` Olive Oil Giant Deoleo on the ‘Crucial but Cruel’ U.S. Market - Olive Oil Times

Olive Oil Giant Deoleo on the ‘Crucial but Cruel’ U.S. Market

Jun. 23, 2014
Julie Butler

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Not just the vast­ness but also the profit mar­gins make the United States arguably the most impor­tant olive-oil mar­ket in the world, Spanish-based olive oil giant Deoleo says in a new report.

The U.S. is the land of oppor­tu­ni­ties, but it is also a cruel mar­ket for those who are not pre­pared to fight.- Deoleo Annual Report

Deoleo said olive oil mar­kets are usu­ally high profit, low con­sump­tion or high con­sump­tion, low profit but in the U.S., both the mar­ket and unit profit mar­gins are big.

In con­trast with (U.S.) retail prices of over $8/liter, in Italy prices are around €4/liter and in Spain, €3/liter,” Deoleo said in its 2013/14 annual report. The main rea­son is North American retail mar­gins are very high, while in Spain olive oil is often used as a loss leader which is extremely destruc­tive for the cat­e­gory.”

The U.S. mar­ket is thus cru­cial because the profit there, apart from pro­vid­ing an out­let for pro­duc­tion, helps finance devel­op­ment, inno­va­tion, and mar­ket­ing which have a flow-on effect through­out the value chain, it said.

Half the olive oil really Spanish

If focus­ing on the areas where olive oil con­sump­tion is con­cen­trated the U.S. – the east coast, west coast, Texas and around Chicago – the per capita con­sump­tion in value is close to that of the tra­di­tional oil-con­sum­ing coun­tries.”

While on paper Spain pro­vides under a quar­ter of the about 300,000 tons of olive oil the U.S. mar­ket imports annu­ally, when tak­ing into account the level of pro­cess­ing, pack­ag­ing and re-expor­ta­tion of Spanish olive oil by Italy, Spain sup­plies about half of all olive oil con­sumed in America, Deoleo said, so any fall in con­sump­tion would have a big impact on its abil­ity to mar­ket national pro­duc­tion.”

Challenges and oppor­tu­ni­ties in the U.S. olive oil mar­ket

In its analy­sis of the chal­lenges, oppor­tu­ni­ties and future threats” of the U.S. olive oil mar­ket, Deoleo said these fall into two cat­e­gories: fac­tors related to the devel­op­ment and even­tual matu­rity of the mar­ket; and those con­nected with a lobby group dri­ving the agenda there.

It said growth is start­ing to slow and con­sump­tion to even fall in cer­tain peri­ods, namely when prices rise abruptly. It’s thus impor­tant to:

- under­stand how American con­sumers per­ceive the prod­uct, its use and culi­nary fea­tures com­pared to other types of oils and fats;

- heed what con­sumers want, with­out impos­ing our tastes or tra­di­tions; be open to cre­at­ing new cat­e­gories or devel­op­ments;”

- mon­i­tor chan­nels and for­mats that destroy value, such as pri­vate label and club stores;

- accept that local pro­duc­ers will gain more shelf space and a larger share of con­sumer spend­ing;

- expect a grow­ing num­ber of local bot­tlers in the U.S., mean­ing the applic­a­ble mar­gin will be earned in the U.S. rather than tra­di­tional exporters;

- expect a dilu­tion’ of olive oil con­sump­tion, espe­cially in the food ser­vice sec­tor, given the law does not impede, or at least not pros­e­cute, blends of olive with other veg­etable fats;”

- be aware of incor­rect prac­tices by cer­tain oper­a­tors out­side the E.U., but also within it, which dis­tort com­pe­ti­tion;

- study how other veg­etable oils are cham­pi­oning health ben­e­fits which till now were key to growth in the olive oil cat­e­gory, espe­cially recent moves in the canola (rape­seed) and corn oil sec­tors, both with sig­nif­i­cant nutri­tional and health value, and which aim to com­pare them­selves favor­ably against olive oil.”

Lobby group seen as threat

Though it didn’t name it, Deoleo took a swipe at what it described as a local lobby spon­sored mainly by Spanish investors, which devel­oped an olive farm in north California with ROI expec­ta­tions that are unlikely to be met, con­sid­er­ing the exces­sive invest­ment made.”

These investors are seek­ing higher prices for olive oil and accuse Spanish exporters of fraud, adul­ter­ation, dump­ing and gov­ern­ment sub­si­dies, while also push­ing for a non-IOC (International Olive Council) trade stan­dard, import bar­ri­ers and the den­i­gra­tion of olive oils from tra­di­tional pro­duc­ers, it claimed.

The result­ing con­sumer uncer­tainty and other effects have aided other veg­etable oils, which are enjoy­ing growth that was pre­vi­ously char­ac­ter­is­tic of olive oil.”

Conclusions: room for growth in the North American mar­ket

The U.S. mar­ket is ready to buy more olive oil, it’s just a mat­ter of know­ing how to achieve this, such as find­ing new ways and times for con­sumers to use it, pro­mot­ing it as a sub­sti­tute for less healthy or tasty oils, improv­ing dis­tri­b­u­tion, and get­ting new con­sumers to not only try it but come back for more, Deoleo said.

It’s a ques­tion of build­ing mar­kets, not just plac­ing vol­ume. The pro­duc­ers, the entire chain, must be respon­si­ble and work on improv­ing the qual­ity and com­pet­i­tive­ness of our oils…but we must also point out the black sheep’, the minor­ity who give the entire sec­tor a bad name.”

The U.S. is the land of oppor­tu­ni­ties, but it is also a cruel mar­ket for those who are not pre­pared to fight,” it said.


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