The contraction of the US cooking oil market by Associated British Foods (ABF), parent company behind prominent brands like Mazola and Primark, has been attributed to a combination of economic strain and increased immigration enforcement. ABF's chief executive, George Weston, pointed out that anti-immigration raids championed by Donald Trump's administration have disproportionately affected Latino communities, traditionally heavy users of cooking oil.
Weston noted that these households are facing significant economic and social pressures, leading to a shift in consumer behaviour. A notable trend is the increased reuse of cooking oil, with ABF estimating that this demographic now uses oil approximately four times before disposal - up from three times historically - a trend not expected to reverse until 2027.
The challenge to the US cooking oil market extends beyond household consumption. ABF's joint venture, Stratas Foods, which supplies oils to the food service sector, is also facing headwinds. Weston highlighted that the rapid adoption of appetite-suppressing drugs, specifically GLP-1s, is leading to a noticeable decline in demand for fried foods - presenting a new challenge for the food service industry and its suppliers.
Despite these challenges, ABF's overall grocery sales managed a modest 1% increase in the three months to 20 June. This growth was primarily driven by stronger performances from brands like Twinings, which helped offset the decline in US oil sales. The group's total sales for the quarter rose by 3% to £5.3 billion, after accounting for exchange rate fluctuations - a result supported by a 3% sales increase at Primark.
ABF has acknowledged that consumer spending habits are being influenced by ongoing economic uncertainties, affecting both US and international markets. While the company's diverse portfolio provides some resilience, market pressures like those seen in US cooking oil underscore the complex landscape for global businesses.
The contraction of the US cooking oil market is a significant development for ABF, given its reliance on this sector. The company will need to closely monitor consumer behaviour and adapt its strategies to mitigate the impact of these challenges. As ABF continues to navigate the 'challenging consumer environment', investors will be watching closely to see how the company responds.