Main margarine producers disagree on market trends

The CEO of Orkla Foods Romania, Aliz Kosza, said the business of the company she is running might be affected by a drop by more than 15 percent in margarine consumption in the first half of 2007 from H1 2006. The company announced higher prices on this product in the near future, due to more expensive raw material.

Kosza said that higher prices on palm oil will lead to more expensive margarine. Orkla will increase prices on the Unirea, Wiesana, Holland, and Bunica brands by 10 percent as of October 8.

“Clearly, a lower consumption will impact on our business. Margarine makes up for some 50 percent in the net sales of Orkla Foods Romania,” Kosza told Business Standard.

The price of palm oil surged by more than 40 percent, to a 10-year record, in the past two years. One ton is worth over €725 on the Amsterdam Stock Exchange. The price of industrial margarine will also rise, but the percentage is not yet known. OFR’s CEO did not mention however to what extent the company’s 2007 financial results would be affected. OFR initially-announced 2007 forecasts in terms of net sales soared to about €40 million, a 30 percent year-on-year increase. The estimate was extended after acquiring the Royal Brinkers companies in 2006.

However, Unilever South Central Europe (USCE) representatives said that the value of the margarine market has not changed in the past years and the trend is expected to remain the same. Company officials said they do not expect significant changes in the margarine market structure in 2007. Unilever and Orkla control over 95 percent of total margarine market.

According to a study made by the GFK market research company, the household margarine consumption dropped by an annual 19 percent in terms of volume in H1 2007. A lower demand was registered on the sandwich as well as on the cooking segments.

The margarine retail consumption started to fall in 2005, according to market data, and a 15 percent average annual drop in volume was observed in the past two years. Demand on the corporate segment did not drop in volume, just in value, due to maintaining the sale price.