Fats & Oils Market Dynamics & Global Forecast to 2026

The global fats and oils market is estimated at USD 236.7 billion in 2021; it is projected to grow at a CAGR of 3.8% to reach USD 285.2 billion by 2026. The market has a promising growth potential due to a plethora of factors, including the rising awareness to use healthier alternatives such vegetable-derived oils among the consumers, increasing health concerns about traditional fats, and increased consumption of processed and baked food items.

Apart from food industry, vegetable fats and oils are also increasingly used for industrial applications, such as soaps, detergents, paints, oleochemicals, the major one of them being biodiesel.

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Driver: Increasing demand for food boosting global consumption of vegetable oils

Edible oil products such as palm oil, sunflower oil, soybean oil, canola oil, among others, generally undergo purification through various methods, such as degumming, neutralizing, bleaching, and deodorizing, to produce uniformity in high-quality oil. In the purification process, minor components are either physically or chemically separated as they are considered impurities. The high-quality edible oils are mostly referred to as refined oils. Refined oils are high in monounsaturated fats.

High-quality oils are made using advanced technologies and are considered a rich source of nutrition. Hence, their consumption is increasing every year due to its increasing application and the growing population. However, the demand for high-quality oils is growing as consumers are opting for healthier alternatives to maintain the taste while enhancing the nutritional value. To meet this demand, manufacturers are improvising on processing technologies and also enhancing their product portfolios. ADM (U.S.), along with Novozymes (Denmark), developed a technology that revolutionized the fats & oils industry. This technology helped the company in manufacturing high-quality edible oils by utilizing enzymes in the developing process.

Restraint: Labelling of fat & oil products and the safety issues

Significant changes in the competitive position of important vegetable oils imply severe cost impacts and potential threats to some of the food products. Within this environment, the vegetable oil market in the world, especially the US, is under pressure because of various legislations. Also, there is a high degree of anonymity of the exact content in the food ingredients due to the use of ambiguous terms such as ‘vegetable fats’ or ‘vegetable oils.’ As a result, the exact composition of the ingredient and its role in the overall formulation is not identified.

New requirements to label trans-fatty acid levels in foods are creating pressure to shift to other formulations for producing hydrogenated oils, thereby increasing the demand for oils as an alternative to trans-fats. In the US, the standard for a product labelled as "vegetable oil margarine" specifies that only canola, safflower, sunflower, corn, soybean, or peanut oil may be used. Products not labelled as "vegetable oil margarine" do not have that sort of restraints. With the implementation of new legislation, consumers will be more informed about the inherent risks in foods containing trans-fats, and this would force them to look for suitable alternatives.

Opportunity: Emerging application of fats and oils as substitutes of trans-fats

Trans-fats are unsaturated fatty acids formed during the hydrogenation of vegetable oils or are found in animal products naturally produced in the gut of grazing animals. Consumption of trans-fat raises the level of low-density lipoprotein cholesterol in the blood. An elevated LDL blood cholesterol level can increase the risk of developing cardiovascular. Trans-fats are found in many food products, such as vegetable shortenings, stick margarine, refrigerated dough products (such as biscuits and cinnamon rolls), snack foods, coffee creamers, cookies, cakes, frozen pies, frozen pizza, and fast food.

Owing to the increased health consciousness among consumers, trans-fats are gradually replaced by a much healthier substitute, namely unsaturated liquid vegetable oils, such as olive, canola, corn, or soy oils.

Challenge: High dependence on imports, leading to high costs of end-products

There is a significant gap between the demand and supply of oilseed processed products, such as edible oil, owing to the limited availability of oilseeds in some domestic markets. For instance, India and European countries import palm oil on a large scale from Indonesia and Malaysia, which are the leading producers, owing to the favorable climatic conditions of these countries. Palm oil is widely used in the confectionery products sector, which experiences high demand in India and other European countries.

Similarly, the European personal care product manufacturers depend on high-cost imports of shea butter from South Africa, which accounts for a significant share of its production. Due to the high dependence of these countries on imports of palm oil and shea butter, respectively, their import cost as well as the cost of the end products increases, which serves as a challenge for the market.

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Key global market players offer wide range of fats & oils products in the retail chain. While prominent palm oil producing companies are present in Asia pacific region. The soybean oil producing companies capture the North American market. The key companies in the fats and oils market are Associated British Foods PLC (UK), Archer Daniels Midland Company (US), Bunge Limited (US), Wilmar International Limited (Singapore). Various strategies, such as expansions, mergers & acquisitions, and new product launches, were adopted by the key companies to remain competitive in the fats & oils market.

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