Requirements for Starting Olive Oil Business in Pakistan

Pakistan is predominantly an agrarian economy, yet it is unable to fulfill the demand of edible oil for domestic requirements. One of the challenges to the economy of Pakistan is the edible oil deficit. Edible oil is considered as a necessity and not a luxury product and hence its demand is relatively inelastic and grows with time. There are many reasons behind the shortcomings such as lack of awareness of farmers and technological deficiency in oil seed production etc.

The demand for olive oil is increasing day by day due to eating habits of people of Pakistan. Local production does not meet the demand which indicates a huge potential for growing olive trees. Currently in Pakistan about 6 to 8 olive oil extraction units having capacity to process 750 to 1,000 kgs of olive fruit per hour are installed which cannot meet the local demand of Olive Oil. In 2015, Pakistan imported 2,706 tons of Olive Oil worth 7.38 million US dollars.

This study is about setting up “Olive Oil Extraction Unit” in Potohar region in Punjab or in any area where olives are cultivated. The Barani Agriculture Research Institute (BARI) located in Punjab’s Chakwal district, has already planted 473,265 olive trees in the region so far. The BARI reveals that the massive Olive Valley Project is not only providing olive saplings to local farmers, but also technical support on olive grove management and financial support for water resource development and drip irrigation.

The targeted customers of these products are food, cocktails / juices, agriculture / animal feed, and various other industries. The main export markets for Pakistani Olive Oil are Afghanistan and other neighboring countries. However, majority of the produce will be consumed locally because most of the local demand is currently met by the imports.

Olive Oil Production Process in Pakistan

Extraction Process of Olive Oil is given below in detail:

Sorting & Cleaning

After the ripe olives have been combed from the trees, they are picked over by hand to weed out unsound olives. The olives are divided into categories according to their plumpness, state of ripeness, and quality. Then the olives are taken to the press and stored for a short period of time. The period is short enough to prevent fermentation but long enough to allow the olives to get warm so that they release their oil easily.

The first step after the Sorting & Grading is cleaning the olives and removing the stems, leaves, twigs, and other debris left with the olives. The olives should be washed with water to remove pesticides, dirt, etc. Rocks and sand will damage a hammer mill and quickly wear out a centrifugal decanter or oil separator, reducing life span from 25 to as little as 5 years.

Grinding & Paste Formation

In ancient times, the olives were mashed into a paste with a simple mortar and pestle. This principle was expanded upon until the stone mortars were large enough to require slaves or pack animals to operate them. In the modern process, the milled olives travel from the mill into vats in which slowly turning blades mash the olives into a homogenized paste. The purpose of crushing is to tear the flesh cells to facilitate the release of the oil from the vacuoles. This step can be done with stone mills, metal tooth grinders, or various kinds of hammer mills.

Mixing The Paste

Malaxing (mixing) the paste for 20 to 45 minutes allows small oil droplets to combine into bigger ones. It is an indispensable step. The paste can be heated or water can be added during this process to increase the yield, although this generally results in lowering the quality of the oil. The most common mixer is a horizontal trough with spiral mixing blades. Longer mixing times increase oil yield but allows a longer oxidation period that decreases shelf life.

Extraction of Olive Oil

The next step is separating the oil from the rest of the olive components. This used to be done with presses, but is now done by centrifugation. Some centrifuges are called three-phase because they separate the oil, the water, and the solids separately. The two-phase centrifuges separate the oil from a wet paste. In most cases, the oil coming out of the first centrifuge is further processed to eliminate any remaining water and solids by a second centrifuge that rotates faster. The oil is then left in tanks or barrels where a final separation, if needed, happens through gravity. This is called racking the oil. Finally the oil can be filtered, if desired. Centrifugation methods are becoming more popular for the pressing process as well as for separating the oil from the vegetable water. Although centrifugation requires more energy and water, the method takes up less space in the factory and requires a shorter set-up time. Centrifugation also eliminates the need for pressing bags, which must be washed after each pressing.

Lastly, possible additional processing steps include refining the oil to reduce its acidity and improve flavor (in defective oils) by alkali (chemical reaction with an alkali – caustic soda) or steam processing; bleaching the oil to reduce chlorophyll, carotenoids, residual fatty acids, and pesticides using diatomaceous earth, activated carbon, or synthetic silica treatment, and deodorization to reduce odors with the use of activated carbon. Needless to say, these steps are only used for low quality oil.

Storage & Packing of Olive Oil

The oil is stored in underground vats until it is ready to be transported. Then the oil is canned or bottled on an assembly line. Cans or dark-tinted bottles will keep the deep-green color of the olive oil intact. Oil placed in clear-glass bottles will fade to a yellowish-green. However, the flavor is not affected. In many cases, olive oil distributors purchase the olive from the producers and re-bottle it. Packaging has become more ornate as the popularity of olive oil has grown. It is not unusual to purchase olive oil in unusually shaped bottles topped with netting or rope. Some packagers also hire professional artists to design their labels.

Olive Oil Extraction Business in Pakistan Success Factors

Following principles need to be pursued for the best extraction of Olive Oil;

  • For best quality Olive Oil, fruit should be transported to facility within 24 hours and if extra virgin Olive Oil is to be extracted, the transportation time should be less than 6 hours.
  • As this project is designed for future yield of olives and extraction units, the expansion will be done in the years later so future contract with machinery suppliers, farm owners, should be placed keeping in view the inflationary effect.
  • When choosing storage location, remember that heat, air, and light are the adversaries of oil. These elements help create free radicals, which eventually lead to excessive oxidation and rancidity that will develop bad taste in the oil. Even worse, oxidation and free radicals contribute to heart disease and cancer.
  • For best flavor, olive oil should be stored in a cool, dark place. Properly stored olive oil can be used for at least two years. It is, however, at its peak within a year of production, and is most flavorful for the first two months.
  • Heat, light and air are not good for Olive Oil, hence it is ideal to store Olive Oil in either metal tins or dark colored glass bottles. These steps should be taken to protect the oil from the light in order to preserve the quality. The olive oil should be stored in a cool, dark place at home with the cap tightened when not in use.
  • Skill enhancement of the contract farmers, process relevant staff and management should be ensured.
  • Effective marketing and distribution of Olive Oil should be ensured keeping in view the international food safety and hygiene standards.

Investment Required for Olive Oil Production Business in Pakistan

The proposed unit has a capacity to process 200 kgs of olive fruit per hour which will produce 40 liters of Olive Oil under ideal conditions and produce 57,600 liters of virgin oil per annum based on 60 working days (1,440 hours a season, working three shifts per day). The unit will extract olive oil through centrifugation process of olives and cake will be sold to local market. The product will be sold in 3 different packages of 0.5, 1.0 and 4.0 liter.

The proposed Olive Oil Extraction Unit comprise a total investment of Rs. 12.77 million with fixed investment of Rs. 11.30 million and working capital of Rs. 1.47 million. Details of these financials can be studied in the business plan of olive oil production plant in Pakistan by SMEDA.

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