Sustainable Production of Edible Olive Oil And Related Olive Products
Sustainable Production of Edible Olive Oil And Related Olive Products
Business Model Description
Investment in B2C models engaged in olive cultivation and oil extraction. Products may include varieties of oil, olive chunks, pickles and the like. Examples of companies active in this space are:
Izhar Farms established in 2013, is a company under Izhar Group of companies (1969) that runs an Olive Garden in Pakistan and is engaged in the production of Extra Virgin Olive Oil extracted. Izhar Farms has grown olives and grapes plantations into sizeable barren lands of Kalar Kahar and has introduced modern drip irrigation systems on slopes, water storage, olive plantation and more. (11)
Siddiqui's Olive Store (Siddiqui), a family business, now Siddiqui Olive Oil established in 2021, is engaged in the production of local olive oil in Pakistan. It supplies its products to domestic consumers in, thereby encouraging local production and packaging facilities. In July 2021, it raised seed funding to scale up operations. (12)
Expected Impact
The IOA provides value addition to traditional crop farming, reduces Agri-water stress, promotes farm to table concept and aims to be suitable for workers, women and the environment.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Pakistan: Punjab
- Pakistan: Khyber Pakhtunkhwa
- Pakistan: Balochistan
Sector Classification
Food and Beverage
Development need
Agricultural sector is indispensable to the country’s economic growth, food security, employment generation and poverty alleviation particularly, in rural areas. It contributes 22 per cent to the GDP and provides employment to ~38 per cent of the labor force. More than 65-70 per cent of the population depends on agriculture and allied sectors for its livelihood. (1)
Policy priority
Agricultural Transformation Plan (2020-2025): Funded by the Ministry of Planning, Development and Special Initiatives, Government of Pakistan (GoP) and implemented by Centre for Agriculture and Bioscience International (CABI), this plan focuses on modernizing agriculture by addressing the yield gap and making interventions for value chain and cluster development (2)
Gender inequalities and marginalization issues
Despite active participation in the agricultural sector, women have less access to assets, services and opportunities compared to men. This gender gap generally relates to access to inputs (including improved seeds, agrochemicals and machinery all essential elements for improving farm productivity), services, land ownership, livestock, technology, education, extension and financial services. (3) In the 2022 floods, women in particular have suffered notable losses to their livelihoods, particularly associated with agriculture and livestock, with negative impacts on their economic empowerment and well- being as women already spend 10 times the hours as men in unpaid care work. (4)
Investment opportunities
Potential for investment is significant due to the high average yields. The International Trade Centre estimates that Pakistan has an untapped export potential of USD 2.6 billion, which represents 40% of actual exports of agriculture products. (5)
Key bottlenecks
Agricultural growth rate has been constrained by shrinking arable land, climate change, water shortages, and large-scale population and labor shift from rural to urban areas. Increasing agricultural productivity, therefore, requires adoption of new approaches. (1)
Food and Agriculture
Due to the 2022 floods, agriculture is the second sector, most hit by damages that amount to USD 3.7 Billion. Standing crops contributed to 82 percent of total damage and losses in sector (4)Development of the agribusiness sector in form of post-harvest activities, including logistics, processing and retail, has remained modest, despite the fact that post-harvest activities contribute about 55 percent of the total global value of the sector (6)
Policy priority
With the support of many Government initiatives like Billion tree tsunami (3.6m olive trees planted in 22 districts) (7), national food security policy and agricultural transformation plan, the investment opportunity is considered ready. Furthermore, import substitution is another reason to invest in this area.
