Sector insight: edible oils

High numbers of Brits have embraced the Mediterranean diet, with its lavish use of olive oil. Many are even trading up to premium olive and speciality oils, with their ornate bottles and exotic flavourings making them as much a fashionable kitchen accessory as a healthier and tastier ingredient.

So while sales of lard and standard vegetable oils in liquid or block form have decreased in the past few years, single-seed and speciality variants have flourished. This has been driven by the rise in ethnic cooking, which has boosted sales of groundnut, walnut and sesame oils.

The increase in sales of olive and speciality oils has buoyed the overall value of the market. As consumers have shown a willingness to pay the premium that these oils command, so the market has benefited. In 2007, it was worth £267m according to Mintel, a 40% rise on 2002.

As modern cooking involves more hob use, with stir fries now tending to be the order of the day rather than roast potatoes, solid oils have lost out.

Once a major competitor to edible oils, the yellow fats market (butter and margarine) has been increasingly sidelined as consumers watch their fat intake more carefully. Between 2002 and 2007, volume sales of yellow fats fell by 2%, according to Mintel.

Similarly, the all-purpose vegetable oil that used to suffice for most cooking is making way for more specific products. Where once one bottle of vegetable oil would have been adequate for all frying needs, kitchen cupboards are now more likely to house several premium oils, all of which offer different culinary propositions.

In terms of new product development, the key innovation has been spray oils. These first appeared with the launch of FryLight in 1995, and appeal to shoppers looking to restrict their fat consumption. The spray mechanism and 'per spray' on-pack calorie information means dieters can easily measure the calorie count in the amount of oil they use in frying. One drawback has been that, historically, they have contained added emulsifiers, water and alcohol, but in September last year Filippo Berio introduced two 100% natural, additive-free olive oil sprays.

Filippo Berio, a family-owned Italian company, is distributed by RH Amar in the UK, and is the leading brand in the olive oil market by some distance. The most recent addition to its range is an unfiltered extra virgin olive oil, launched this month. This slightly cloudy variant contains some sediment from tiny particles of fruit, and its richer texture and flavour makes it suitable for use as a condiment.

Unilever Bestfoods' Bertolli brand is another major player in the olive oil category. Renamed from Olivio to Bertolli in the UK in 2003, as part of Unilever's global masterbrand strategy, the brand extends across other food sectors including sauces, spreads and snacks. Its positioning is focused on the healthy Mediterranean diet and lifestyle, and its ads use the strapline 'Spread the goodness of the olive tree every day'.

Pura Foods is the leading supplier of own-label oils in the UK. Its Pura and Trex brands compete in the solid oil sector, but it also makes Pura branded oils and Golden Touch rapeseed oil.

Heavy users of edible oils tend to be 35- to 54- year-olds ABs, often with children. Low or non-users are likely to be 15- to 24-year-olds or the over-65s, DEs or one-person households. As the number of single-person households rises and the 65-plus age group expands, brands will need to find more effective ways of appealing to these segments.

By 2012, the premium oils market is expected to have grown by almost 50%, to reach a value of £411m, according to Mintel. When food inflation is accounted for, this will equate to 37% growth.

Specialist oils will be instrumental in value growth, as will the emergence of healthily-positioned 'superoils' containing added vitamins and minerals. The increasing AB population is predicted to be a key factor in the sector's expansion, as higher levels of disposable income make consumers more inclined to trade up.

However, while liquid oils will profit, solid oils will decline, with sales expected to drop by 16% over the same period. This format tends to be more popular with older consumers, and while these will account for a growing proportion of the population, their increased affluence and health-awareness will make them less likely to opt for solid over liquid oil varieties.

Analyst comment

Fizzah Kazmi,  Research analyst, Euromonitor International

Sales of edible oils continue to rise, with higher unit prices the greatest contributing factor. While multi-purpose olive oil leads the market, consumer awareness and growing health concerns have led to an explosion in the variety, provenance and format of edible oils available.

 The industry has responded to consumers' growing, and some-times diver--gent, demands, with cholesterol-free products, as well as oils containing Omega-3, 6 and 9. Manufacturers have also produced virtually trans fat-free oils, such as AAK's Again and Again product and the spray-format Less Cal.

Another factor that has fuelled the rise of speciality oils is experimentation in cuisine. Truffle oil, for example, has proved popular, with consumers willing to pay premium prices for high-quality oil that complements fish and pasta dishes.

More surprising, however, has been the continued strong performance of vegetable oils, which are experiencing year-on-year growth of 14%. While this rise

is often attributed to the aforementioned increase in consumer awareness of healthier lifestyles, it is widely believed that this has manifested itself predominantly in the growing popularity of olive oils.

An alternative explanation is that vegetable oil is being used to create biodiesel for cars, as consumers face rising fuel prices. With the aid of converters, vegetable oils can produce fuel at a cost as low as 42p per litre, compared with average diesel prices of 166p per litre, and this seems to be a factor that will bring its impact to bear on the market for the foreseeable future.

As a result, consumer awareness and health concerns are not necessarily entirely responsible for growth in the market.