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An overview of edible oil industry in Kenya.

An overview of edible oil industry in Kenya.

  • Kenya is a diverse, semi modern society of approx. 43 million people, half of whom live in urban areas. In 2014, the population of people living in urban areas was estimated to be approx. 14 million people.
  • The emerging middle class, at an annual average rate of 5% and now stands at 45% of the total population which translates to 19.4 million people, is fueling consumption behavior in the economy especially on consumable goods.
  • Kenya’s well educated middle class consumers are increasingly becoming more health conscious. According to Euromonitor International, Kenyan middle class consumers are increasingly interested in health benefits for most edible commodities.
  • Kenya’s demand for edible oils continues on an upward trend as Kenya’s population continues to expand.

Kenya has more often been named as one of the most important ‘emerging markets’ in Africa. Many industries across all sectors are striving to meet the ever increasing demand of goods and services; thanks to steadily expanding national population that is increasing at an average annual rate of 2.1% (as at 2014 est.) As a result, demand for most commodities have increased has prompted many manufacturers to rethink and re-strategize their business models to be well equipped with new marketing and distribution strategies and one such industry is edible oil industry.

Cooking oil is one of the common commodities in almost every household which makes the industry one of the highly lucrative in Kenya with an average annual consumption of 500 million Litres annually. The commodity has for a long time been a compliment to most meals in our kitchens thereby making it almost inevitable a fact that has seen consumption of cooking oil increase by a margin of approx. 11% annually.The industry is oligopolistic in nature with market leaders being Bidco Africa, Kapa Oils Industries Ltd and Pwani Oils whose market shares are 24%, 14% and 11% respectively. Other market players include Golden Africa, Menengai, Diamond manufacturers, United Millers and Gill Oil. The three market leaders have been in constant competition with a sole objective of increasing their market shares but has this competition really yielded desirable results of lowering prices for the benefits of consumers? In my view, the answer is NO! These companies have not used price-competition as their key marketing strategy, instead they are using a pure-parity pricing strategy. This is because the industry has a high cross elasticity of demand and therefore it’s very likely that competitors will set their prices just the same way if one player adjusts prices downwards. As a result, the market price for the entire industry can easily slip into a downward spiral, a phenomenon too familiar to the manufactures. Further, consumption of edible oils is quality sensitive as opposed to being price sensitive, especially in major urban centers such as Nairobi and Mombasa, thanks to the increasing population of middle income class consumers. Edible oil manufacturers in this industry are therefore using non price competition strategies with a prime objective of distinguishing their products on the basis of distinctive attributes such as packaging type and design, health benefits and quality.

Future of this industryThe standard economic objective of any business is profit maximization and a business unit can only make profit if it enjoys support of consumers. While profit earning is regarded as the main objective of every business, it is essential for it survival and growth. Just like any other company in consumable goods, survival for edible oil manufactures simply means being very sensitive and reactive to the changes in consumer tastes and preferences which are fueled by changing demographic characteristics of their potential consumers as a result of but not limited to urbanization and healthy living preferences. In this regard, manufacturers must be very innovative and receptive to changing tastes and lifestyle preferences especially for the middle income consumers.

Product differentiation: Most edible oils produced in Kenya are almost similar across the industry and consumers have very little knowledge of distinct differences between these products. Product differentiation is a marketing strategy that can be used by less dominant edible oil manufacturers to distinguish their products from similar offerings in the market. In our market, product differentiation has only occurred in packing type; but less has been done on the product itself.

It’s time to innovate: Product innovation is critical, not only for cooking oil but to the entire consumer brands. In cooking oil brands category, such innovations has been witnessed in brands such as; Avena Cooking Oil (Golden Africa Ltd) which contains Omega 6 and 9 fatty acids, Elianto (Bidco) which is an example of a winterized cooking oil brand that contains healthy Omega fatty acids as well as Golden Fry (Bidco Africa) which contains essential vitamins (A & D) for a good, healthy living. With increased knowledge base and sensitivity on health matters among most consumers, product innovation is essential and inevitable in today’s merchandise.

Market Intel: The ever changing consumer taste is one of the most perplexing phenomenon for many marketers, especially for the food and personal care products. Changes in consumer attitudes, health issues and need for convenience has always compelled marketers to invest heavily in consumer insights to determine the consumption cycles and what consumers want. Therefore, companies must constantly scan the environment for emerging consumer taste and preference and be receptive to such changes just in time.

Are we therefore likely to have flavored cooking oil brands as the price competition intensifies? Are manufacturers likely to flavor their brands with cinnamon, paprika,curry, pepper and cardamom etc as a means of product differentiation?? It’s a matter of time.

To enquire for more information, request for quotation or general enquiries, contact;info@neematechnologies.co.ke or call: 0792880966 today.

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