Gender inequalities and marginalization issues
Women, traditionally in Pakistan, have not had access to upstream opportunities in this sector. The sub-sector gives women an opportunity to link their agro-produce to processing units. The sector employs 65 percent of women (2019) and it has increased to 68 percent in 2021. (8)
Investment opportunities
Pakistan’s federal Ministry of Climate Change also launched Olive Trees Tsunami Project in 2021, intending to plant four million hectares of olive trees. Under the Ten Billion Tree Tsunami Project, Pakistan is growing thousands of olive trees in its northwestern region. (9)
Key bottlenecks
These include weak contract enforcement for contract farming, poor on-farm sanitary and phytosanitary standards (SPS) enforcement, inadequate post-harvest infrastructure for packing, handling and transportation, lack of protocols for certifications of health and safety standards, and unassured supply of raw material to processors. (10)
Processed Foods
Pipeline Opportunity
Sustainable Production of Edible Olive Oil And Related Olive Products
Investment in B2C models engaged in olive cultivation and oil extraction. Products may include varieties of oil, olive chunks, pickles and the like. Examples of companies active in this space are:
Izhar Farms established in 2013, is a company under Izhar Group of companies (1969) that runs an Olive Garden in Pakistan and is engaged in the production of Extra Virgin Olive Oil extracted. Izhar Farms has grown olives and grapes plantations into sizeable barren lands of Kalar Kahar and has introduced modern drip irrigation systems on slopes, water storage, olive plantation and more. (11)
Siddiqui's Olive Store (Siddiqui), a family business, now Siddiqui Olive Oil established in 2021, is engaged in the production of local olive oil in Pakistan. It supplies its products to domestic consumers in, thereby encouraging local production and packaging facilities. In July 2021, it raised seed funding to scale up operations. (12)
Business Case
Market Size and Environment
> USD 1 billion
5% - 10%
Current production is 11,000 tonnes and is expected to grow at 17,000 tonnes by 2027. (14)
The market is expected to grow annually by 7.4 percent (CAGR 2023-2027). (13) Current production is 11,000 tonnes and is expected to grow at 17,000 tonnes by 2027. (14) In 2020 import bill, edible oils contributed USD 2.2 billion, of which USD 1.1 Million went towards Olive Oil import. Olive cultivation and oil extraction can substitute imported oil as local production would be cheaper and of higher quality. (15)
4.9 percent or USD 3.6 billion worth of animal and vegetable fats and oils have been imported to Pakistan that meet 86 percent of the total needs. The business model can serve as an alternate produced and manufactured locally. (4)
Indicative Return
20% - 25%
In 2021, the revenue generated by oil and fat segment in the food sector, USD 1.7 billion revenue was generated and is projected to grow to USD 1.7 billion in 2026. (13) . As per Small and Medium Enterprise Development Authority' pre feasibility, IRR is 57 percent (17)
Based on expert consultations held in Punjab and Balochistan, businesses suggested gross profits range of 20-25% in five years' timeline
Investment Timeframe
Short Term (0–5 years)
As per SMEDA's evaluation, olive cultivate takes about 4 years and a side-by-side completion of extraction facility will start generating revenues in 4th to fifth year. (16)
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Business - Business Model Unproven
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
90 percent of agriculture in Pakistan depends on Indus River, due to high demand for irrigation and poor water storage capacity the country is considered "water stressed". (20)
Cultivating olive is profitable because existing crops are not productive in those barren lands, where olive can easily be grown owing to its drought-tolerant nature and limited water requirements. (21)
In rural areas in Punjab, KPK and Balochistan, the agriculture land is available, but water stressed. Thus, crops that have low water intake can be easily cultivated in such regions.
Gender & Marginalisation
Women work as fruit pickers, line workers, managers as well as owners in the sector. But as landowners and business owners, women face issues related to access to capital and land ownership. There is a need to ensure access to capital for women to expand their business in the sector. (3)
Women in Pakistan work for 15.5 hours per day of which 5.5 are spent caring for livestock and women’s contributions to the agriculture sector (homebased livestock rearing and vegetable farming) are devalued as extension workers and often limited to support work. (22)(23)
Almost 4 billion acres of agriculture land has been damaged by the 2022 floods. Sindh and Balochistan have been significantly impacted by floods as 72 percent and 21 percent of damage done to agriculture was in Sindh and Balochistan, respectively. (4)
Expected Development Outcome
Reducing Pakistan's edible oil import bill which amounted to USD 2.2 Billion in 2021. (15)
Olive cultivation and oil extraction not only supports water stressed countries (as olive has low water requirements and is draught resistant), but also helps in reducing the import bill (due to import substitution of edible oil with locally sourced and produced oil).
