Edible Oils Industry in Pakistan

In Pakistani culture the use of edible oil in the form of desi ghee is very popular, but the supply shortened due to few dairy operations in the country as well as the nutritional drawbacks lowered its consumption rate, therefore alternatives such as hydrogenated vegetable oil or Vanaspati ghee originated, but again due to the health hazards related to vanaspati and desi ghee which are saturated and tans fat, through a research by Harvard School Of Public Health proved these oils as threat to increased heart disease from artery blockage. Its use was greatly decreased and the majority of the population shifted to vegetable cooking oil as a result of awareness created by government. Vegetable oil was the most preferred among the urban area which accounted to 30% because of its nutritional aspects as compared to rural where it accounted for only 4 %.As the production of edible oil increased as a result of increased consumption quantity, price, value in billions, as well as due to increased consumption the level of imports increased drastically in 2001-2002 that is from 36 rs in billions in 1970s to 634.6 rs in 2002

Porter's 5 Forces Analysis 1. Threat of New Entrants: The threat of a new organisation entering the industry is high when it is easy for an organisation to enter the industry i.e. entry barriers are low. Edible oil industry will look at how loyal customers are to existing products, how quickly they can achieve economy of scales, would they have access to suppliers, would government legislation prevent them or encourage them to enter the industry. So to summaries porters five forces model is essential to carry to help you understand your industry in depth before you enter it. There are thousands of oil and oil services companies throughout the world, but the barriers to enter this industry are enough to scare away all the big companies. Barriers can vary depending on the area of the market in which the company is situated. 2. Power of Suppliers: While there are plenty of oil companies in the world, much of the oil and ghee business is dominated by a small handful of powerful companies. All organizations have to obtain resources and provide goods or services. The suppliers can affects on strategic freedom of an organization and can influence the margins of that organization. Regarding edible oils industry there are two types of suppliers. One is a local supplier, and others are foreign suppliers. 3. Power of Buyers.

The balance of power is shifting toward buyers. Oil is a commodity and one company's oil or services is not that much different from anothers? This leads buyers to seek lower prices and better contract terms. 4. Availability of Substitutes. Substitutes for the oil industry in general include ghee, banaspati etc that can be consumed.

5. Competitive Rivalry Organizations will also be concerned with the extent of rivalry between themselves and competitors. The extent of competitive rivalry depends upon the nature of four forces described earlier. It could be concluded from previous discussion that the edible oil market is highly competitive

Swot Analysis STRENGTHS Pakistan is the fourth largest producer of cottonseed. The development of Pakistan Oilseed Development Board for oil seed promotion. Solvent extraction efficiency.

WEAKNESSES Imports of palm oil and soya bean oil. Higher population growth rates in Pakistan Few exporters of vegetable oil. Illegal practices in various segments allow the use of dangerous materials such as Nikal. Inadequate seed technology Unsupportive Government pricing policies which favored only traditional crops. Lack of non-traditional oil due to technical problems in cultivation areas and high import prices. Unregulated price and absence of government audit. Exploitations by the Govt. purchase centers due to lack of interface between farmers and processers.

OPPORTUNITIES Focusing on the secondary source of income to poultry farms which can generate a good deal of profits by being an efficient supplier. Untapped rural Market, There is a lot of potential to cater untapped market where people still use unbranded/loose cooking oil.

THREATS: Malaysian dominance of palm oil Lack of latest technology which resulted in low efficiency in refineries total production. The foreign competition from Malaysian palm oil exporter. Deteriorated law and order situation International brands are entering in the market Non-availability of basic utilities power Higher Govt. duties on palm oil imports and consumer awareness can lead lower the growth of solvent extraction sector. Illegal trade in the tribal areas of NWFP providing oil at low prices outside the restricted area that is harmful to organized ghee manufacturers.

Marketing Channel Strategy:

1. Integration: If your suppliers are many then integration would be easy If your suppliers are few then integration is difficult as suppliers are worried to lose their competitive advantage. 2. Competitive Price: Oil is very expensive and inflation depends on it. Setting the price of a product or service based on what the competition is charging. Competitive pricing is used more often by businesses selling similar products, since services can vary from business to business while the attributes of a product remain similar.

Communication planning: It is the art and science of reaching target audiences using marketing communication channels such as advertising, public relations, experiences or direct mail etc. It is concerned with deciding who to target, when, with what message and how? Public relation It is the duty of every sector to provide edible oil with nutritional benefits in this regard the illegal private manufacturers of oil are not legally authorized by the government which results in the selling of harmful raw-materials such as Nickel as a catalyst in ghee production which ultimately affects the health of the consumers and a bad publicity. Experiences The customer experience with a particular product can make the product valuable for them or worst for them. Hence in the case of edible oil the customers are satisfied with their oil and ghee that they are consuming.

Value analysis:
The edible oil industry is largely sustained by importing mainly because of the increase in population although the vegetable cooking oils are the one with nutritional value and to sustain this the process of refinement is carried out to remove harmful materials and provide the consumers good quality at lowest costs, but in this case the price per unit has sustained to 20.1 which is reasonable as compared to mid 90s where the price per unit were 30.6 and the quantity attained justifies the price that is 1196.8 at 20.1 rs per kg. The customer is satisfied by the lower price offerings in edible oil although the industry is not much satisfied in this regard. For example the market leader such as Dalda is providing quality with reduced hydrogenation and is providing quality at low costs and healthier aspects as well as the availability of Dalda in retailers through efficient channels of distribution creates value for the customer. However, in the industry lack of technology and strict government regulations by setting tariffs on imports led a contention between the palm oil importers as an important raw material.