Demand for organic products and healthy food to retain — UKROLIYA

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APK-Inform

1665

A half of the oilseed season passed. In terms of the recent events related to the pandemic, quarantine, trade bans, it is difficult to refresh memory about other factors impacted significantly on oilseed market development for six recent months. Difficult but possible! Especially when we talk about such interesting markets as high-oleic and organic markets, which sustainable development we see in Ukraine. APK-Inform talked to the company that is directly relevant to both these markets and supply its healthy food on the domestic and external markets — UKROLIYA.

The head of commercial department, Nataliya Ryasantseva, answered the questions about high-oleic oil production, and the head of Organic BU, Sergey Kuzmenko, addressed the questions about organic market.

 

Your company poses as the driver of high-oleic and organic oils market in Ukraine. Tell us about the results of Your work for the first half of the season and the main trends of these markets.

Nataliya Ryasantseva (N.R.): Targeting the high-oleic oil market for several years we know that mainly it is the market of forwarded contracts. This season is no exception. In the first half of the season-2019/20, we saw many producers and buyers signed forwarded contracts for delivery of high-oleic oil, so there were no sizeable price fluctuation and sharp surge in demand for the oil. In September 2019 – February 2020, we turned to high-oleic oil production and lowered the share of conventional oil. Thus, the share of high-oleic oil in the total offtake reached about 70% within the given period of time.

Sergey Kuzmenko (S.K.): We successfully started the processing season and selling of packed organic product — own branded GARNA organica under both previously signed (b2b clients) and new contracts to such countries as USA, China, Spain. For us, export activity is an expansion for innovative and healthy products we produce.

Sales geography of organic sunflower oil of our company in 2019/20 MY is as follows:

  • USA

The organic certificate of USA — NOP raises our export potential and opened US and Canadian markets for our organic products.

In March 2019, we shipped our first lot of organic high-oleic sunflower oil (400 tonnes out of total volume bought) to our US partners.

  • France

This is one of the countries with high demand for organic vegetable oils. We supplied our first ever lot of organic high-oleic crude oil to France. We keep on cooperate with French importers this season.

  • China

Chinese market is huge and really attractive for us. This market gives UKROLIYA chance to extend sales geography and find large number of potential buyers of organic products.

  • Vietnam

This market is not new for UKROLIYA. We have established relations with retailers and final consumers are familiar with conventional sunflower oil of UKROLIYAPRODUKT.

Now, Vietnamese consumers are getting familiar with Ukrainian organic oil. We shipped the first lot of packed refined organic oil GARNA organica (volume 500 ml).

 

— Have You already experienced any disruption in working process, in terms of the pandemic? Have You seen the decline of demand for high-oleic and organic oilseed products in both Ukraine and the world? Tell us about sales pattern of the product.

N.R.: Sure, the pandemic affected the market of high-oleic oil as well. For example, we have products branded EFFO in our portfolio. This is high-oleic oil designed to cooking, meaning that the chief cooks of restaurants and cafes are the target segment (HoRaCa segment). The quarantine closed all food locations in Ukraine as well as many importing countries. So, we see the sizable decline of demand for this product.

At the same time, the clients who buy this oil for production of chips, cookies and other food increased the volumes bought as there is a significant growth of demand for these products. Today we see a surge of demand for delivery services of ready-to-eat food. Mainly people buy fast food and pizza cooked with vegetable oil.

S.K.: We keep on selling of organic products as usual and do not see any demand decline. Moreover, sales of GARNA organica increased in Ukraine during February-March.

Today, refined deodorized oil GARNA organica has the main share in the total structure of our sales. Staying at the quarantine many Ukrainians decided to try cooking.

I want to point out that common health concern made people to pay more attention to food quality. Buyers focused on organic products.

We are sure that our nutrition is really important and could promptly activate reserves of our organism to fight against different infections.

COVID-19 pandemic affected gastronomic practice of the population as quarantine and appeal to stay at home raised the demand for delivery services of products and ready-to-eat food.

In our case, we see the growth of online sales of GARNA organica. Online sales of organic products become more popular as there is no high markup for retail products. Today, the online purchases are popular among the restricted amount of people in large cities where debit and credit cards are more widely spread.

At the same time, we intensively promote the consumerism of high-oleic organic oil through social networking. As known, oleic acid is one of the main healthy fatty acids necessary for proper metabolism.

