In an open letter, several unnamed Iranian oil producers accused Savola Behshahr of flooding the market with cheap cooking oil, in order to expand its own market share. The company currently controls 40% of Iran’s edible oil market.
“This cheap selling… does not benefit the customers and the discount goes to wholesalers in order to entice them into cutting supplies from other cooking oil producers,” said the letter, as reported by Fars and PressTV, without specifying the authors.
“Continued dumping by a specific company will gradually force other competitors out of business, after which the flooding will stop and the prices of supplies to the wholesalers will return to real levels,” the letter reportedly added.
Growing Iranian presence
Saudi-based Savola Group currently owns 79.9% of Behshahr Industrial Company, along with 100% ownership in the Savola Behshahr Sugar Company, distribution firm Tolue Pakshe Aftab, and confectionery maker Modern Behtaam Royan Kaveh, according to the group’s latest annual report. Savola originally bought a 49% stake in Behshahr Industrial Company in 2004.
This majority ownership of a major staple provider has become a source of tension in Iran, which is engaged in a long-standing cold war with Saudi Arabia thanks to numerous religious and political differences. The recent conflict in Yemen, which has seen Saudi forces go up against Iran-backed fighters, has made Saudi-Iranian relations dramatically worse.
Last month Iranian MPs questioned the high stake Savola had in its Iranian subsidiary, with some suggesting the Saudi firm was attempting to establish a monopoly on cooking oil in the country. PressTV quoted MP Ruhollah Baygi-Ilanlou as saying no foreign company should have a stake of more than 20% in a staple producer.
Expansion under threat
Behshahr is an important part of Savola’s business, accounting for 13% of its total revenues in 2014. Last year the Iranian firm saw sales of US$923m, around 37% of Savola’s edible oils business.
Following the recent nuclear agreement between Iran and a number of other countries, Savola has been listed as a possible beneficiary of a more open Iranian investment environment. But regional political tensions, and its poor perception within Iran, may undercut the Saudi firm’s ability to increase its footprint.
Ahead of Savola Group’s second-quarter results, analysts offered widely differing profit forecasts for the firm this week, ranging from HSBC’s low US$115m, to Alistithmar Capital’s more generous US$147m, with Yahoo-Maktoob reporting an average of US$131m. Along with its first-quarter results, Savola itself projected a Q2 profit of US$114.4m.