Indian Institute of Management, Calcutta
Section C Group-III Ganesa Kumar K V 0128/48 Happy Saini 0137/48 Harshit Krishna 0143/48 Himanshu Kumar 0147/48 Rohan Gala 0127/48 Uday Mehta 4035/18 Vinay Kumar Juluri 4040/18
Marketing Management
Project Report Branded Cooking Oils
Prof. D.P. Ghosh
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Executive Summary
Marketing Survey
The objective of the survey was to know the areas affecting consumer behaviour when they buy
edible oils. We analyzed the interactions between these areas and how they affect each other and
the consumer and based on that we drew our conclusions on what the marketers must do in this
regard. The methodology we used was a division of customer groups and shopkeepers groups.
Even though the lines between the two are quite blurred, but still we managed to draw reasonable
indication of the preferences of the two different groups.
Also, we drew samples from southern region to highlight the differences in the preferences in
these two regions especially as the data sample collected from southern region shopkeepers was
quite comprehensive.
We have designed 9 exhibits in our report which give a comprehensive insight to the data
collected. The exhibits are divided as follows:
1. Preferences for types of edible oil
2. Factors affecting the choice of the edible oil
3. How customers came to know about the brand
4. Number of years since last brand switch
5. Willingness to switch brand, given an option of similar quality edible oil at cheaper rate
6. Brand preferences of consumers
7. Preferences in terms of branded and non branded oil
8. Shopkeeper’s responses regarding customers reaction
9. Customer responses from South
Consumer Behaviour Analysis
The analysis of Customer behaviour captures how consumers take buying decisions based on
insights captured from the consumer survey. The section starts from a discussion of what is valued
and moving through why it is valued and under what circumstances, it concludes with a summary
of consumer buying. The analysis focuses on the following aspects
Customer Value Analysis : benefits and costs entering the buying decision process
Total Customer Satisfaction and Brand Loyalty Analysis: drivers of customer satisfaction
The Buying Decision Makers: who make the final and the who influences the same
The Five Stage model: A summary of the consumer analysis
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Analysis of Marketing mix variables
Our main analysis focuses on marketing mix variables which affect or are likely to affect consumer
buying pattern. The 7 P's of marketing that marketers can use to design their marketing strategy
accentuate their sales.
The main variables are in marketing mix are:
1. Product: It consists of Value, Quality and Packaging
2. Price: Loss leadership, Value Pricing, Product Quality Pricing
3. Place: kirana stores, retail stores and wholesalers
4. Promotion: Special offers, advertising and free gifts
5. People
6. Physical Evidence
7. Packaging
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1. Industry overview
Oilseeds and edible oils are two of the most sensitive essential commodities in any economy. India is
one of the largest producers of oilseeds in the world and this sector occupies an important position
in the agricultural economy. India has a wide range of oilseeds crops grown in its different agro
climatic zones. Groundnut, mustard, sesame, safflower, castor are the major traditionally cultivated
oilseeds. Soya bean, sunflower and rice bran oil have also assumed importance in recent years [1].
In terms of volumes, India is the world’s fourth largest edible oil economy after USA, China and Brazil
with total market size is at Rs. 600 billion and import-export trade is worth Rs.130 billion. India has
1,50,000 oil crushing units, 945 refineries, 795 solvent extraction units, and 26 vanaspati plants
employing more than one million people [2]. India being deficient in oils has to import 40% of its
consumption requirements. The Palm and soy oils constitute more than 95% of total edible oil
imports. In 2008 the import duty on crude edible oils has been abolished and duty on refined edible
oils has been lowered to 7.5% [3].
Edible oil industry is a low-margin and high-turnover industry because edible oil is majorly a
commodity in India and it is very difficult to highlight the point of differentiation to common citizen.
Majority of the edible oil sector comprises small units, with fragmented capacities and high
operation costs. Big companies encompassing crushing, extraction and refining capacities can earn a
better margin. By having a presence across the value chain, from trading to manufacturing and
branding saves cost for big companies and enable them to earn better profit margins.
