India's AWL Agri Business has built up inventories of imported edible oils over the past two months, adopting a strategy similar to the one it used during COVID to guard against supply snarls from geopolitical conflicts, its CEO told Reuters.
Businesses globally are grappling with shipping disruptions stemming from wars in the Middle East and between Russia and Ukraine, prompting many to reassess their sourcing and logistics strategies.
AWL, the market leader in India's edible oil sector and maker of Fortune cooking oil, has increased inventory cover for imported edible oil to 40-45 days from its usual 30-35 days.
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"Keeping in mind all this disruption, because we are living today in a very dynamic world and you don't know what's going to happen tomorrow, we have, to some extent, improved or increased the holding days," CEO and Managing Director Shrikant Kanhere said.
India is the world's biggest edible oil importer, meeting nearly two-thirds of its edible oil demand through imports from countries including Indonesia, Malaysia, Brazil, Argentina, Russia and Ukraine.
"Supply chain volatility is becoming a medium-term baseline (and disruptions are) no longer viewed as short-term blips," said Deven Choksey, managing director of fund and wealth manager DRChoksey FinServ.
AWL's move comes after overall stocks declined over the last few months due to lower imports, although refiners are rebuilding inventories to meet demand during the upcoming festive season.
The CEO said the strategy would stay in place until he was confident logistics disruptions are unlikely to recur.
The move could help larger brands gain share from smaller rivals, as refiners with stronger balance sheets-including AWL, backed by Wilmar International, one of the world's largest food producers-can afford to hold larger inventories and avoid stock-outs, Choksey said.
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Patanjali Foods, too, said it is holding more stocks, with Choksey calling the move "a material policy pivot."
Higher inventories tie up more cash, though Kanhere said the impact on margins has been minimal. He added that cooking oil prices have tracked commodity movements, while packaged foods face a lower risk of price increases due to domestic sourcing.