Gender & Marginalisation
Development of this IOA through refinance schemes from State Bank of Pakistan as well as incentives for women can help in generating improved employment and business opportunities for women.
Primary SDGs addressed
2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)
2.1.1 Prevalence of undernourishment
2.a.2 Total official flows (official development assistance plus other official flows) to the agriculture sector
2.c.1 Indicator of food price anomalies
The prevalence of moderate or severe food insecurity in the population increased by 0.46 percent for one year period from 2018-19 to 2019-20 and in 2020, the percentage of severe or moderate food insecure population was 32.6 percent (24)
In 2019, Prevalence of undernourishment was reduced by 4 percentage points from 2015-16 to 2018-19. (25)
Total official flows that is official development assistance plus other official flows to the agriculture sector were reduced by 8 percent between 2015 (USD 298.33 million) and 2017 (USD 275.26 million). (25)
Food inflation increased by 20 percent between 2014-15 and 2018-19. In post covid scenario, the food inflation has further increased 17.25 percent as compared to same time last year. (26)
Reduce food insecure population from 60 percent to 30 percent as per Vision 2025 from Ministry of Planning.
The voluntary national review attributes the improvement in the progress on Goal 2 by the decrease in percentage points of undernourishment, but the Vision 2025 does not give any specific target.
5.5.2 Proportion of women in managerial positions
The percentage of women in managerial positions has increased from 2.70 percent (2014) 4.53 percent in 2019. (25)
The National Vision 2025 by Government sets the target of increasing women labor force participation from 24 to 45 percent by 2025 but does not give a specific target of increasing their presence in managerial positions.
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Market may not respond to the product if it is priced higher than the cheaper imported alternatives available.
In the absence of regulations, women may continue to remain "invisible workers" instead of recognized agricultural workers to fulfil the employment gap.
Impact Risks
It may be difficult to track impact generated through this investment opportunity area given limited data availability. Furthermore, low labor costs in existing business models for directly selling the produce, instead of processing it and making finished products can discourage agricultural businesses to invest in oil extraction for improving productivity.
Impact Classification
What
Increasing the production to 17,000 tonnes of edible oil and reducing the import bill for edible oil.
Who
Improving the living standards of people of rural Punjab, Sindh and Balochistan where source of livelihood is farming and agriculture.
Risk
Potential negative environmental and social impacts need to be tackled for project to be safely deployed. Better access to finance required for establishment of processing plants and storage units.
Contribution
The IOA contributes to the GDP directly as currently the sector contributes 22% to the GDP already. (1)
How Much
The sector employs 38% labor force directly or indirectly. Therefore, it is expected that IOA would contribute to increase employment in the sector. (1)
Impact Thesis
The IOA provides value addition to traditional crop farming, reduces Agri-water stress, promotes farm to table concept and aims to be suitable for workers, women and the environment.