The key success factor for any company in this area could be:
Raw material sourcing: Quality oilseeds at a nominal price which varies with the agricultural
output and price in the international market.
Ensuring regular supplies: Good and mutually benefiting relationship with farmers and suppliers.
Price competency: Efficient distribution network and better packaging technology to reduce
costs and reduce the difference between unpacked and packed branded oils.
Branding and point of differences are important for success i.e. health issues, packaging,
blending various types of oils.
Edible oils are refined, bleached and de-odorized and then packed. This processing renders oil
practically colourless and odourless, therefore, have become easily interchangeable in the kitchen
and across companies. Newer oils which were not known before have entered the kitchen, like those
of cotton seed, sunflower, palm oil, oilve oil, soya bean and rice bran because these oils tend to have
a strong and distinctive taste preferred by most traditional customers [1]. As, people are becoming
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more quality conscious, their preferences are shifting from unpacked oil to packed oil. Hence,
consumers are shifting towards branded or packaged oil [3].
2. Market Trend
The demand for edible oils in India has shown a steady growth at a CAGR of 4.43% over the period
from 2001 to 2011. The growth has been driven by increase in population and improvement in per
capita consumption, which in turn is attributable to rising income levels and living standards. India’s
annual per capita consumption has shown a steadily increasing trend from 4 kg in the 1970s to 10.2
kg in the late 1990s to current levels of 13.5 - 14 kg. However, it still ranks well below the world
average of around 24 kg (per capita figures including consumption of bio-energy), thereby signifying
the high growth potential of the industry [4].
Source: Ministry of food processing industries
The share of raw oil, refined oil and vanaspati in the total edible oil market is estimated at 35%, 55%
and 10% respectively [1]. The market share of refined oil is increasing and that of other two is
decreasing. In terms of volumes, palm oil, soya bean oil and mustard oil are the three largest
consumed edible oils in India, with respective shares of 46%, 16% and 14% in total oil consumption
in 2010. Majority of the Indian consumers are high price consciousness and have varied taste
preferences of Indian consumers, hence according to ICRA these three oils will continue to account
for the bulk of edible oil consumption in the country [4].
The branded oil industry in India is annually growing at the rate of 20%, with sunflowers and soy oils
leading the market [3]. The olive oil industry in India is small and largely people use it more for
cosmetic purposes than for cooking. High end customers and highly health conscious people with
high disposable income are moving to better cooking mediums like Olive oil. Olive Oil has always
been placed somewhere between food and medicine and the biggest challenge is to educate Indian
0
5
10
15
20
25
2000 2005 2010 2015 2020
Edible Oil Demand (million tonnes)
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consumers on the benefits of olive oil as a cooking medium. Today, the domestic olive oil
consumption is seen rising 25% annually [3].
The key market players are National Dairy Development Board, ITC Agro-Tech, Marico Industries
and Ruchi Soya.
Various well known brands in edible oil industry are Sundrop, Nutrela, Dhara, Saffola, Sweekar,
Engine, Nature Fresh, Emami- Kachi Ghani, Ganesh etc.
3. Marketing Survey
3.1 Objective
The objective of this report is to:
Identify the key areas which affect consumer buying behaviour with regard to edible oils
Analyze the interaction between these areas, and how they affect each other
Derive conclusions that would enable a marketer to make useful decisions in this field
3.2 Methodology
Based on the Industry wide analysis available in public domain, we designed a survey in accordance
with the objectives above. We conducted our marketing survey under two broad categories:
Customers and Shopkeepers. The survey for customers was carried out by two sub-groups, one in a
lower-middle class neighbourhood and one in a relatively affluent neighbourhood. We procured
data from around 40 customers in each segment (83 overall), as well as 15 shopkeepers. Although
the line between the two segments is quite blurred, the data we got gives a reasonable indication of
the differences in preferences between two different sets of people.
The questions for consumers were based around
their specific preferences in terms of brand names
why they chose those brands/what led them to the brands
a measurement of their willingness to switch to other brands
The questions for shopkeepers were designed to identify
The influence of shopkeepers over consumer buying behaviour
Buying pattern and SKU preferences of customers
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We also procured data from 20 customers from southern India to highlight the differences between
buying preferences of these two regions. Although the sample from southern India is small and
homogeneous in socio-economic background, the data, especially from shopkeepers, is very
detailed. This provided some key insights into reasons behind retailers’ behaviour and its effect on
consumer buying behaviour.
