Chinese market of sunflower oil: growing and changing

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APK-Inform

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Over the last years, Chinese market of sunflower oil is one of the most fast growing in terms of consumption and import. The article reveals overall trends of sunflower oil consumption and import in China and peculiarities of 2016/17 MY.

 

 

 

 

Despite significant consumption growth, sunflower oil still has rather small share of Chinese vegetable oils market. It share in total vegetable oils consumption is 6% against 3% 8 years ago. One of the key trends of last years is slower import of vegoils in China and higher import of oilseeds (soybean, canola) for inner processing, however the tendency has not adverted sunflower oil segment. China is constantly increasing sunflower oil import, it totaled 94 thsd tonnes in 2006/07 and can reach about 920 thsd tonnes in 2016/17 MY according to COFCO forecast. Moreover, Wilmar expect the volume to hit 2 mln tones per year by 2020.

 

 

Despite stable domestic production of sunflower oil, imported oil is cheaper than local one. This fact together with growing consumption are the key drivers of import. The list of sunflower oil importers is constantly growing. Processing plants in increasing frequency avoid traders and buy oil directly from sellers for further refining/bottling that is the key trend of last years.

 

 

Moreover, China significantly increased import of bottled sunflower oil in 2016 and the trend seems to strengthen in 2017. Traders suppose that currently there are about 1000 brands of sunflower oil on Chinese market (including regional brands, private label, import of original oil from Russia and other countries). 

Additionally price difference between sunflower oil and key products of Chinese market (soybean and corn oils) influences on import and inner consumption. Higher global production of sunflower oil improved competitiveness of the product last years.

Significant development are observed in logistics. Before 2012 almost whole volume of imported sunflower oil passed through Shanghai port. However, over the last 5 years China imports sunflower oil through 3 main ports – Shanghai, Nanjing and Tianjin (their shares are 40%, 30% and 20% correspondingly). In January-October 2016, China imported sunflower oil through following ports: Shanghai (271 thd tonnes), Nanjing (216 thsd tonnes), Shenzhen (21 thsd tonnes) and Tianjin (153 thsd tonnes).

Over the last 3 years list of TOP-3 Chinese importers of sunflower oil is stable – Yihai, COFCO and Sinopharm. However, Yihai and COFCO are increasing oil import in 2016, while Sinopharm is lowering.

Except overall higher import, growing supply of South American sunflower oil and significant uptrend in import of Russian product are the key trends of Chinese sunflower oil market in 2016. These trends will be observed in 2017.

Chinese market of vegetable oils faced high activity in October mainly in segments of soybean and corn oils. Sunflower oil market was rather calm mainly due to previously obtained stocks. China imported 716 thsd tonnes of sunflower oil in January-October 2016, up 47% on year. The share of Black Sea oil totaled 85%, however the share of Russian product significantly increased. China imported 45 thsd tonnes of Ukrainian oil, 10 thsd tonnes of Russian and 21 thsd tonnes of Argentinian in September. Wilmar forecasts total import of Ukrainian sunflower oil to reach 660 thsd tonnes, Russian and Argentinian – 110 thsd tonnes each in 2016 (share of Russia and Argentina to increase in comparison to 2015).

 

Marketing aspects

During the recent years, China is increasing vegetable oils consumption. In 2015, per capita consumption reached average global 23 kg. According to COFCO, structure of vegetable oils consumption is changing significantly. Consumption of rapeseed, sunflower, groundnut oils is increasing while that of corn oil as well as blends of different oil types is going down significantly. Remarkably, the sharpest growth occurred in sunflower oil segment and the strongest gain is expected in 2017-2018.

What is pushing sunflower oil consumption up? Firstly, strong marketing events. According to Zhongtian Galaxia/Ereli monitoring, costs of sunflower oil advertising in China increased by 41% in the first half of 2016. Producers are not only ramping up advertising but also use such expensive methods as engaging movie and TV stars acting as spokespersons of different oil brands. Spokespersons of Arowana brand produced by Wilmar are movie and TV stars Angelababy and Huang Xiaoming, while famous Chinese TV chief cook promotes Mighty sunflower oil brand.

However, the consolidation is the main marketing trend. Despite actively growing number of new Chinese sunflower oil brands (without mentioning imported bottled oil from Russia and other countries) people are loyal to 5 the most popular brands.

 

 

Fulinmen Sunflower seed oil (selling – product for healthy family, quality, health), Arowana sunflower oil (on-trend product, new family choice, 100% European oil), Mighty sunflower oil and Lu Hua Sunflower oil are currently the main brands of sunflower oil in China.

 

Fang Gang, marketing director of Wilmar China

 

- What can you tell about development of high-oleic sunflower oil market in China in 2016 and what are the further prospects of the segment?

China will import only about 10 thsd tonnes of high-oleic sunflower oil in 2016, so it is rather small market niche now. However, there is one moment that can turned the market. Chinese branch of McDonald’s announced that all restaurants will shift to high-oleic oil for frying since 2017. However, they did not clarify the type of oil, it can be sunflower oil (and so its import to China can reach 30 thsd tonnes in 2017) or canola oil.

 

- What volumes of sunflower oil imports do you expect in coming months?

We expect China to import 80 and 70 thsd tonnes of sunflower oil in November and December correspondingly. It is difficult to predict volumes for January-February, however, there can be traditional consumption growth in January due to holidays. Thus, the companies are hurrying up to form necessary stocks.


 

- Is the competition between Argentinian and Black Sea oil getting stronger on Chinese market?

Yes, the supply of Argentinian oil increased, however Black Sea product, especially Ukrainian, has higher demand on Chinese market. Quality of Argentinian oil is the main problem. Moreover, Black Sea oil has better perception as Chinese consumers prefer European products against South American. Therefore, I do not think that Ukrainian exporters should be nervous about competition with Argentina on Chinese market.   

 

 

Svitlana Synkovska,

APK-Inform/ISOA

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