By: Suresh Thamotharan -- Senior Analyst, Agro Commodities
01 January, 2017
Increasing focus on regulatory norms such as FDA’s requirement of labeling trans-fat content in nutrition labels,and more recently, the elimination of PHO (Partially Hydrogenated Oils) for manufacturing foods has increased the demand for healthier oils to be used in cooking. This article focuses on the trend being created by high oleic sunflower oil in the quick service restaurant (QSR) industry and the competitive advantages that QSR industry suppliers are developing for the future.
Increasing global awareness on a healthy diet has shifted the use of high oleic sunflower oil (HOSO) in the QSR industry;in the U.S.andthe EU, palm oil is being replaced by HOSO. This process is being supported by new regulations on package declarations and forbidding trans-fatty acids.
As HOSO is fitting to the healthy food segment, demand is steadily growing and,in turn, forcing producers to keep up with the supply.The expectedgrowth rate of HOSO consumption is above 8percentCAGR until 2023. As Asian countries are also joining the demand trend, new solutions are being implemented to provide intermediate solutions, such as mixing HOSO with other oils for several processes.
However, there is a potential risk of shortage, due to high demand and low acreage of high oleic soybean cultivation, specifically the higher oleic content HOSO variants.
Oleic content of the sunflower can be different;above 75 percent oleic acid in the sunflower seed is accepted as HOSO. However, some buyers may ask for more than 80 percent for their processes, while others accept oleic acid content even if it is above 65 percent.Shortage risk is not associated with countries, even though all importing countries can be affected. It is mostly related to small-and mid-scale buyerswho do not have long-term contracts. Since these typesof buyers need to purchase either on the spot or on short-term contracts, they are most vulnerable to possible shortages. So, a buyer might be required to purchase lower oleic (still high oleic when compared to normal sunflower) content oil in case of any shortage of HOSO.
Demands from major buyers (buyers who require more than 1000 MT/year) are already secured, as contracts are mostly fixed from Sep–Oct 2018, for a 12-month period.
The issue comes from small-scale buyers (local companies which want to introduce new products with HOSO and ho-re-ca channel)as most of the QSRchains, hotels, and fast food restaurants are gravitating toward the trend of switching to HOSO mainly for fried products. New product launches with HOSO are 15 percent above the previous year. A similar growth figure also comes from the ho-re-ca channel. Therefore, suppliers face availability issues for smaller-scale buyers, especiallyfromWesternand Northern Europe.
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