Millers venture into cooking oil business in hope for revenue growth

Diversification strategy aimed at meeting growing consumer demands.

In Summary
  • Kenya's oil market is expected to progress at a compound annual growth rate (CAGR) of 13.37 per cent in revenue and 4.75 per cent in volume.
  • This during the forecasting period 2023-2028.
Kitui Flour Mills finance accountant Shaaban Said and the finance director Anwar Bajber during the launch.
Kitui Flour Mills finance accountant Shaaban Said and the finance director Anwar Bajber during the launch.

Millers in Kenya are diversifying into the cooking oil business to shore up muted revenue deflected by the controversial government's maize subsidy plan. 

Among them is Kitui Flour Mills, the parent company for wheat and maize flour brand Unga wa Dola, which has ventured into the sub-sector with its debut brand, 'Dola Cooking Oil', less than four months after Capwell and Eni hinted of going the same route. 

In a statement, Kitui Flour Mills said the launch of cooking oil products is part of its diversification strategy aimed at meeting consumer demands for high-quality food. 

"The rising living standards and growing consumer demands for safe, high-quality food is evolving in the country. It is against this backdrop that we saw the potential to expand downstream to meet these expectations,'' said Kitui Flour Mills finance director Anwar Bajber.

The launch of the edible oil to be manufactured in Kilifi County also seeks to spur the local economy with job creation at the company’s Vipingo-based plant.

“We are pleased to launch Dola cooking oil which demonstrates our commitment to the Kenyan market as a company rooted in the country for over 50 years,” Bajber said. 

Last year, disruption in the global supply chain worsened the cooking oil deficit in the country, pushing up the cost of a litre averagely from Sh346 in February, Sh430 in March, Sh408 in April to Sh455 in June.

This was up from Sh303 the previous year and Sh206 in 2020, meaning the prices more than doubled in less than two years.

A recent spot check by the Star shows averagely, across various retail shops, the one litre cooking is retailing between Sh340 and Sh419.

The Russia-Ukraine war saw palm oil prices surge as producing countries cut on exports to meet local demand.

As a result, cooking oil purchases jumped by 25.1 per cent to 133.95 billion due to higher prices of palm and sunflower oil globally.

However, there has been little respite in the global oil prices with vegetable oil price index easing by three per cent to 131.8 index points last month.

This is the lowest since December 2020, as lower soy, rapeseed and sunflower oil quotations more than offsetting higher world palm oil prices.

The rising cooking oil prices on low supply saw the government allow the importation of cooking fat and oil duty-free for one year, to cushion households from the high cost of living.

This is despite the existence and implementation of the EAC-CET trade regime, which puts imported finished goods such as edible oil in a tax band that attracts a 35 per cent import duty to encourage and promote local producers.

The decision has since been objected to by the Kenya Association of Manufacturers (KAM), which says importation will bring unfair competition. 

The venture by local millers in the cooking oil industry is thus expected to boost the local production of edible oils.

The oil market is expected to progress at a compound annual growth rate (CAGR) of 13.37 per cent in revenue, and 4.75 per cent in volume during the forecasting period 2023-2028.

This is according to market intelligence firm, Research and Markets.

It further notes that retail sales of edible oils will continue to grow rapidly, as edible oils are a kitchen staple that most local consumers continue to purchase.

"The growth rate in retail volume sales of edible oils will remain robust throughout the review period, aided by population growth, urbanisation and post-pandemic economic recovery,"the firm says.

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