3.3 Limitations
The results of our survey are likely to affected to an extent by these limitations
Geographical limitations: Most data is procured from the city of Kolkata. The results are
pertinent to urban areas of East India.
Sample Size: The sample size of 83 may not properly capture the preferences of different socio-
economic classes accurately.
4. Consumer behaviour analysis and influencing factors
4.1 Customer Perceived Value
Customer Perceived Value is defined on the basis of a cost-benefit analysis among various factors
which vary in the degree of importance from product to product and among consumer segments.
The group holds the following three components of Total Customer Benefits as the main product
based influencers in the customer’s decision to purchase branded cooking oil:
1. Economic: Price
2. Functional: Taste, Purity, Perceived quality
3. Psychological: Health benefits (intangible)
For the Low Income Groups, economic costs were established to be of highest importance. As the
income level increases, preferences are more and more determined based on Taste, Purity and
Health benefits.
Refer to Exhibit 2
The main component of the total customer cost while determining CPV was recognised to be
monetary costs, especially for the low income groups. The analysis for the same is provided here
forth.
4.2 Customer Value Analysis
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4.2.1 Most valued attributes and benefits
The group approached customers with questions regarding the attributes and benefits they look for
in a product while choosing a particular brand of cooking oil. The following attributes were found to
be predominantly explanatory of the buying behaviour:
1. Health Benefits
2. Price
3. Taste
4. Quality
5. Traditionally used
Importance of different attributes
Based on data from our customer insights survey conducted among different income group areas of
Kolkata, the group came out with the following results as to what extent the customer buying
behaviour is affected by particular factors:
Refer to Exhibit 2
As seen in Exhibit 2, health and price are the two most important attributes on average with 39%and
31% people rating it as the most valued attribute respectively.
In the high income group, almost half (47%) of the respondents rated health benefits as the prime
factor as compared to 31% of low income respondents whereas low income group gave more
importance to price (42%). Thus, price on the whole turned out to be the second most important
factor in total.
Hence, a brand offering more health benefits or claiming to have more health benefits will be
preferred more by high end consumers. These health benefits could be because of blending certain
oils or essential vitamins or fatty acids present in the oil. Price and taste will be secondary factors for
them and will not influence their buying decisions much. As most of the high income people don't do
much of the physical work (both men and women) and usually have higher stress levels in their live.
Hence, health factor is more important for them. Further, according to Maslow's hierarchy theory
they are kind of achieving security needs. They are not just satisfying their primary need which is
food.
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High income consumers have found to be less loyal. As these consumers are more educated, aware
and health conscious. Hence they can spend more on their health and thus look for better options in
the market.
For low income low income consumers price is the key driver of their purchase. Rest are secondary
factors for them. Hence, they will buy their oil from the company which is offering it at the lowest
price. Group thinks that over time with increasing income, rising standard of living and awareness of
products available will make these people less sensitive to price. With the hue and cry about heath
by various NGOs may influence their decisions and they may start valuing health benefits, taste and
purity over price.
In nutshell higher income segment was thus found to have more health, taste, purity based
preferences, while the lower middle income segment was bound by economic constraints and hence
price considerations. Therefore the group contends that relative values of importance attached to
different factors change over time and should be constantly monitored.
4.3 Total Customer Satisfaction and Brand Loyalty Analysis
Total customer satisfaction after a purchase depends on the product’s performance in relation to
the buyer’s expectations from the product. If the product performance meets or exceeds the buyer
expectations, the buyer is accordingly satisfied or delighted. It is in this context that the group
checked for consumer responses regarding their expectations.
Branded cooking oil is a fast moving consumer good which has high rate of repeat purchases. Hence,
if a customer is not satisfied with the product he/she can easily switch brands. So, it will be very
difficult for a company to retain customers unless their expectations are being met consistently.
