` Deoleo Reports Tough Time for Global Olive Oil Sales - Olive Oil Times

Deoleo Reports Tough Time for Global Olive Oil Sales

Apr. 29, 2013
Julie Butler

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Deoleo, the world’s biggest olive oil com­pany, says American con­sumers have helped off­set a fall in its sales due to belt-tight­en­ing by Spanish and Italian households.

In its lat­est annual report and first quar­ter results for 2013, the Madrid-based com­pany also revealed plans to fol­low last month’s open­ing of its own sales office in China with oth­ers in India, Malaysia and Colombia.

And it said the next har­vest in Spain is in line to be an extra­or­di­nar­ily good” one.

First quar­ter: sales down but profit up

In the infor­ma­tion it released last week, Deoleo said the first three months of 2013 had been tough. The dire eco­nomic sit­u­a­tions in Spain and Italy were hav­ing a big impact and had seen con­sump­tion fall.

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However, despite a slide in sales, Deoleo logged an increase in its first quar­ter earnings.

Its net profit of €4.4 mil­lion ($5.7m) for January-March was well above the €700,000 it booked for the same quar­ter a year ago, though sales were down 4.4 per­cent to €198 mil­lion ($258m).

Its EBITDA (earn­ings before inter­est, tax, depre­ci­a­tion and amor­ti­za­tion – a broad gauge of a com­pa­ny’s finan­cial health) fell 22.6 per­cent to €15.1 mil­lion, and its EBITDA mar­gin dropped from 9.4 per­cent in the first quar­ter of 2012 to 7.6 percent.

U.S. and Canada: strong and impor­tant markets

A regional break­down shows North America made up nearly 55 per­cent of Deoleo’s total EBITDA in the first quar­ter of 2013, com­pared to just 24 per­cent in the same quar­ter last year and about 41 per­cent for 2012 in full.

Deoleo said the fig­ures showed the strength and impor­tance” of this market.

International mar­kets had reacted to ris­ing prices with the usual slow­down in growth. But, in the United States, olive oil con­sump­tion is up two per­cent in vol­ume, accord­ing to Nielsen, despite the price increases. This shows that olive oil con­sump­tion is con­sol­i­dat­ing there,” it said in com­ments on its first quar­ter results.

Last year, Deoleo reported that its Bertolli brand had gained mar­ket share in North America while its Carapelli and Carbonell brands had held theirs. Thanks to the abil­ity to main­tain pre­mium prices, together with an opti­miza­tion of oper­at­ing costs, this region deliv­ers the best EBITDA mar­gin in the com­pany group,” it said then.

Emerging and growth mar­kets off­set­ting cri­sis in mature ones

Deoleo’s Carbonell brand enjoyed very strong growth last year in Brazil, the Bertolli brand was key to increased sales in Japan, and in India its stal­wart was the Figaro label.

In the report on its lat­est quar­ter, titled Bad times, good foun­da­tions”, Deoleo said open­ing its own sales offices in key emerg­ing mar­kets was part of its new inter­na­tional expan­sion strat­egy, hence the new premises in China and planned open­ings in India, Malaysia and Colombia.

Our invest­ment in emerg­ing and growth mar­kets will enable us to mit­i­gate the effects of the cri­sis in mature ones,” it said.

Crisis boosts store brand sales in Spain

In Spain, an increase in sales tax and in the ex-mill price of olive oil late last year pushed up retail prices and made more shop­pers switch to store brand olive oil. Store brands gained 10 points in vol­ume to hold a 70 per­cent mar­ket share, though this has been clawed back a lit­tle of late.

Deoleo said its sales mar­gins were reduced because it needed to offer sales pro­mo­tions amid this intense com­pe­ti­tion, which was par­tic­u­larly fierce last month in Spain.

The company’s pro­mo­tional efforts, and the fact store brands price started to rise this month, will allow us to adapt our spread to keep per unit profit in the nor­mal range,” it said.

As we’ve seen in the past, sharp increases in prices cause an ini­tial drop in con­sump­tion but later it recov­ers after con­sumers accept the new sce­nario, which is the sit­u­a­tion that is now occurring.”

Deoleo’s man­ag­ing direc­tor Jaime Carbó was reported in the Spanish press last week as esti­mat­ing that olive oil con­sump­tion had slumped 6 – 7 per­cent in Spain in the first three months of the year. Demand is very weak and a fall in con­sump­tion in Spain and Italy has a big impact at a global level,” he said.

Spain‘s olive trees ripe for return to high production

While Spain’s record pro­duc­tion of more than 1.6 mil­lion tons in 2011/2012 wasn’t repeated this sea­son, it will no doubt be exceeded in future crop years,” Deoleo’s annual report said.

Indeed, after a long, dry cycle with lit­tle rain­fall, last month was the wettest March in Spain since rain­fall records began there in 1947. The con­sis­tent and well dis­trib­uted rain, with­out tor­ren­tial down­pours, after a win­ter with­out any severe frosts, augured well for a suc­cess­ful com­ing sea­son, it said.

With the trees rested and recov­ery of the water reserves in the land, pro­vided the trees blos­som with­out any inci­dents in May, and the sum­mer is no hot­ter than usual, the forth­com­ing sea­sons should be extra­or­di­nar­ily good.”

However, this past week­end Spain was struck by unsea­son­able weather with snow­fall in var­i­ous parts of the coun­try, includ­ing in areas of olive oil epi­cen­ter Jaén, spark­ing con­cerns about poten­tial impact on the all-impor­tant flow­er­ing stage.

Hojiblanca-Deoleo merger

Deoleo said its gen­eral share­hold­ers meet­ing on May 27 is set to approve the company’s acqui­si­tion of the Hojiblanca extra vir­gin olive oil brand and Málaga bot­tling plant. Hojiblanca, the world’s biggest pro­ducer of extra vir­gin olive oil, will in turn raise its stake in Deoleo to 10.3 per­cent with the receipt of 109 mil­lion new shares each with a face value of €0.50 .



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