Ghee, cooking oil makers feel heat of collapsing demand

Producers of ghee and cooking oil are reporting a rapidly shrinking market, as consumers
search for cheaper alternatives and retailers become wary of placing order following the
newly introduced condition to obtain a CNIC of all parties purchasing or providing supplies
to registered businesses.
Many distributors are non-filers, coupled with restriction of filling the form requiring details
of shopkeepers, the requirement has put the brakes on an industry that was already
struggling due to collapsing purchasing power, manufacturers of the vital food told Dawn.
Shopkeepers, especially non-filers, are also not interested in piling up stocks in bulk
quantities.
Painting a grim sales picture of his industry, former chairman Pakistan Vanaspati
Manufacturers Association (PVMA) Abdul Majeed Haji Mohammad estimated sales decline
of 30-35 per cent during July to August alone.
Another manufacturer, who has also been chairman of the PVMA in the past, Sheikh Amj ad
Rasheed said sales of branded items fell by 10-15pc in July and August while unbranded
sales saw 30pc drop.
He said branded products do not suffer heavily as they run on “consumers’ loyalty.”
Amjad said he had reduced ghee and edible production by 30pc in his Karachi unit to 70
tonnes a day.
This is a massive drop for any manufacturer to sustain without resorting to drastic cost
reduction measures, mostly layoffs.
“The axe of unemployment basically falls on daily wage earners,” he told Dawn. “Contract
and full-time employees are the last to face the axe.” The daily wage earners are the poorest
rung of the working classes.
A ghee/cooking oil producer in Khyber Paktunkhwa said sales have been depressed by at
least 40pc in July and August and also pointed to the CNIC condition as the main culprit.
The government has introduced the condition as a means to spur documentation among
small and medium enterprises, especially in the services sector, whose tax contribution is
minuscule by comparison to its 20pc share in the country’s GDP.
But distributors are only part of the problem. “The price has risen by at least Rs20 per
kg/litre in ghee and cooking oil from July 1 till to-date,” the Peshawar-based producer told
Dawn.
For their part consumers, faced with a serious constraints on their purchasing power, are
increasingly buying ghee and cooking oil in one kg or litre pouches to instead of 2.5 and
five kg ghee/cooking oil tins, in a spend-as-you-go pattern of consumption that is
increasingly being seen in other markets as well.
Keeping in view low demand, some manufacturers have already introduced half kg/litre
ghee and cooking oil pouches while others are also seriously looking to follow the suit. “A
number of people purchase goods as per their requirement and this trend is also visible in
other products also because of rising cost of living in the last one year especially,” he added.
Karachi Retailers Grocers Group General Secretary Farid Qureishi said some manufacturers
have also been making 250-gram pack of ghee and cooking oil to meet the demand of low-
end consumers.
According to Pakistan Bureau of Statistics, the country’s vegetable ghee production fell by
3pc in FY19 to 1.376 million tonnes while cooking oil production slightly inched up by two
per cent to 400,000 tonnes in FY19.
Despite 10.7pc rise in import of palm oil to 3.147m tonnes in FY19, the import bill declined
by 9.6pc to $1.844 billion. It means that average per tonne price in FY19 plunged to $586
per tonne from $717 per tonne in FY19 which encouraged the manufacturers to import
higher quantities.
However, consumers have been paying higher prices for ghee and edible oil due to massive
devaluation of rupee against the dollar.
Soy bean oil imports showed 3.7pc and 21pc fall in FY19 to 150,912 tonnes and $ 107m,
respectively.