It was found that the expectations of consumers are based on the benefits outlined above. The
above list of attributes contains both tangible attributes like price, quality, taste, as also intangible
attributes like health benefits. It is difficult to measure intangible attributes. Therefore the group
contends that marketing activities should be focussed on influencing the perception of the customer
in addition to maintaining product quality in meeting customers’ expectations.
4.4 Measuring Customer Satisfaction
Analysis of customer satisfaction yields important results regarding extent of customer retention and
loyalty attained by the product. Since a reverse causality exists between customer retention and
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satisfaction, a product’s customer retention in the range of over 10 years would signal high
satisfaction with a product.
Refer to Exhibit 4
As per the exhibit 4, 39% of the total survey sample was found to have been using their current
brand of oil for more than five years and another 47% were found to have been using it for a period
of 2 to 5 years. This implies a high amount of customer loyalty and retention which is because of
satisfaction levels achieved by using their respective brands.
4.5 Major External Factors influencing Consumer Behaviour
4.5.1 Cultural Factors
Cultural factor is one of the key influences in consumer behaviour as eating habits and thus usage
and availability of different types of oils differ across regions and cultures. This affects the
preference at a basic level and is a dominant driver of demand for traditional products. In terms of
cooking oil, the group discovered in the consumer survey that mustard oil is widely consumed (41%
of total households surveyed were using mustard oil) across different income households in Kolkata.
Likewise groundnut oil is widely consumed in Andhra Pradesh (Exhibit 9) as they are required in
most traditional recipes of these regions. Also a deviation was observed from the effect of cultural
factors among the high income group only 18% respondents used mustard oil as opposed to 52% of
low income group. This was found to be affected by health concerns for the family in the high
income groups and therefore sunflower oil is been predominantly used (43%), while the low income
group is driven more by other factors.
4.5.2 Personal Factors
1. Age and stage in life cycle: A clear indication from probing on brand selection and change of
same over time has been that people although guided by television advertisements, and to a
small extent word of mouth, were very much influenced by their age and age dependent
ailments in choosing a brand over another. Most importantly, the focus on health benefits has
been majorly reflected in the high age group.
2. Economic circumstances: The extent of importance of price as an attribute in purchase decision
making is guided by economic circumstances of consumers. According to the survey of different
income groups, the low income groups were found to be very sensitive to price in deciding the
brand.
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5. The Buying Decision Makers
5.1 Buyers and Users
The head of the household, in this case the male earning member, has been found to generally take
the final decision for the purchase at the point of sale and thus externally affects the choice of Oil
Brand. It was a hidden insight in the survey that the females although tended to decide which ‘kind’
of oil shall be purchased but in general did not bother about or did not have a say in which particular
‘brand’ was bought.
5.2 Influencers
The other family members have been found to influence which attribute gets preference in deciding
the Brand and Type of Oil would be purchased. As noted previously, older members in the family
implied more health consciousness in oil purchase. Younger members (mostly middle income group
households) implied more importance to the taste attribute.
6. The Five Stage model
As a conclusion, the group proposes the Consumer Behaviour Analysis can be structured as per the
Five Stage Model.
6.1 Problem recognition
The consumer is in general aware of the Need and the Drive to purchase has been established as
well. This is evident from the fact that the product is very frequently bought.
6.2 Information search
For almost all the consumers, information search happens through TV ads (64% respondents
reported to having gained primary and secondary information from Television). In case of new or
better quality products the survey indicated that Word of Mouth also played an important role (22%
of respondents).
6.3 Evaluation of Alternatives
Some people do a continuous evaluation. While some consumers mentioned first using different
products before deciding on their current one, brand loyalty in general has been high (46%
expressing flat unwillingness to switch to a new offering and another 29% expressing doubt at best).
Refer to Exhibit 5
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6.4 Purchase Decision
As outlined, the different criteria used to evaluate a product intermingle with the Economic
and Personal Background (Health and Age) as well as Social and Cultural standing of
consumers to yield a purchase decision.
6.5 Post Purchase Behaviour
Post-Purchase satisfaction and positive word of mouth are reflected in customer retention.
