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Vanaspati & Shortening Industries of Bangladesh – Loyal Consumer of Palm Oil

There are 4 major sectors in Bangladesh, namely household consumers, vanaspati & shortening industries, food processing industries and HORECA sector and these 4 sectors together are consuming almost 100% of annual consumption of 1.5 million tonnes of palm oil. Current annual production quantity of vanaspati and shortening is about 330,000 tonnes against installed capacity of 404,000 tonnes. Out of 330,000 tonnes, about 30% i.e., 99,000 MT is vanaspati and rest 70% i.e., 231,000 MT is shortenings. Vanaspati is produced through a partial hydrogenation process using a blend of 20% soyabean oil and 80% RBD Olein/soft stearin, while shortening is produced through blending process with 100% palm oil, a blend of palm stearin, soft stearin and RBD olein. Presently, local vanaspati and shortening industries are annually consuming about 300,000 to 310,000 tonnes of palm oil.

In pace with the growth of food processing industries, who are one of the major consumers of vanaspati & shortenings in the country, consumption of vanaspati & shortening is also growing. In stride with the steady economic development of the country vis-à-vis change of food habit of urban consumers, demand of processed foods is also growing. Urban people are now more dependent on process foods compared to past. As per latest economic census of Bangladesh Bureau of Statistics (BBS), growth of local food processing industries is fairly rapid, which is 7.7% annually. According to some industry analysts, the food processing sector in Bangladesh is a 4.5 billion US Dollar industry.

Another major consumer of vanaspati & shortening is HORECA sector, which is also growing. As per BBS, HORECA sector is growing at a rate of 7.28% annually. Urban people are now preferring to eat at eateries. To cope-up with the demand, new eateries are being opened in urban areas, which are contributing in increase of consumption of vanaspati and shortenings.

Contrary to the aforesaid facts, practically, there is no domestic use of vanaspati & shortening in Bangladesh. About a decade ago vanaspati was very popular among the household consumers and was widely used as a substitute of dairy ghee, but later consumers gradually switched back to dairy ghee, which is being consumed in the country since ancient time for preparing traditional dishes.  

Increasing trend of consumption of vanaspati & shortenings in food processing sector and HORECA sector are contributing together in steady growth of vanaspati & shortening market in Bangladesh and that resulting in increased consumtion of palm oil by vanaspati and shortening industries. Country’s most of the major refineries are equipped with vanaspati & shortening plant, although some of the plants are closed for various reasons. Noticing the increasing demand and future potentials of vanaspati & shortenings market, owners of closed plants are actively considering to restart their respective units. Besides, some of the refinery owners have decided to add vanaspati and shortenings production facilities in their existing edible oil refineries. Moreover, few new edible oil refineries, which are in process of installation, will be equipped with vanaspati and shortening plants. Accordingly, it is expected that by 2025 annual production capacity of vanaspati & shortening of the country would cross 0.5 million tonnes benchmark, which could be translated that consumption of palm oil by this sector would also be increased in similar pace.

In Bangladesh super olein is popular among the local consumers as cooking oil due to its competitive price and compatibility in preparing local dishes. Accordingly, a significant quantity of soft stearin is produced during fractionation of RBD palm olein and refiners have no choice but to use the same in production of vanaspati and shortening. Because of high markup, refiners are also inclined towards production and marketing of vanaspati and shortening. Considering all these facts it is expected that the shortening production industries in Bangladesh would continue to be an important destination for palm oil.  

Nowadays, Trans Fatty Acids (TFA) is highly discussed issue in Bangladesh. Food scientists, medical doctors and different stockholders are vocal about TFA and its adverse role on human health. They are advocating to enact law limiting the TFA level in processed food items to 2% max. This will open more opporatunities for palm oil as it is the best available replacement for producing TFA free vanaspati and shorterning.

Besides the local production, some quantity of solid fats is also imported in consumer packs i.e., in 16 kgs carton and annual import quantity varies between 6,000 to 7,000 tonnes. Imported solid fats consists of vanaspati/shortenings/margarine/fat blends/ specialty fats etc and entire quantity comes from Malaysia. Vanaspati and shortening are the major items among the commodities imported as solid fat occupying almost 50% of total import quantity followed by margarine. All these are imported to meet the requirement of local bakery industries, who prefers to use Malaysian products because of quality despite comparatively higher price. Import of solid fats are subject to 25% import duty, 4 % Import tax, 15% VAT and 5% advance income tax.

Prepared by Fakhrul Alam 

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