Food processing giant ADM already has a presence in India through subsidiary Tinna Oils and Chemicals Ltd. and ADM said that this latest acquisition from Noida-based Geepee Agri Private Ltd, a major Indian edible oil maker, complements current operations.
President of ADM Europe Brent Fenton told FoodNavigator-Asia: “In addition to being an important supply region for our oilseeds business, we see India as a key destination market due to growing populations and incomes, and therefore growing demand. These acquisitions extend our processing footprint in the Indian subcontinent.”
The Indian edible oil market accounts for 10.2% of global consumption, according to a July report from Indian credit rating company ICRA and had a compound annual growth rate of 4.43% between 2001 and 2011, driven by improvement in per capita consumption as a result of rising income levels and living standards.
India’s annual capita consumption however, remains significantly lower than the world average of 24kg, at 14kg, indicating high growth potential, according to the ICRA report on India’s edible oils industry.
Diverse, large-scale companies: strong players
The report identified palm, soybean and mustard oil as the three main edibles consumed in India and said that companies with a diversified presence, catering to these three main categories, will be better placed for growth than companies offering a single product.
The two facilities acquired include soybean crushing, refining and packaging capabilities enabling ADM to produce vegetable oil and meal for the food and animal feed markets and a palm oil refinery. The two plants serve the domestic market for packaged oils and the export market for soy meal. The Kota site has rapeseed production facilities allowing ADM to tap into the domestic and export rapeseed oil markets as well.
Senior analyst at ICRA Ltd Ankur Malik told FoodNavigator-Asia: “Domestic sale of edible oils and export of oil meals is a complementary strategy being followed by many Indian edible oil companies.”
ICRA said the edible oil market in India has been characterised by commodity price volatility and is a highly fragmented industry, resulting in severe competition and thin profitability margins.
Malik said: “The large-scale, integrated edible oil companies are, in general, better placed compared to stand-alone refiners and bulk traders of edible oils. They are better placed to withstand the challenges in the business environment.”
ADM’s acquisition fits ICRA’s forecast of expecting large-scale integrated players to lead the industry through expansion, acquisitions and consolidation.