At the same time price elasticities vary depending on the consumers’ income level and
personal factors and it has been discovered that customers would switch to a cheaper
variety if provided similar quality.
Refer to Exhibit 4 & 5
Before moving ahead, it must be reinstated that the findings are reflective of Eastern Indian
Urban setup.
7. Influence of marketing communications
As mentioned in the exhibit 3, the most important marketing communication channel for branded
cooking oils is TV advertisement and word of mouth. In total 64% of consumers get aware of brands
by TV advertisements and 22% got aware by word of mouth. As, cooking oil is a consumer product
which is used daily and is bought quite often hence continuous advertisements should be used to
maintain the customers top of mind awareness. As, people are becoming more health conscious and
related issues are discussed quite often with friends, family and people.
8. Analysis of marketing mix variables
8.1 Product
Value: The data related to rationale and pricing points out very clearly that value or perceived
value of the offering/product was one of the major considerations for buying and a strong
indicator of the consumer’s psyche.
It is therefore imperative that the product offers value both in terms of price and quality.
Both aspects of value – quality and price have been dealt with in detail in the following analysis.
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Quality: Product quality has an overbearing influence on the buying patterns of a large portion
of society. The correlation is very strong when it comes to high and middle income families as
expected but it is surprising to see that the correlation is almost equally strong for lower income
groups.
This can be attributed to the fact that with television, even the masses are exposed to
advertisements and understand the need for an element of health in the oil that they use.
Marketers need to understand this paradigm and channelize their efforts towards healthy oils as
we believe this segment is bound to become one of the largest, with both the classes and
masses moving into this category.
Packaging: It is evident from pricing and SKU volumes data that individuals and small households
prefer a 1L packaging. The reasons for this are two-fold: 5L packs are as expensive as 5x1L packs;
Consumers have doubts related to spoilage of the oil when stored over long periods of time.
The above data in no way indicates that 2, 5L SKU are not selling. Restaurants, institutions and
joint families have a higher consumption rate and buy more.
8.2 Price
Loss Leadership – Data collected from Modern Retail chains pointed to a strong fact that edible
oil is one of those commodities that falls under the high volume, low margin items. Margins in
modern retail stores are generally sacrificed for bundling multiple products and pushing higher
volumes and larger SKUs through.
Value Pricing – From the pricing data of different brands and consumer preferences related to
prices it can be inferred that although product quality is the major factor affecting price, the
brand’s position in the market also has a role to play.
Different brands offering almost similar benefits are priced differentially, based on regional and
local preferences. Some local brands are able to command a higher price and demand than
national brands – a clear case of price skimming by market leaders.
Also some established brands provide very high quality at non-premium margins to provide
maximum value to loyal customers, ensuring high volumes and profitability.
Product Quality Pricing – This is the most important factor for pricing the product. This is evident
from the fact that better quality oils sell at higher prices than lower quality oils.
There is a definite exodus from non branded, lower quality oils into branded, higher quality oils
and marketers can extract maximum consumer surplus by simply offering a higher quality
product.
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8.3 Place
Edible oils account for a very large volume and thus are found almost everywhere. From small
kirana stores, to retail shops, to wholesalers.
Wholesalers mainly serve retailers and large institutions like hotels, hospitals, educational
institutes and other residential institutions. A few notable differences from retail outlets here
are: Larger SKUs are typically more fluid and they do not stock every brand and variant.
Modern retail stores are a stark contrast to the wholesale outlet in terms of the options
available. Every SKU and every variant of oil is present in decent quantities so that every
customer meets his needs.
8.4 Promotion
Special offers–Brands, both in their infancy and mature stages, often resort to special offers and
sales promotions to provide an impetus to sales for a given region/time period. These offers may
include limited stocks of discounted packs or additional free volume. Although there is no data
to support this observation right now it is well observed that some consumers may switch
brands for that singular period to avail of the ‘10% extra’. As we all know and is well
documented - Everyone loves a good discount .
Advertising– Like any other product Advertising in Televisions is very important for reaching a
large number targets. Another important fact we observed is that most of these advertisements
are aired on primetime television with house-makers being the target.
