Indonesia oil ban poses new problems for packaged food brands

Faced with rising prices domestically, Indonesia’s decision to restrict exports of palm oil is expected to affect prices of edible oils around the world, with implications for global packaged food manufacturers such as Nestlé, Mondelez and Unilever. 

Why it matters

Food manufacturers are already facing shortages of sunflower oil because of the war in Ukraine. At the same time, exports of other major oils are under pressure, as droughts in South America affect soybean production and poor canola crops in Canada hit rapeseed oil manufacture. 

Palm oil, already widely used as both a food ingredient and a cooking medium, was a fallback option, but with the world’s leading producer banning refined exports after tomorrow, prices will inevitably rise and shortages could hit within weeks – brands will need to be prepared to cope with supply interruptions and retail price hikes.

Context 

• Unilever says it has enough supplies for now and is well placed to look for alternative materials, Bloomberg reports. 
• In India, Hindustan Unilever, Nestlé India and ITC are among businesses expected to be directly affected, with categories hit including biscuits, noodles, cakes, potato chips and frozen desserts.
• As the second-biggest producer of palm oil, Malaysian exports will rise, but food manufacturers domestically can’t escape the price rises. 
• China imports significant amounts of both palm oil and soybeans, which will add to inflationary pressures on the government there.

Sourced from Japan Times [Image: Pixabay]