Costco Poised for Upturn in U.S. Olive Oil Consumption

Summary

Despite chal­lenges such as the pan­demic and tar­iffs, U.S. olive oil con­sump­tion is on the rise, with a pro­jected total of 357,000 tons for the cur­rent crop year. Costco’s focus on qual­ity, trace­abil­ity, and vari­ety in its olive oil offer­ings has helped boost con­sumer con­fi­dence and drive growth in the mar­ket, indi­cat­ing a trend towards increased con­sump­tion of extra vir­gin olive oil in the U.S.

Despite a once-in-a-cen­tury pan­demic and a 25-per­cent tar­iff on some Spanish olive oil imports, olive oil con­sump­tion in the United States con­tin­ues to climb.

According to data from the International Olive Council, U.S. con­sump­tion is expected to reach 357,000 tons in the cur­rent 2020/21 crop year. If their esti­mate is cor­rect, it would be the sec­ond-high­est total, just behind last year’s record-high of 399,500 tons.

Since the 2008/09 crop year, the U.S. has been the third-largest global con­sumer of olive oil, behind Italy and Spain. Consequently, it is a care­fully-watched mar­ket by pro­duc­ers, bot­tlers and exporters.

While most U.S. olive oil con­sump­tion comes in the form of bulk imports of blended, non-vir­gin oils des­tined for the restau­rant, hos­pi­tal­ity and food man­u­fac­tur­ing sec­tors, evi­dence sug­gests the extra vir­gin cat­e­gory con­tin­ues to grow.

Research from Fortune Business Insights, a con­sult­ing ser­vice, sug­gests that the cur­rent dip in olive oil con­sump­tion is mostly fueled by lower demand in the restau­rant and hos­pi­tal­ity sec­tor.

However, grow­ing health con­cerns, specif­i­cally around the immune sys­tem, have led to a resur­gent inter­est in healthy oils from indi­vid­ual con­sumers. The firm expects this trend to con­tinue even after the pan­demic has sub­sided.

Few peo­ple in the U.S. are as well-posi­tioned to observe and under­stand these trends as Lucas Stanuch, Costco’s main olive oil buyer. The mem­ber­ship-based big-box seller is the fourth-largest retailer in the U.S. and fifth largest in the world, with more than 81 mil­lion mem­bers.

Costco has long stood out for its olive oil range. The company’s Kirkland Signature extra vir­gin olive oil brand con­sis­tently per­forms well in off-the-shelf tests and inde­pen­dently-admin­is­tered qual­ity analy­ses.

“When we’re devel­op­ing items or some other pri­vate label offer­ing, we focus on qual­ity first,” Stanuch told Olive Oil Times. ​“That means that we’re going to make sure that we under­stand what the best olive oil is. What makes good olive oil.”

“Then we fig­ure out ways to make it a great value to any­body else out there and we do that by part­ner­ing with the right peo­ple and obvi­ously, our vol­ume helps us to get to those price points,” he added.

When the com­pany began sourc­ing its own extra vir­gin olive oils about 25 years ago, the only offer­ing was a Tuscan oil. Since then, the com­pany has expanded its pro­gram with oils sourced from California, Spain, Greece, Tunisia and Portugal, includ­ing about 10 dif­fer­ent prod­ucts with pro­tected geo­graph­i­cal indi­ca­tors.

“It’s what we like to call a trea­sure hunt expe­ri­ence,” Stanuch said. ​“We think that strat­egy is the next step when it comes to these SKUs (stock-keep­ing units). The mem­ber never knows what they are going to get.”

“They’re going to find nice Greek olive oil, a Spanish one, a California one,” he added. ​“They always know they’re going to get some­thing inter­est­ing to keep that excite­ment in that cat­e­gory.”

Costco’s push for trace­abil­ity in all of its oils also has helped boost con­sumer con­fi­dence.

The com­pany uses a com­bi­na­tion of third-party ver­i­fi­ca­tion via Bureau Veritas and the indi­vid­ual con­sor­tia for Protected Designation of Origin and Protected Geographical Indication asso­ci­a­tions, along with its own inves­ti­ga­tions into the sup­ply chain to ensure that the con­tent of the bot­tles is what the label says.

These kinds of trace­abil­ity efforts help to instill trust in con­sumers when shop­ping for extra vir­gin olive oil. The U.S. olive oil retail sec­tor could more widely adopt them.

“I think [these prac­tices] could be widely adopted,” Stanuch said. ​“Any retailer who puts effort in can do the same.”

Combined, these prac­tices may be the key to grow­ing the trend of extra vir­gin olive oil con­sump­tion in the U.S. and, if Costco is a bell­wether, that trend is cer­tainly tak­ing place.

Stanuch said that olive oil sales had increased since the onset of the COVID-19 pan­demic in the U.S. last March as more house­holds sought to stock up on goods.

“You can assume that a lot more peo­ple are cook­ing at home and not eat­ing out, so they’re going to be buy­ing more ingre­di­ents,” he said. ​“Our entire oil cat­e­gory has been doing very well dur­ing this time for obvi­ous rea­sons. The olive oil sub­cat­e­gory has ben­e­fited from that.”

While it is dif­fi­cult to tell how the post-pan­demic world will look and what king of eat­ing trends will pre­vail, the ground­work has been laid for extra vir­gin olive oil con­sump­tion to keep grow­ing in the U.S.

“It is def­i­nitely trend­ing upwards. I think as mem­bers and cus­tomers become more edu­cated in dif­fer­ent oils, they nat­u­rally start to grav­i­tate toward higher qual­ity prod­ucts,” Stanuch said. ​“Our mem­bers trust that we’re going to have very good qual­ity oil, so it seems like they’re will­ing to try those dif­fer­ent oils with us.”

Cultivating trust among Costco’s mil­lions of mem­bers for its Kirkland Signature brand has helped the com­pany cre­ate an olive oil cul­ture and may serve as a tem­plate for other large American retail­ers.

“California olive oil has been very pop­u­lar lately. Our core SKUs, the organic and 100-per­cent Italian, have always been pop­u­lar. Those SKUs have been around a decade or longer.” Stanuch said. ​“You can def­i­nitely see that mem­bers are start­ing to expand their hori­zons to dif­fer­ent types of olive oils.”

• Fortune Business Insights