The global specialty fats & oils market size is estimated to be USD 12.6 billion in 2020 and is projected to reach USD 19.8 billion by 2026, at a CAGR of 7.8% during the forecast period. One of the major factors driving the specialty fats & oils industry is the increasing gap between cocoa butter demand & supply. Also, the increase in the consumption of confectionery and processed foods and rise in the demand for clean label food products have been driving the growth of this market.
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COVID-19 Impact on the Global Specialty Fats & Oils Market
As this virus continues to spread rapidly at a global level, countries across the globe are trying to prevent further contagion by taking measures, such as social distancing, contact tracing, self-quarantining, surveillance, communication, and testing. The supply and demand for specialty fats & oils in the global market has shifted as a response to the coronavirus crisis, with an increasing uncertainty related to prices. Palm oil, which is the largest type of oil produced globally, faced the impact as demand dropped across the world, trade was disrupted, and production got hampered in Indonesia and Malaysia, according to the top producers of the vegetable oils such as Wilmar International and Mehwah Group that operate in the region. The bakery and confectionery industries observed a spike in sales, with people stocking up on these products during lockdowns. The bakery and confectionery industries also observed a spike in sales, with people stocking up on these products.
Driver: Fluctuations in global cocoa production
Cocoa beans are among the key ingredients being used in the production of chocolate. However, in the recent past, the overall production of cocoa beans has been slightly hampered due to uncertain climatic conditions that are being endured in top cocoa-producing countries. With the rising demand for cocoa as an ingredient on the one hand, and a decline in the production rate on the other, specialty fats offer an alternative solution. Specialty fats such as cocoa butter equivalents, cocoa butter replacers possess a similar set of characteristics as that of cocoa. Moreover, specialty fats are less expensive than cocoa butter.
Restraint: Health concerns pertaining to the excessive consumption of fats and oils
Excessive consumption of hydrogenated fats & oils increases the level of LDLs (low-density lipoproteins) and decreases the level of HDLs (high-density lipoproteins) in the blood, thereby increasing the risk of the thrombosis. This is because the PUFA in vegetable oils oxidize automatically during food processing, resulting in the production of inflammatory peroxides and hydroperoxides. Thus, awareness about the negative health effects of the inclusion of trans-fatty acids is affecting the confectionery fats & shortenings market, and in turn, the confectionery ingredients and specialty fats & oils market.
Opportunity: Rise in demand for natural cosmetic products
Over the years, there has been a growing preference for natural products over artificial chemicals in the beauty and personal care industry. The culmination of factors such as the rise in the number of the millennial population specifically in the Asia Pacific region, a surge in online presence and use of the internet, increase in per capita income a growing awareness toward sustainable and environmentally-friendly products has all together driven the market for organic cosmetics and personal care products. This has resulted in an increase in the demand for specialty ingredients such as palm oil, olive oil to be used in the beauty and personal care industries in the recent past.
Challenge: High dependence on imports, leading to high costs of end products
There is a significant gap between the demand and supply of oilseed processed products, such as edible oil, owing to the limited availability of oilseeds in some domestic markets. India and European countries import palm oil on a large scale from Indonesia and Malaysia, which are the leading producers, owing to the favorable climatic conditions of these countries. Palm oil is widely used in the confectionery products sector, which experiences high demand in India and other European countries.
The specialty oils sub-segment is estimated to account for the highest market share in the by type segment for Specialty Fats & Oils market
Specialty oils are derived from sources, such as palm, coconuts, soybeans, sunflower, rapeseed, and other sources such as peanut and olive oil. These oils have unique properties that are desirable in industrial and non-edible applications. Palm, coconut, and sunflower oils are growing in their market shares, with the increasing demand for vegetable oils, in the growing bakery and confectionery businesses. The constituent fatty acids of each culinary oil are primarily responsible for the functionality of these oils, along with their minor components. Sunflower oil is used in the cooking of foods such as French fries and frozen pre-fried foods at home, in fast-food restaurants, and in the industry. High growth is observed in developing regions such as Asia and the Middle East, with the increasing trend toward the use of vegetable oils for cooking and household use.
By Application, the infant nutrition sub-segment is estimated to observe the fastest growth in Specialty Fats & Oils market
In highly developed and rapidly urbanizing nations, there is a rising focus on the emerging trend of feeding infants with infant formulas and infant food lipids, which are primarily mimicked based on the composition of mother’s milk. Because there were a lot of variations in mother’s milk from different regions of the world due to varied diets, the development of one such compound with optimal levels of nutrition was essential. Here, specialty fats and oils play a crucial role, as they need to be added to the product, to balance the overall fatty acid composition.
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Asia Pacific is estimated to be the largest market
The Asia Pacific region is estimated to account for the largest share of the global specialty fats & oils market in 2020. The rising income, purchasing power, rapid growth of the middle-class population, and consumer demand for processed products present promising prospects for growth and diversification in the region’s specialty fats & oils sector. The application of specialty fats is estimated to increase at a higher rate due to the demand from the chocolate & confectionery industry. Countries such as China and India recorded the highest vegetable oil consumption. According to the Food and Agriculture Organization (FAO), in 2017, China consumed about 35 million tons of vegetable oil, whereas India consumed about 23.8 million tons.
The major vendors in the global specialty fats and oils market are Cargill Incorporated (US), Wilmar International (Singapore), Bunge Limited (US), Mewah International (Singapore), and AAK AB (Sweden).