Palm Oil Market to Witness Steady Growth with Preeminent Demand in Foodservice Segment, Says Fact.MR

Published: Thu Oct 18 2018

Ongoing efforts to achieve complete transparency and sustainability in the palm oil supply chain is expected to prominently influence the growth of the palm oil market. According to the report published by Fact.MR, the palm oil market is projected to grow at a moderate pace while representing a CAGR of 3.9% during the forecast period 2017-2022. The report focuses on the palm oil market performance in the food and beverage sector which captures the major share among other end users such as biofuel and pharmaceutical. Demand for palm oil in the global food and beverage sector is expected to report over US$ 33 billion revenue generation by 2022 end.

Fact.MR study reveals that the ongoing clean label trend is likely to influence business strategies of the palm oil stakeholders with a greater focus on establishing greater transparency in the supply chain as well as product labelling. Amid the rising clean label trend in the European food industry, research shows that Europe palm oil market is projected to dominate the global palm oil demand while representing the most attractive CAGR of 4.9% during the forecast. Amid recent EU ban on the palm oil in the transportation fuels, the food and drink industry in Europe, EU’s biggest manufacturing sector, is expected to maintain its leading palm oil demand during the forecast period.

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With the establishment of the North American Sustainable Palm Oil Network (NASPON) by RSPO members, the North America palm oil market is expected to surpass US$ 5.5 billion by the end of 2022. This growth can be attributed to stakeholders’ initiatives in delivering sustainable palm oil to the end users.

The processed palm oil segment is estimated to outsell its counterpart - virgin palm oil by capturing three-fourths of the total market share in the palm oil market. This growth can be attributed to the higher concentration of saturated fatty acids present in the processed palm oil as compared to virgin palm oil. Demand for virgin palm oil remains concentrated in traditional cooking habits, however, the segment accounts for only a third of the total product type revenue in the palm oil market.

Demand for palm oil in the foodservice segment is estimated to be the highest with the revenue generation of worth over US$ 13 million by the end of the forecast period. The food processor segment in the palm oil market is expected to present an opportunity of worth US$ 9 billion by 2022 end against the backdrop of growing demand for palm oil in the food ingredients industry.

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While modern trade continues to dominate the distribution channel segment with over US$ 13 billion in revenue, the speciality store segment is the most attractive distribution channel in the palm oil market. As leading market players are engaged in expanding their market presence using additional marketing strategies, speciality store segment is expected to expand rapidly at a CAGR of 4.4%. Despite its lower market share, online distribution channel is the second most attractive distribution channel with almost 19% of the total market share by 2022.

Manufacturers in the palm oil market are focusing on achieving sustainability statement by implementing innovative strategies to enhance transparency and traceability in the palm oil supply chain. For instance, Nestle has recently announced the implementation of a satellite-based service to monitor the company’s palm oil supply chain across the globe. BASF and Unilever have also initiated steps to achieve transparency in their palm oil supply chain and product offerings. However, increasing preference for close substitutes of palm oil such as soybean oil and rapeseed oil and their affordable cost can pose challenges to the growth of the palm oil market. In addition, the rising cost of production caused by sustainability factor and broadening supply-demand gap is expected to present challenges of low-profit margins in the palm oil market during the period of assessment.

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