Bulk oil is stable business. In 2011/2012 MY Ukraine produced 4.0 MMT of sunflower oil. 80% of this amount was exported abroad. Ukrainian sunflower oil market is characterized by a high level of market saturation, a large number of producers and few leaders that possess crushing capacities. Existing competition on the market is strengthened by demand for substitute products. Many agricultural manufacturers prefer to raise sunflower because of its profitability. Though an agricultural producer does not work on equal footing with strong agriholdings due to his small production capacities. We believe in case of an unfavorable situation in the agricultural sector Kernel is able to protect its market share, thus it has its own production, long-term cooperation arrangements with farmers. Simultaneously Kernel owns 36% of the sunflower crushing capacities in Ukraine and private storage facilities.
Bottled oil market heads towards exhaustion. Bottled oil sales provide more earnings to Ukrainian producers than bulk oil that is less resource-demanding and still remains more attractive due to its sales volume. Domestic consumption stands at 420 million liters and is completely satisfied by Ukrainian manufacturers. Excess of their production is exported to the neighboring countries of the former Soviet Union where sunflower oil still prevails over other types of vegetable oil in the diet. Kernel satisfies one third of the domestic consumption of sunflower oil. Kernel also works in Russia and competes with local producers and Bunge which is at the same time its main rival in Ukraine. We suppose there are no grounds for rapid growth of sunflower oil demand in the nearest future.
