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The Food Processing Industry in Bangladesh

ndustry and Market Overview

The food processing industry in Bangladesh has been growing steadily with the pace of economic growth. Even in times of global economic uncertainty, Bangladesh has proven to have a strong track record of growth and development according to the World Bank. Although the surge in commodity prices especially during the second half of 2022 presented new challenges to the country, it has managed to recover from Covid-19. The industrial production for food and beverage has grown more strongly than its overall economic growth.

Presently, there are around 1,000 food processors across the country. 10% of these are made up of large and medium-sized enterprises, while the remaining are considered small businesses. Around 300 companies are currently registered with the Bangladesh Agro-Processing Association (BAPA) and these companies are accredited with food safety certifications. Despite the fact that the industry’s per capita production is still lower than that of neighbouring countries such as India and China, this is actually an opportunity for the industry to expand further.

The growth in the economy has also translated to an increase in the imports of major edible oils in the country. In 2022, total edible oils imports in Bangladesh recorded a marginal increase of 2,930 MT, or by 2.18%, to reach a total of 2,930,746 MT. Edible oils such as palm oil and soft oils (soybean and sunflower oils) are widely used in the food industry. In 2022, palm oil imports increased by 6.10% Y-o-Y to 1,511,000 MT, and soybean oil imports increased by 77,125 MT to 1,285,987 MT as compared to 2021.

The total palm oil product share in the import basket increased to 51.57% during this comparative period as compared to the share of soft oils, which decreased to 48.43% from 50.34%. The growth was driven by a few factors, mostly price parities, the Ukraine war, market inflation, the rise in USD prices worldwide as well as government intervention. In 2022, the Government of Bangladesh partially abolished palm oil and soft oil import duties for a stipulated time frame, which contributed to the higher overall imports.

Total Oils and Fats Import (MT)
  Jan-Dec
2022
Jan-Dec
2021
Change
(Vol.)
Change
(%)
Crude Palm Oil 0 2,000 (2,000) (100.00)
RBD PO & RBD PL 1,458,610 1,357,228 101,382 7.47
Crude/RBD PS 28,366 39,363 (10,997) (27.94)
Crude Degummed SBO 808,090 755,541 52,549 6.96
CSBO (from imported soybean) 477,897 453,321 24,576 5.42
Coconut Oil 23,545 16,142 7,403 45.86
Others 134,238 246,663 (112,425) (45.58)
Total 2,930,746 2,868,258 62,488 2.18

Source: MPOC Bangladesh

The increase in palm oil trade is also reflected in the Malaysian palm oil (MPO) exports to Bangladesh, which remained strong during the Jan-Dec 2022 period. MPO exports to Bangladesh were recorded at a total of 227,461 MT, as compared to the 91,386 MT recorded during the same corresponding period in the previous year. This volume represents an increase by 148.90% if compared to the same period of 2021, according to the official data released by MPOB.

The main reason for the higher imports of palm oil from Malaysia was the shortage of the Indonesian supply due to their Domestic Market Obligation (DMO), as well as Indonesia’s palm oil export ban that took place early this year, which prompted Bangladeshi buyers to source more palm oil from Malaysia. The price competitiveness of MPO vis-à-vis Indonesian palm oil (IPO) also contributed to the higher palm oil intake from Malaysia, while the Bangladeshi festive seasons contributed to the spike in the overall demand of palm oil in the country.

MPO Exports to Bangladesh by Type of Products (MT)
  Jan-Dec
2022
Jan-Dec
2021
Change
(Vol.)
Change
(%)
RBD Palm Olein 207,807 82,145 125,662 152.98
RBD Palm Oil 8,164 702 7,463 1,063.61
PFAD 3,644 2,720 925 34.00
RBD Palm Stearin 2,459 2,381 78 3.29
RBD Palm Olein for RSPO From Segregated 1,866 2,242 (375) (16.75)
CO/DPL 2,538 346 2,191 632.89
Others 982 851 131 15.39
Total 227,461 91,386 136,075 148.90

Source: MPOB

Key Segments in the Bangladeshi Food Processing Industry

As the world becomes more fast-paced, consumers are quickly adapting to new circumstances that have led to new food requirements. Packaged and convenient food industries have seen growing demand in recent years and Bangladesh is one of the countries that is embracing this new trend. From a market size of USD3.0 billion back in 2013, the market size of the domestic packaged food sector in Bangladesh has grown to USD5.2 billion in 2018 and it is projected to reach USD7.3 billion in 2023. In the packaged food market, edible oils, dairy products, and snacks are the sectors with the highest sales values. The products are expected to see a continuous growth of 6% in 2023. Other sectors that will see rapid sales growths include processed fruits and vegetables, seafood, and meat, with projected growths to be between 8-13% respectively.

The demand for packaged or ready-to cook food is expected to grow with rapid expansion driven by many factors which include rising per-capita income, an increasingly urban lifestyle, and a growing number of women in the workforce. As consumers become more knowledgeable and develop an increasing awareness by consuming social media content, there is also a growing demand for food quality or safety that will drive the need for healthy packaged and ready-to-cook food products. This is particularly true in the urban areas where the population has become more conscious of the health and nutritional benefits of food and its ingredients. This will further provide more opportunities for the local food processors to cater to the needs of this particular market segment.

The projected growth in the Bangladeshi domestic market size of packed foods for 2023 is illustrated as follows:

Source: Euromonitor

The edible oil segment is another major component of packaged food products in Bangladesh. It is mainly a liquid oil market, and almost 85% of its present annual consumption of about 3 million tonnes is consumed in liquid form, and the remaining 15% is in solid form. In the liquid oil market, palm oil holds the largest market share, but its presence is visible only in loose trading, while the branded edible oil market is dominated by soybean oil. About 30% of the total edible oils consumed in the country are sold as branded oil, which is dominated by soybean oil occupying about 95% and the remaining 5% is shared by palm oil and rapeseed/canola oil.

Vanaspati/shortening is mainly consumed by institutional users, namely, hotels and restaurants, food processing industries, biscuit and bakery industries, while cow ghee/butter is popular for household consumption. Major palm oil users include giant fast food companies, such as KFC, Pizza Hut, Nando’s as well as producers of local bakery items, industrial food, fried food items, instant noodles, and condensed milk. Vanaspati manufactures are the single largest industrial consumer of palm oil, occupying about 30% of the total consumption of palm oil in the country.

The revenue in the oils and fats segment in Bangladesh has been forecasted to reach USD2.54 billion in 2023, while the market is expected to grow by 9.54% annually. In relation to the total population figures, per person revenue of USD14.99 will be generated in 2023. The average volume per person in the oils and fats segment is expected to be at 2.4kg in 2023. The charts below further illustrate the forecasted sale revenues and volumes in the oils and fats segment of Bangladesh.

 

Source: Statista

Sources:

  1. Bangladesh Investment Development Authority
  2. Statista
  3. Euromonitor
  4. Malaysian Palm Oil Board

Prepared by Azriyah Azian

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