Indonesian Palm Oil Needs Promotion to Increase Market Penetration in China
One of the speakers in the Palm O’Corner at Gadjah Mada University (UGM) was Marina Novira, who is the Indonesian Trade Attache in Beijing.
In her presentation, Ms. Marina revealed that Indonesia is in the fourth position as China’s trade partner with improved bilateral trade performance after the pandemic, especially in the first quarter of 2021. Indonesia is also the main source of palm oil commodities imported by China with a share in 2020 reaching 58.3 percent. In the January-March of 2021, Indonesia’s share has reached 77.8 percent with the export value of palm oil (HS 1511) reaching USD 902 million, or a significant increase of 128% compared to the same period the previous year.
In the global market, China is the third-largest importer country in the world with an average volume of imports reaching 5.5 million tons per year since 2000. This large volume of imports is due to their increasing consumption. China is also listed as the largest palm oil consumer country in the world after Indonesia, India, and the European Union.
Apart from population growth and urbanization, other factors that have led to increased consumption of palm oil in China are lower price compared to soybean oil or rapeseed oil; increased industrial use as an implication of developing a wide range of application from processed food to the oleochemical industry; limited stock and availability of vegetable oil as an implication of the US-China trade war and other impacts.
Palm oil trade in China is concentrated by vertically integrated agri-food companies, such as COFCO (China National Cereals, Oils, and Foodstuffs Corporation) and Sinograin Oils Corporation. This shows that most of the imported palm oil (around 75 percent) is used by the food industry such as instant noodles and processed food products, followed by the personal care industry (including cosmetics). Although palm oil is widely used by the Chinese industry, their consumers are not very familiar with palm oil because the palm-based products traded are labeled as vegetable oil.
The adaptation of a new normal lifestyle by maintaining personal and environmental hygiene is also a positive sentiment for the increasing demand for palm oil by the Chinese personal care industry to produce various hygienic products such as soap, detergent, hand sanitizer, etc. Although China’s population is estimated to experience a decline due to Covid-19 to below 1.4 billion in 2021, this figure is still very large, reaching 18 percent of the global population.
Its also indicating that China’s food needs are still very large, which has implications to the demand for imported palm oil which is still large. Apart from the need for food products and hygiene products (personal care), the demand for palm oil as a feedstock for Chinese biodiesel is also expected to grow.
Regarding the issue of sustainability, even though Chinese companies that are members of the RSPO have experienced rapid growth, namely around 167 members, Chinese consumers are observed that they are still not provoked by black campaigns that use sustainability issues such as in the European Union market, but consumer demand for high-quality products is also starting to grow. This condition shows that China is still a strong market for palm oil and Indonesia will get benefits, given its position as the main source of imported palm oil in the country which has also implemented sustainable and high-quality palm oil at competitive prices.
However, the Indonesian Trade Attache in Beijing said about Malaysia as Indonesia’s competitor in the Chinese palm oil market, through the Malaysia Palm Oil Council (MPOC), which had already established a more intense trade relationship with the Chinese Government (G to G) and among its business actors (B to B) to conduct Research and Development collaborations with leading research institutes and universities in China. Malaysia has also developed the Malaysian Palm Oil WeChat Program as a strategy for the penetration and promotion of Malaysian palm oil among Chinese consumers.
This is homework that the Indonesian government and palm oil business players must work together in cooperation, either G to G or B to B so that market penetration can be more optimal so it can increase the acceptance of Indonesian palm oil in the Chinese market. The Indonesian government can make various efforts to cooperate with the Chinese government, such as bilateral agreements that focus on discussing sustainable palm oil trade (COP15 commitment), investment in educational support, the use of technology transfer, to develop a representative office for the Indonesian palm oil association (B to B approach).
Besides that, efforts are needed to build a positive image of Indonesian palm oil among Chinese consumers who tend to be loyal to group companies (products) by developing R&D collaborations involving research institutions/universities of these two countries. Another important promotion strategy and positive palm oil campaign are through creative content with the Chinese language that is posted on various social media platforms that are widely used here such as TikTok.
From the explanation given by the Indonesian Trade Attache in Beijing, it was shown that China, which is a traditional market for Indonesian palm oil, is still a very large, strong, and very promising market. Therefore, Indonesian palm oil stakeholders must focus on increasing market penetration and competitiveness in the Chinese market by launching various promotional strategies and positive campaigns for sustainable palm oil.
Share this article
You may also like these articles