 

— Several countries tighten quality control of imported products. Have You faced any additional requirements? Are there any other peculiarities of oilseed market functioning under current realias?

N.R.: We have НААСР system at our facility, thus the whole production process in under control in regards to products safety. However, we implemented some though measures to prevent coronavirus spread. Some our clients requested the information regarding the steps we took. We sent them our inner proceedings and orders regulating workers activity and business process during the quarantine.

 

— There is the upward price trend on Ukrainian market of sunflower seed and sunflower oil. What is the current price policy of Your company?

N.R.: We need to follow global oil price trends as we export about 75% of total volume produced. Actually, we see the significant growth of sunflower prices and respectively higher cost of sunflower oil production. At the same time, prices of sunflower oil in the global market depend on crude oil and other vegetable oils prices, mainly palm oil. Recently we eyed crude oil price collapse. However, lockdown for quarantine of palm oil plantations in Malaysia led to lower supply of palm oil causing uptrend on palm oil market and price gain of other vegetable oils, including sunflower oil.

S.K.: At the organic sector, we work under agreed contracts and fulfil them. We do not see any price correlation with conventional oil. We can expect some possible movement since the new season.

 

Oil processing plants often face oilseed deficit to fully load their capacities. How does Your company cope with this problem, taking to account the specific character of Your work? How loaded are Your plants Ukroliyaproduct and Ukroliyaorganic?

N.R.: High-oleic segment along with organic needs adherence of crop cultivation technology, practice of storing and assortment. However, such though requirements provide farmers with high profitability as premium in high-oleic segment is significantly higher.

UKROLIYA buys sunflower seeds for processing on arm's length terms and rate high success experience as well as aims at long-term mutually beneficial cooperation.

Now the company buys high-oleic and organic seeds all over Ukraine, there is no territorial specialization in this segment yet. We buy conventional and high-oleic sunflower mainly in oblasts close to our facilities — Poltava, Chernigov, Kharkov and Sumy oblasts. We also have talks with suppliers from other regions.

The company concluded forwarded contracts with farmers for delivery of high-oleic sunflower for 2019/20 MY. The share of raw materials supplied through forwarded contracts reached about 30%. Moreover, we finished construction of additional sunflower storage capacity at the beginning of the season. Currently we can store up to 45 thsd tonnes of sunflower on elevator that lets us to be full of product in the period of deficit.

Today, Ukroliyaproduct capacities are fully loaded.

However, lowering of high-oleic sunflower supply on the market that is typical for spring and summer and related upward price trend affect our production structure. Since March 2020, we increased the share of conventional oil and lowered the share of high-oleic oil.

S.K.: We have strategical partnership relations with several agricultural companies.

UKROLIYA realized the support program for farms and agricultural companies cultivating organic sunflower. We inform about the benefits of organic sunflower production, leading agronomists teach organic farming on the basis of our educational partner — the company Agroecology.

We try to provide long-lasting relationships with farmers. Our main goal is to fully load our capacities. This grants farmer that we will fulfill our obligations timely and full. Moreover, we cooperate on a give-and-take basis for processing of HOSO and LINO sunflower. So, currently it is not a problem to load our Ukroliyaorganic capacities.

 

— Ukrainian companies keep on increasing of the production of sunflower oil. However, the analysts forecast just a modest growth of sunflower seed areas in 2020. Could this affect anyhow the performance of Your plants?

N.R.: Sunflower planted area will not grow significantly, but the area under high-oleic sunflower will increase in 2020.

Thus, as year ago, we plan to focus on high-oleic sunflower oil production at the first half of 2020/21 MY.

 

— Many experts fix and forecast the further decline of the consumer demand for high-value products. Do You consider changes in the production and sales structure?

N.R.: There is a surge in demand for conventional refined sunflower oil since the beginning of the quarantine, mainly for bottled oil on both local and external markets. This is due to move to home-made food. That was the reason to increase the production of conventional bottled oil packed at 0.85 l and 1 l bottles.

S.K.: If we go off quarantine topic, I can say that demand for organic products and healthy food will retain. Moreover, people will pay more attention to their health and food choice. We are going to fully load the capacities of Ukroliyaorganic to cooperate closely with Ukrainian retail and continue to expand sales geography of organic oil.

Organic production is the business of the future! The problem of food quality is growing every year. Thus, there are more and more people who pay higher attention to food safety and chose quality organic products.

 

Interviewed by Julia Schevchenko, APK-Inform Agency

 

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