Is the cooking oil business profitable?

. 7 min read
Is the cooking oil business profitable?

How to start, investment, tips & more

The people of India love to eat delicious food. Cooking oil is an indispensable ingredient for preparing delectable food. Hence, if you are an aspiring entrepreneur and want to foray into a new business, the cooking oil business is the perfect choice for you. If you want to know how to start a cooking oil business, you just need to have the zeal to learn about this business and the acumen to establish your brand in the industry.

Capital required for starting an edible oil business

You should start your cooking oil business on a small scale so that you require less capital. After gaining experience in the industry, you can gradually increase your scale of operations by ploughing back your profits. You need around Rs. 5 lacs to start on a small scale and open a small oil mill. With this money, you have to buy the necessary machines, raw materials, power connection, 20 HorsePower motor, etc.

You can either go for a cooking oil wholesale business or a cooking oil retail business, depending upon your interest. In a wholesale business, your target market would be the retailers. You need to identify the shopkeepers and dealers who purchase your product and sell it further to the end consumers. You would be required to produce in bulk and sell in bulk as well. In the retail business, you need to target the end consumers.

Impeccable Cooking Oil Business Plan

1. Market Research: If you are thinking about how to start an edible oil business, the first step is to do comprehensive market research about the cooking oil industry. You need to study the market, competitors, trends, and the demand for different kinds of oils.  In India, people use different oils for cooking like mustard oil, groundnut oil, sunflower oil, olive oil, etc. You should decide which oil you would produce in your oil mill.

2. License and Permits: If you want to start an oil mill and venture into the cooking oil business, you need to get licenses from FSSAI (Food Safety and Standards Authority of India) and BIS (Bureau of Indian Standards). It is a mandatory requirement to get permission to establish an oil mill.

3. Finance: Adequate finance is imperative for the success of any business. You cannot succeed if you do not have the required funds for your business. You should arrange funds for the start-up capital and the working capital requirements to ensure a smooth flow of business operations. You can use your money to start your oil mill, or you can also get it financed through banks. You can also take advantage of the various schemes and subsidies that the government offers to MSMEs (Medium and Small Scale Industries).

You should maintain proper accounts of your business as your accounts present a vivid picture of the growth and profitability of your business. You can easily record the financial transactions of your business by using the exemplary app- Okcredit, as it is user-friendly and easy to operate. You can maintain the digital ledgers of your business and ensure that not a single transaction is omitted.

4. Location: It is essential to find the right location for your oil mill. You will require 1000 sq ft of space to set up your oil mill. You can set up your factory or start with rented premises to start your oil mill.

5. Raw materials: The raw materials required for starting an oil business are vegetables and plant seeds like mustard seeds, olive seeds, sunflower seeds, etc. You can easily procure these raw materials directly from the farmers or the market.

6. Machinery: Extraction of oil from the seeds require the following machinery:

  • Oil Expeller: It is the primary oil extraction machinery that you require in your mill. It is used for extracting oil from the seeds. This machine costs around Rs. 1 lac and is the essential machinery required for your business.
  • Cooking Machine: The seeds need to be heated to a specific temperature to extract oil from them. The cooking machine is required to heat the seeds to the required temperature.
  • Oil Refining Machines: Once the oil is extracted, it needs to be refined. Oil filters are needed to refine the oil, purify it, and fit for sale and distribution.
  • Containers for Storing the Oil: You also need to have a storage tank for storing the extracted oil.
  • Weighing Machine: An electronic weighing machine is also required in the mill to measure the quantity of the oil and pack it accordingly.

You need to buy the required machinery and get it installed at your mill. You should buy machinery of superior quality as it is a long-term investment.

7. Hire Labour: A team of talented and motivated employees ensures the success of a business organisation. You should hire diligent employees who work sincerely and have the zeal to deliver excellence. A small oil mill requires around four to five people- two to work on the machinery and two for the packaging and distribution of the output.

You should give proper training to your employees to work on the machines efficiently. You should also keep track of their performance and reward the employees for their remarkable performance. You can take the help of the Okstaff app, which is a holistic staff management app that enables you to manage attendance, performance, and salaries of employees very conveniently.

8. Packaging, Distribution, and Marketing: Once you have extracted the oil, the next step is to pack it in the containers, label it and sell it. You need to have systematic and seamless logistics services to distribute the oil to the target customers. You should market your cooking oil and build a brand for your product. You can also explore digital market space for customer acquisition and retention.

If you do not want to set up an oil mill, you can also opt for a cooking oil agency business. Taking a well-known brand franchise is also a promising idea to earn substantial profits without much risk and investment.

Profit Potential of Cooking Oil Business

The edible oil business gives a return of 5 to 10% in the beginning. The premium segment offers a higher return of around 25% of the revenue. The target market for the premium segment is the upper class or the higher income group. You can start with the regular oil segment and then gradually diversify and expand your product portfolio.

Valuable Tips for Cooking Oil Business

  • Set up your oil mill at a strategic location that is easily accessible and is well connected to the market.
  • Train your employees to use the machines efficiently to produce the required output with minimum wastage.
  • Promote your product extravagantly to the customers. You can take advantage of the digital platform and create a website for your business. You should offer something unique to the customers to amplify your revenues and profits.
  • Use automated administration processes such as digital preparation of the accounts using Okcredit app, mechanical packaging, and recording the attendance and performance of employees using the Okstaff app.

Also Read:

1) How to start your tea manufacturing and marketing business?
2) How to start a pharmaceutical manufacturing company?
3) How to become a business broker & start business broker services?
4) How to Become A Successful SME Owner?

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Q. Is the cooking oil business profitable?

Ans. Yes, the cooking oil business is immensely profitable as there is a huge demand for cooking oil in India. It offers good returns and has low risk.

Q. What are the monetary requirements for starting an edible oil business?

Ans. You can start a cooking oil business with a capital of Rs.5 lacs. You can easily arrange these funds yourself or take a loan. You can also take advantage of the subsidies offered by the government.

Q. What is the main machinery used in the oil mill?

Ans. The main machinery used in an oil mill is an oil expeller. It is used to extract oil from the seeds.

Q. How can I promote my cooking oil business?

Ans. You should advertise your product in the market, offer introductory discounts and free samples to attract customers, and use the digital medium to enhance your visibility and reach.

Q. Do I need a license to start my cooking oil business?

Ans. Yes, you need to obtain the necessary license from FSSAI for setting up your oil mill.