Vegetable-oil makers shift strategy

TIP Intertrade, producer of the Tip brand, has stopped producing bottled oil and shifted to supplying bulk oil to restaurants and focusing on niche markets such as salad oil.

"These sectors generate higher margins than the mass market," said managing director MR Supanee Diskul, who expects a poorer financial result this year than last year.

She said TIP would not return to the mass market even if the Internal Trade Department allowed producers to raise retail vegetable-oil prices. She said the health cooking-oil market's share of only 4 per cent of the overall market had substantial room to grow and TIP wanted to be the leader in the segment.

Palm-oil producers have asked for permission to raise the price of 1-litre bottles from Bt49.50 to Bt57.50, while soybean-oil firms have also asked for a Bt8 increase per bottle from Bt49.50. The prices were last raised early this year.

Several producers have complained that as they have to import raw materials, the price controls force them to make the products at a loss.

An executive of another vegetable-oil maker said the company had cut production. "We have suffered a loss," he said. "We have to import soybean, the price of which is escalating in line with fuel prices. Higher demand for alternative fuels has pushed up the demand and the prices of soybean and palm oil."

The executive said modern trade outlets had been informed of the lower supply. "Higher production could resume only if retail prices are increased in line with rising material costs," he added.

Thai Vegetable Oil executive vice president Sethasan Sethakarun said retail oil prices were now lower than global market prices while consumers, fearing further price increases, are stocking up. "No manufacturers are hoarding," he said.