Myanmar’s Fast-Food Boom Is Boosting Palm Oil

22.06.2018

A fast food boom is luring Southeast Asia’s top palm oil producers to Myanmar to meet surging demand in the formerly-isolated state.

Palm oil imports surged 60 percent in the past six years to 750,000 metric tons, according to the U.S. Department of Agriculture. Myanmar previously limited purchases before 2011, when it typically bought about 200,000 to 300,000 tons each year, according to U Toe Aung Myint, permanent secretary to the Ministry of Commerce.

Myanmar’s emergence from economic isolation and its untapped potential has attracted foreign companies including KFC, the nation’s first western fast food restaurant in 2015. The country now has 23 stores and is on track for 32 by March 2019, according to Singapore-listed Yoma Strategic Holdings Ltd., the franchise partner in Myanmar. There’s now also Pizza Hut restaurants as well as a Burger King.

The opening of more fast food chains will boost palm oil demand as Myanmar’s food and beverage industry prefers the vegetable oil due to its cost-effectiveness and frying properties, according to Zakaria Arshad, chief executive officer of Felda Global Ventures Holdings Bhd. The company, one of the world’s biggest crude palm oil producers, sells palm-based cooking oil under the brand Saji in Yangon and Mandalay.

As well as increasing spending power and changing lifestyle habits, Myanmar’s transition to a more market-based economy and reforms to open the country present opportunities for palm oil exporters, according to Zakaria. FGV may expand into selling bulk volumes of palm oil, he said in an email.

Myanmar mainly buys palm oil from Malaysia and Indonesia, allowing only “higher quality” supply, while soybean oil and sunflower oil imports are also permitted, according to the ministry’s Toe Aung Myint. Purchases reached a record 820,000 tons in the year ended Sept. 30, according to the USDA. While they are set to decline this year, purchases may rebound 4 percent in 2018-19, the agency estimates.

Myanmar relies on imports to meet its domestic needs and more than half of its edible oil consumption is palm oil, according to Sime Darby Plantation Bhd., the world’s top grower by acreage. While there’s been a recent slowdown in the country’s imports from Malaysia, it “can still be considered as a good prospect for the palm oil market,” Managing Director Mohd Bakke Salleh said in an email.

Improvements in infrastructure are yet to catch up to increasing demand. Underdeveloped roads and limited cargo storage facilities at ports drive up logistic costs, impacting margins and delaying deliveries, Sime’s Bakke said. Companies also need to take into account political risks and policy inconsistencies, he said.

About 85 percent of palm oil, used as a cooking oil to fry food as well as in chocolate to cosmetics, is produced in Indonesia and Malaysia.



Bloomberg

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