Finding room for cotton seed oil
Cotton seed is reputed for having a stable flavor and recommended for use in the same products as other vegetable and nut oils. It is also cheaper to produce. Moreover, the BoP market for cooking oil is said to be underserved, there is more demand than supply. Why then is it not as readily available as other oils?
An iterative approach
The assignment from the BoP Innovation Center (BoPInc) asked for a research design to investigate market attractiveness of cotton seed oil as a finished consumer product for the BoP, and develop a value proposition and marketing plan, based on market and consumer insights. Governed by the B-Space philosophy of the iterative research process, we proposed to conduct a desk study, a retail audit and stakeholder survey or anything else as deemed necessary by the insight from the previous research phase.
For the desk study
We reviewed available secondary data on the production, consumption, trends, usage patterns, benefits and potential side effects of cotton seed oil in Uganda vis-a-vis other cooking oils. Where data was available, we focused primarily on Kasese asking questions like: What does the desk research tell us about the competitive landscape, and is there indeed a gap in the market for a new cooking oil?
We discovered that the opportunity to develop and sell cotton seed oil as a finished consumer product for low income communities was identified by a farmer cooperative of 15,000 members in Kasese, a district in western Uganda.
We assessed the retail environment of cooking oil in Kasese in urban and rural outlets (availability and choice in type of oils, manufacturers, brands, pricing, packaging). Competition has increased over the past years. Retailers sighted increased variety, portion packs of even 50 ml and reduced prices.
Mawese is a cheap, locally produced and unrefined vegetable oil, made from palm nuts. It is by far the most consumed type of cooking oil in the rural areas. It is not available in the mainstream retail channels, but only sold on weekly markets, bottled in various ways, with things that the sales women have at hand. We found there is a huge gap in pricing between refined, branded cooking oils and cheap alternatives like Mawese.
Branded cooking oil alternatives are 2-13 times as expensive!
The Ugandan vegetable oil industry is dominated by Mukwano Industries and Bidco Oil. In the branded segments of cooking oil, both consumers and retailers generally differentiate on brand name, rather than on type of oil. ‘Mukwano’, the first cooking oil manufacturer to market its products in Kasese, has acquired substantial mind share, such that the brand name itself is also often used as the generic term of the category.
We interviewed representatives from both companies, as we tried to understand why neither company ventured into the production of cotton seed oil.
Limited availability of raw material and doubts about quality were the main hindrance.
We traveled down to Kasese, to capture consumer insights on consumption habits, perceptions, associations and knowledge of cotton seed oil. We interviewed a wide range of low-income consumers (housewives, men, youth), and cooking oil related businessmen and women: market vendors , mini supermarkets within the towns, dukes within the residential areas, roadside vendors, street cooks and owners of restaurants and bakeries. These businesses are typically run by individuals in informal business setting.
From a consumer point of view there is a business case and opportunity to fill the gap between the low quality Mawese and the branded, more expensive alternatives.
To determine whether a high quality, refined cotton seed oil can be offered against a significantly lower price than the mainstream, commercial brands, it is advisable to first undertake a technical and financial feasibility assessment of the investment project. When there is proof that it is a sustainable business case, than phase II would be crafting a value proposition and go-to-marketing plan, together with a market actor, that has:
• Interest to venture into production and sales of cotton oil.
• The skills, know-how and organizational strength
• The financial resources to invest in the venture
About the 2SCALE Consortium for agribusiness
BoP Innovation Center (BoPInc) is an inclusive business accelerator headquartered in The Netherlands. Their mandate is to develop, learn about and accelerate inclusive businesses that serve the demand of low-income groups at the base of the pyramid with affordable, quality products and services. BoPInc is one of the three organisations in the 2SCALE consortium, the largest agribusiness incubator in Africa, with an objective to develop competitive agro-food industries that are targeting low-income markets. Together with the International Fertilizer Development Center (IFDC) and the International Centre for development oriented Research in Agriculture (ICRA), they provide financial services, technical assistance and build networks that connect farmers, buyers and intermediaries.