Enabling Environment
Policy Environment
Agriculture Transformation Plan: enhancing farm productivity, improving post-harvest management to reduce losses, export performance to improve export-production ratio, value chain management, processing of agriculture commodities as cottage industry & improve inefficient farm operations. (20)
National Food Security Policy: the goals of the policy are to alleviate poverty, eradicate hunger and malnutrition; promote Sustainable food production systems by achieving an average growth rate of 4 percent per annum; make agriculture more productive, profitable, climate resilient and competitive. (2)
Processed Food and Beverages Export Strategy 2023-2027 outlines path for the development of the processed food and beverages industry in Pakistan. Strategy defines concrete opportunities that can be realized through steps detailed in its plan of action. (14)
Strategic Trade Policy Framework 2020-2025: The policy framework states the incentives and interventions for "developmental priority sectors" for export. These sectors are processed foods and beverage, fruits and vegetables, meat and poultry and seafood. (27)
Financial Environment
Financial incentives: Refinance Scheme for Working Capital Financing of Small Enterprises and Low-End Medium Enterprises. (17)
Fiscal incentives: Low custom duties on capital goods used for handling, processing and storage of Vegetables, Fruits, Food items etc. and 0% customs duty on capital goods for setting up Fruit Processing in specific areas. (18)
Other incentives: In case of special economic zone: Exemption from income tax for ten years for Zone Developers, Co-developers and Zone Enterprises and One time exemption from all custom-duties and taxes on import of capital goods to Zone Developers, Co-developers and Zone Enterprises. (30)
Regulatory Environment
Legal Documents: Punjab Food Authority Act, 2011 Punjab Foodstuffs (Control) Act, 1958; KPK Food Safety and Halal Food Regulations Act. (28)
Punjab Food Act: Punjab Pure Food rules cover 104 items falling under nine broad categories which are as follows: Dairy & Dairy Products, Edible Oil & Fat Products, Beverages, Food Grains & Cereals, Starchy Food, Spices & Condiments, Sweetening Agents, Fruits & Vegetables and others. (28)
Pakistan Standards and Quality Control Authority's provided standards for various industries, including oils. (29)
Marketplace Participants
Private Sector
Corporates: Pakolive, Cannolive, Zaitoon Pakistan, Siddiqui's Olive Store, Bagh e Zaitoon and Punjab Oil Mills. Investors.
Government
Ministry of National Food Security and Research, Food Department of all provincial governments and Pakistan Standards and Quality Control Authority.
Multilaterals
Multilaterals: United Nations Development Programme, Food and Agriculture Organization and UAE Pakistan Assistance Programme. World Bank, World Food Programme, UKAID and International Trade Centre
Non-Profit
Pakistan Food Association, Overseas Chambers of Commerce and Industries (CCI), Federal, Provincial and City level Chambers of Commerce and Industries.
Target Locations
Pakistan: Punjab
Pakistan: Khyber Pakhtunkhwa
Pakistan: Balochistan
References
- (1) Finance Division, Government of Pakistan, 2022. “Agriculture.” Chapter 2, Pakistan Economic Survey 2021-2022. https://www.finance.gov.pk/survey/chapters_21/02-Agriculture.pdfAccessed 29 March 2023.
- (2) BOI (Board of Investment). 2020. “Sector Profile Food Processing.” https://invest.gov.pk/food-processing?language_id=en.Accessed 29 March 2023.
- (3) Mohiuddin, I., M. A. Kamran, S. Jalilov, M. Ahmad, S. Adil, R. Ullah and T. Khaliq. 2020. “Acknowledging the Role of Pakistan’s Women in Agriculture”. Sustainable Development Investment Portfolio Journal. https://research.csiro.au/sdip/pakistan-women-in-agriculture/.Accessed 29 March 2023.
- (4) UNDP (United Nations Development Programme). 2022. “Pakistan: Flood Damages and Economic Losses over USD 30 billion and Reconstruction Needs over USD 16 billion.” UNDP press releases. https://www.undp.org/pakistan/press-releases/pdna-pakistan-floods.Accessed 29 March 2023.
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- (7) The News. 2021. “3.6 million Olive Trees Planted in 22 Districts.” https://www.thenews.com.pk/print/897183-3-6m-olive-trees-planted-in-22-districts.Accessed 29 March 2023.
- (8) ILO (International Labour Organization). 2019. “Employment in Agriculture, female (% of female employment) (modeled ILO estimate) – Pakistan.” International Labour Organization. ILO modelled estimates database. https://data.worldbank.org/indicator/SL.AGR.EMPL.FE.ZS?locations=PK.Accessed 29 March 2023.
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- (11) Izhar Farms. 2023. “Olive Oil.” https://izharfarms.com/products/olive-oil/#page.Accessed 29 March 2023.
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