Olive oil scare puts coconut oil on marketing toes

M Sarita Varma in Thiruvananthapuram

The olive oil cancer scare, which flared up in Spain last month, has excited the coconut oil business in India for two reasons. One, it was a similar health stigma that had long reined in the growth of coconut oil in its edible oil segment. Two, it was the fierce consumer loyalty enjoyed by olive oil in its $3,000 million world market had so far appeared impenetrable.

While the European Union has alerted its members about the olive oil concerns, the EU-sponsored Kerafed in Kerala has not concealed its interest at the development. “This could be a development that opens unprecedented export vistas for coconut oil,” said a senior official in Kerafed.

“Coconut oil, recently established as a cholestrol-lowering food, has been battling with the rigid consumer preferences in the overseas market,” he said. According to the Coconut Development Board (CDB), more than the edible oil segment, it could be the massage oil segment that would give a better international entry to the coconut oil. The soya bean oil from USA is more than likely to occupy the void opening up in the edible oil segment, a Board spokesman told The Financial Express.

“More than India, it is Phillipines or Indonesia which controls international coconut oil prices at $270 per tonne (roughly Rs 1,200 per quintal) that may immediately benefit from the olive oil ban. The Indian price of Rs 3,100 per quintal can hardly match the international price,” said Mr N Ananthan, secretary, Cochin Oil Merchants Association (COMA).

However, if Asian and Pacific Coconut Community (APEC) seizes this opportunity to create an awareness of the health aspects of coconut oil and thus expand the market, the international price may pick up, he added. Coconut oil is cited as a key ingredient in the ayurvedic treatment of AIDS.

According to a study made by Mr RajMohan, Biochemistry Department, University of Kerala, the earlier belief that coconut oil causes cardiac problem are baseless. Contrary to the popular assumption that it elevates LDL cholestrol, it was discovered that consumed along with the coconut kernel, the oil actually lowers blood cholestrol and decreases serum triglycerides.

Speculations in the edible oil industry started, when on July 6, Spanish Food Safety Authority ruled that pomace olive oil should not be sold or used in the country until further notice. It was acting on the discovery that the pomace olive oil sold in the country contained potentially dangerous levels of carcinogen benzopirene. Prolonged exposure to benzopirene can cause cancer.

Promptly, Portugal has also prohibited trade in low grade olive oil derivatives. It has even started seizing shipments. Already one food producing company, Golden Vale, has withdrawn from sale its butterspread, Golden Olive and other olive oil products as a precautionary measure. Jordan has stopped allowing import of olive oil.

Since there is no consensus in Europe on the levels of benzopirane that makes it toxic, the European Union is yet to impose any rules. According to Spanish media reports, the excessive levels of benzopirene could be the result of changes in the traditional production processes.

These were introduced in 1990s meaning that Spaniards have been using the newly banned oil for the last ten years. The latest is that the Gulf countries have started taking note of the health hazards posed by the use of olive oil.

For the coconut oil trade, the first overseas marketing destination has always been the Gulf, where there is a base minimum market of immigrants from Kerala, the coconut oil population. Marico Industries, which has the lion’s share in the coconut oil market in India through its Parachute brand, has already set up a marketing office in West Asia. Kerafed has an export arrangement with Montana Food Stuffs in Abu Dhabi.

Even the use of the then chief minister of Kerala to make the first sales pitch in the West Asian market had not yielded the slightest improvement in the export of ‘Keragold’, Kerafed’s overseas brand. Neither Marico and Kerafed are likely to claim that their coconut oil exports are more than a token export presence. But the possibility of Gulf countries also steering clear of the new health scare offers scope for speculation in coconut oil marketing circles.

The olive oil business, naturally, has not taken it lying down. According to Spanish media, the olive oil producers have dubbed the ban as ‘overreaction’. Spain exports about 13,000 tonnes of olive-pomace oil per year to more than 50 countries, as part an industry generating 175 billion pesetos ($890 million) in annual export earnings. Even as the whole nation is currently debating, as to whether only pomace olive oil is tainted or other derivatives are also equally suspect, there has been a general consensus, according to media reports, to contain any further scandal.