Complex Made Simple

Investments in the vegetable and animal oils and fats industry valued at US$646 million

The Gulf Organization for Industrial Consulting (GOIC) revealed the remarkable progress accomplished by the vegetable and animal oils and fats industry in GCC countries in the previous years. This progress was the result of the increasing local demand on these products paralleling the increasing population and awareness about the important of healthy diet.

GOIC Secretary General Mr. Abdulaziz Bin Hamad Al-Ageel explained that “the number of factories operating in this area increased from 24 in 2003 to 37 in 2013. Cumulative investments in this sector increased from 278.6 million USD to approximately 646 million USD for the same period of time. Likewise, this sector’s labour force jumped from 2488 workers in 2003 to 5558 workers in 2013. As a result of these developments, the design capacity increased from about 875000 tons in 2003 to approximately 1350 million tons in 2013 (54.3%).”

The Secretary General stated: “Various oils and fats are key to GCC economies for they are part of the food security and a significant part of the diet. They are basic nutrients highly demanded in several sectors and they complement other food industries in GCC countries such as the production of feed, poultry meat, proteins and concentrates etc. This industry is also directly and indirectly linked with a number of economic sectors like manufacturing industry, soap industry, pharmaceuticals, plastic industry and chemical industry.”

Edible oil industry in GCC countries is generally based on importing crude oils for refining, because oilseeds are not available locally, except for some efforts to extract sesame oils and olive presses that have been launched in the region recently after the expansion in olive cultivation, especially in Al-Jawf region in Saudi Arabia.

In this regard, GOIC’s IMI Plus data reveal that KSA was ranked first in this area in 2013. It has 20 factories with cumulative investments of 285 million USD, 44.1% of the total GCC investments in this industry. This sector in Saudi Arabia employed 2415 workers (43.5% of the total workers in GCC countries) and achieved 59.5% of the total GCC design capacity. The UAE was ranked second with 11 factories and cumulative investments worth 225.4 million USD (39%), a labour force of 2343 workers (42.2%) and 29.1% of the total GCC oils and fats design capacity.

Thus, KSA and UAE shared about 88.6% of the total vegetable and animal oils and fats design capacity in GCC countries.

Oman was ranked fourth with four factories, cumulative investments worth 22.8 million USD, 448 workers and about 9.5% of the total GCC design capacity. Kuwait has one factory producing a number of food products including oils and facts with cumulative investments of 107.2 million USD, about 263 workers and approximately 1.8% of the total GCC design capacity. Qatar also has one olive oil filling factory with 5.5 million USD worth of investments, 49 workers and a limited design capacity of 500 tons only. As to Bahrain, it had one factory that stopped working long ago.

Estimate apparent consumption in GCC countries
According to GOIC’s data, GCC countries consume large quantities of vegetable and animal oils and fats as a result of the population growth and increase in standard of living and health awareness. GCC countries’ consumption of different types of oils and fats was estimated at more than 1.2 million tons in 2013. Saudi Arabia consumes almost half of this quantity (50.8%) and then UAE (24.4%), Kuwait (approximately 10.5%), Oman (7.9%), Qatar (approximately 4%) and Bahrain (2.5%).

Sources of oils and fats and manufacturing stages
There are oils and fats in organic tissues and cellular fluids of the seeds of some plants (oilseeds) as well as in the dairy and in tissues surrounding the internal organs of wild and marine animals. In general, vegetable oils constitute approximately 80% of the total oils, animal oils’ share is about 19% and marine oils’is 1%.

Oilseeds are the most important sources of production of oils, notably soybeans, sunflower, cottonseed, corn, peanut, olive, sesame, coconut and palm oil. Furthermore, some oilseeds are mainly used for industrial purposes and partially for food industries like rapeseed, flaxseed, castor bean, safflower seed and other seeds. As to marine oils and fats, they are fish and other aquatic oils, while animal fats are found in the milk of wild animals such as cattle, sheep, goats, buffaloes and camels.

Vegetable oils manufacture goes through several stages in order to become ready for consumption, including cleaning the seeds from soil, then peeling and cracking seeds to facilitate oil extraction process. The seeds are then cooked using steam and oil is extracted through either heat or mechanical pressure, or by using solvents, after which oil is refined and cleaned. Oil colour and acidity are then adjusted and the product is whitened doing away with the dark colour. Finally, distillation is done and impurities removed from whitened oil before packaging the product in plastic or metal containers of different capacities and putting them in cartons in preparation for storage and marketing.

Maize, sunflower and soybean oils are mainly imported from USA while most of the palm oil is imported from Malaysia and Indonesia.

The status of the industry
A comprehensive overview of this industry in GCC countries shows that they rely on importing crude or semi-refined oil for refining. There are only a few olive presses mainly in Saudi Arabia, while vegetable and animal fats are mainly produced within dairy factories operating in GCC countries.

The palm olein is the most prevalent in the GCC region because of its relatively low price, and large Asian communities accustomed to it. Moreover, there is an increased consumption of other types such as sunflower, corn and olive oil. As for soybean oil, and in spite of its nutritional value, its consumption is still low because people are still not used to it.

Most vegetable oil producing companies in GCC countries, especially major corporations, attempted to adopt efficient marketing strategies. They have become widely known in the Gulf, other Arab markets and global markets as well. They continuously seek to adapt to the requirements and tastes of consumers which helps in increasing shares and boosting exports.