The advertisements are quickly moving towards portraying the oil to be a major contributor in
making a family healthy and happy.
Free gifts–Freebies are a major draw in selling a multitude of products in the consumer segment
but not so much in edible oil. A free gift may not induce a non-user to buy or a user to increase
consumption but just like a promotion it is interesting to note that a few correspondents were
open to switching brands and sacrifice loyalty for once if two offerings were different only due
the free gift.
This can be used as a very important tool in the hands of marketers in introducing new
customers to give their product a chance and subsequently prove itself.
8.5 People
The company making the oil does not directly interact with end consumers and do not influence
buying patterns much.
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8.6 Physical Evidence
The oil is the physical evidence in itself.
8.7 Packaging
A basic necessity, the packing of typical oils did not attract much attention from consumers.
Luxury oil: Certain packages like that of virgin olive oils did elicit a certain positive response from
a few correspondents. An aesthetic looking outer package gelled better with the sophisticated
image linked to an extra virgin olive oil.
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Exhibits
Exhibit 1: Preferences for types of edible oil
Mustard Sunflower Groundnut Soya Others
HMC 6 14 1 7 5
LMC 33 14 2 11 3
Total 39 28 3 18 8
Exhibit 2: Factors affecting the choice of edible oil
Tradition Taste Health Price
HMC 11 2 17 6
LMC 3 9 14 19
Total 13 11 31 25
18%
43%
3%
21%
15%
HMC Mustard
Sunflower
Groundnut
Soya
Others 52%
22%
3%
18%5%
LMC Mustard
Sunflower
Groundnut
Soya
Others
41%
29%
3%
19%
8%
Total Mustard
Sunflower
Groundnut
Soya
Others
7%
20%
31%
42%
LMC
Tradition
Taste
Health
Price
31%
5%47%
17%
HMC
Tradition
Taste
Health
Price
16%
14%
39%
31%
Total
Tradition
Taste
Health
Price
HMC: Higher Middle Class LMC: Lower Middle Class
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Exhibit 3: How customers came to know about this brand
TV Magazine WOM POS
HMC 21 2 6 3
LMC 23 3 9 2
Total 44 5 15 5
Exhibit 4: Number of years since last brand switch
<1 1 to 2 2 to 5 > 5
LMC 3 0 11 23
HMC 2 4 19 2
Total 5 4 30 25
62%8%
24%
6%
LMC TV
Magazine
WOM
POS66%
6%
19%
9%
HMCTV
Magazine
WOM
POS
64%7%
22%
7%
Total TV
Magazine
WOM
POS
8%
15%
70%
7%
HMC <1
1 to 2
2 to 5
> 5
8%0%
30%
62%
LMC <1
1 to 2
2 to 5
> 5
8%6%
47%
39%
Total <1
1 to 2
2 to 5
> 5
WOM: Word of Mouth POS: Point of Sales
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Exhibit 5: Willingness to switch brand, given a cheaper option of similar quality
Yes No May be
HMC 2 11 13
LMC 15 21 7
Total 17 32 20
Exhibit 6: Brand preferences of consumers
Saffola Nature Fresh Sundrop Emami Fortune Engine Others
HMC 11 4 7 2 4 2 1
LMC 5 3 12 1 6 7 11
Total 16 7 19 3 10 9 12
Exhibit 7: Preferences in terms of branded or non-branded oil
HMC
LMC Branded Non-Branded Branded Non-Branded
22 0 21 4
8%
42%50%
HMC Yes
No
May be35%
49%
16%
LMC Yes
No
May be
25%
46%
29%
Total Yes
No
May be
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References:
1.http://fcamin.nic.in/dfpd/EventDetails.asp?EventId=561&Section=Edible%20Oil&ParentID
=0&Parent=1&check=0
2.http://fcamin.nic.in/dfpd/EventDetails.asp?EventId=562&Section=Edible%20Oil&ParentID
=0&Parent=1&check=0
3. www.indialawoffices.com/pdf/edibleoilsindustry.pdf
4. www.icra.in