Ukraine

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8:31 AM Friday, December 15, 2017
Agriculture
Sun Oil: Brand and Bottle at Home
Ukraine is king of ‘sunoil,’ but 16 other vegetable oils compete for the world’s kitchens
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KYIV – Long “Europe’s breadbasket,” Ukraine should now re-brand itself as a Black Sea fountain of natural sunoil.

“The industry needs to move up the value chain, to focus on the consumer, on marketing campaigns, instead of focusing on growing seeds and selling bulk,” says Bohdan Chomiak, who does strategic advising work for UkrAgroConsult. “When you sell bulk, your margins are small and you can’t break the correlation with other oils.”

For two years now, the acreage of Ukrainian farmland planted in sunflower equals the acreage planted in wheat, the nation’s historic crop. Of Ukraine’s 12 largest crops, sunflowers had the highest profit margins last year.

But threats cloud Ukraine’s sunflower oil production, warned experts gathered here for the annual Black Sea Veg Oil Trade conference, sponsored by UkrAgroConsult.

Sergey L. Feofilov, general director UkrAgroConsult, warns Ukrainian sun oil producers not to be complacent. He cited the collapse of Ukraine's sugar industry in the 1990s, when Ukraine lost it's 'captive' markets -- Russia and other former Soviet states. (James Brooke)

Competitors Multiply

Conference speakers walked attendees – from 31 countries – through the maze of competitors to Ukraine’s cooking oil – palm oil from Malaysia, a soy oil boom in Brazil, and Russian sunflower producers cutting into Ukrainian market share in China and India. Russia is inaugurating 10 Black Sea ports – from Anapa to Sochi – speed its own ‘sunoil’ to foreign markets.

Ukraine’s position as the world’s top sunoil producer and exporter is vulnerable, warned Sergey L. Feofilov, general director UkrAgroConsult

Land prices – in the form of rents – are climbing from 3 percent of normative values to 15 percent. Labor costs rise as Ukrainian farms raise salaries to keep workers from migrating to the EU. Benefits of the hryvnia devaluation of 2014-2015 are wearing off as producer prices inflate. Over the last decade, the number of seed crushers has fallen by one third, to 220. This creates the risk of monopolies and higher prices.

Ever Changing Market

And the outside world is not sleeping.

“China has abolished its price support policy for corn – their soy production will be 4.4 million tons larger than last year,” said Artem Hammerschmidt, a senior analyst with Oil World, the Germany-based global market research oilseeds, oil and fats. “Imports from China will stagnate, albeit at the very high level of 93 million tons.”

In Indonesia and Malaysia, planting and higher yields have helped to double in a decade palm oil’s share of the world vegetable oil market – to 34 percent, Hammershmidt said.

This year, the world’s top three importer of vegetable oils will be India at 16 million tons, the EU at 12 million tons, and China at 9-10 million tons.

G. Chandrashekhar, an agro specialist from India, the world's largest market for imported cooking oil, says Indians respond to 'healthy' branding. (James Brooke)

Cooking Oils Can be Interchangeable

Ukraine controls 57 percent of world sunoil exports. But sunoil is only one vegetable oil in 17. And, since the year 2000, world production of vegetable oils has doubled.

“Price spreads between sun oil, palm oil, and soy oil are converging -- prices are becoming interchangeable,” Feofilov warned.

The solution for Ukraine’s sunflower oil is branding and marketing.

“Sunflower oil needs to be pitched as a healthy oil,” G. Chandrashekhar, a global agribusiness specialist from India, told the conference at the Kyiv Hilton. “You need to demonstrate sunflower oil’s strong health benefits as regards to palm oil. You must have a promotional budget.”

Canola Saves Rapeseed Oil

Chomiak, a Canadian, cited the successful re-branding of cooking oil made from rapeseed.

In supermarkets, the label ‘rape oil’ repelled housewives. As a result, in the 1970s, the Rapeseed Association of Canada rebranded their cooking oil as “Canola” -- "Can" for Canada, and "ola" for oil.

Canola, then a trademark, was touted as a low cholesterol alternative to corn oils. The U.S. Food and Drug Administration cautiously opined in 2016 that consumption of canola “may reduce the risk of coronary heart disease due to the unsaturated fat content in canola oil.”

Natural Sunoil

Given Ukraine’s negative international image, attendees were divided about using the name ‘Ukraine’ to promote the nation’s ‘sunoil.’

At the conference, attendees were handed goodie bags containing 250 milliliter designer bottles filled with sunflower and linseed oil. Labelled ‘eco,’ each bottle carried a green foil seal marked -- four times -- “organic.”

Instead of sending to cooking oil tanker trucks to Germany, Ukraine should add value by bottling and labelling sun oil at home.

“At a Metro supermarket in Berlin, I saw a one liter bottle of Ukrainian oil selling for EUR 1.55,” recalls Chomiak. “At that price, we can bottle and put on the trilingual labels right here in Ukraine.”

Slider Photo: The sunflower, the national flower of Ukraine, attracts a girl in vyshyvanka last weekend at Kyiv’s Museum of Folk Architecture and Folkways of Ukraine (UNIAN/Aleksey Ivanov)

For comments and story tips, email UBJ Editor in Chief James Brooke at james.brooke@theubj.com

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