end of 2014, domestic rapeseed oil prices had continued range-bound price fluctuations for several months.
In 2015, domestic rapeseed oil is expected to become somewhat more active due to an increase in overall demand, but overall market sales will still show relatively large range fluctuations due to timing differences. Although the Chinese people's awareness that soybean oil is generally genetically modified has become very widespread, which will help increase rapeseed oil consumption in 2015, looking at domestic rapeseed oil imports, from November to December 2014, imported rapeseed volume was nearly 1.5 million tons. Although lower than the same period last year, it is still at a relatively high level among the past five years. Imports in 2015 are expected to basically be above 1.5 million tons, which will greatly increase domestic rapeseed oil production capacity. At the same time, in the second half of 2015, as domestic rapeseed is harvested and crushed, rapeseed oil supply will far exceed consumer demand.
In a market environment with sufficient rapeseed oil supply, only holiday demand can effectively drive product consumption, and consumer purchasing has obvious periodicity. Therefore, in 2015 domestic rapeseed oil will continue range-bound fluctuations, and prices throughout the year will also show ups and downs.
Trend Three: Blowout development, the spring of non-GMO edible oil
In 2014, the domestic call for non-GMO edible oil consumption was sounded, and mass consumption soared accordingly. At present, our country's non-GMO edible oil market is expanding rapidly, market share is relatively concentrated, and there is a cost advantage brought by the decline in international oil prices. Judging from consumption trends, in 2015 and even in the next 2-3 years, in terms of merchant promotion and consumer mindset, this market will enter a rapid blowout period.
Our country currently has a 26 million ton edible oil market, with small-packaged edible oil accounting for less than 20%. This means that the market share of branded small-packaged edible oil in our country can be further expanded, and among small-packaged oils, the one accounting for the largest proportion of market growth is non-GMO edible oil. The non-GMO small-packaged oil market will grow at more than 8% per year, and in the next 2-3 years overall small-packaged oil sales will exceed 10 million tons, of which the non-GMO edible oil market may account for a 20%-30% market share, that is, 2-3 million tons. Industry insiders say that there are currently dozens of non-GMO edible oil varieties on the market, with various products dazzling on the shelves. This also indirectly reflects the domestic consumer enthusiasm for non-GMO products, and this trend will continue in 2015.
Trend Four: Rising all the way, flaxseed oil leads specialty oils
In recent years, as Chinese people's health awareness has strengthened, many consumers have begun to try high-end edible oils, driving high-end edible oil sales upward, and the high-end edible oil market has begun to heat up. Rare raw material resources, nutritional combinations more suited to the human body, and strong risk resistance brought by long-term brand operation.
At present, in China's high-end edible oil market, the first tier: represented by foreign olive oil, with Spain, Italy, Greece and other places being the most famous. The second tier: represented by high-end edible oils based on Chinese-style raw materials, such as safflower seed from Xinjiang and walnut from Shanxi. New force: in the past two years, flaxseed oil rich in unsaturated acids has become a dark horse among high-end edible oils, with very active market performance, leading the specialty edible oil market.
Because food sources of alpha-linolenic acid are extremely scarce, combined with the unique dietary structure of Chinese people, this has created the current situation in which Chinese people's alpha-linolenic acid intake is severely insufficient and scarce for everyone. This is the most important contradiction causing nutritional imbalance among Chinese people today. The market for alpha-linolenic acid is broad. First, there are 160 million hypertension patients, 170 million people with abnormal blood lipids, 260 million overweight and obese people, 90 million diabetes patients, 110 million people with abnormal glucose metabolism, 20 million new cancer patients in China each year, 18 million newly married couples, and more than 21 million newborn infants; second, other chronic disease and sub-health populations accounting for more than 70% of China's total population; and finally, healthy people. As people's awareness continues to increase, China's alpha-linolenic acid market has entered a stage of rapid development.
In 2014, "Yamahan" flaxseed oil targeted this market and began to comprehensively lead brand operations in the flaxseed oil market. The Yamahan brand is the core brand created by Alfalfa Biotechnology Company, and its products are mainly mid-to-high-end edible oil brands centered on flax oil. The company has established planting bases in the world's two major main production areas at 42 degrees north latitude, the golden production area for flaxseed - Zhangbei, China and Canada - laying a production-area foundation for comprehensively leading the flaxseed oil market. In order to develop the flaxseed industry, the company's general manager Mr. Wang Wenjie traveled across more than half of China and to core production areas around the world such as Canada for on-site inspections, treating the flaxseed industry as a lifelong endeavor and dedicating himself to building the entire flaxseed industry chain and deeply exploring the value of the flaxseed industry chain.
Since the company's products were launched, through comprehensive brand planning and promotion, it has built "Yamahan" into the number one brand in China's flax oil market, seized the first mindshare of consumers in the flax oil category, and formed the brand perception that flax oil is "Yamahan." In the future, through continuous brand operations and product research and development, the company will realize "Yamahan's" leading position in the flax oil market in China and even the world, making "Yamahan" a pioneer brand in China's edible oil market and the brand leader of new oil varieties. In 2015, China's flaxseed oil market led by "Yamahan" is bound to become a major hot spot.
Facing the new market environment, consumer demand is also changing. Competition in the edible oil market will break away from traditional supply competition and gradually shift toward meeting consumer needs. And the market landscape dominated by traditional edible oil categories is also changing accordingly.