Future Lies in Specialized, Sustainable Production, Deoleo CEO Says

According to Ignacio Silva, specialization is key to the survival of traditional producers, and the whole sector must modernize to thrive.

Dec. 1, 2021
By Daniel Dawson

Recent News

Since he was appointed Deoleo’s chief exec­u­tive, Ignacio Silva has man­aged to turn the for­tunes of the world’s largest olive oil bot­tler around.

With a port­fo­lio that includes some of the world’s most pop­u­lar olive oil brands – Bertolli, Carapelli and Carbonell – Deoleo was sad­dled with debt and strug­gling to pay it off when Silva arrived in April 2019.

The prob­lem with olive oil is that there is a year that some earn and another year that oth­ers earn, but the chain does not gen­er­ate value in a sus­tain­able way, and we have to solve that.- Ignacio Silva, CEO, Deoleo

However, in the two and a half years since his arrival, Silva spear­headed efforts that sig­nif­i­cantly reduced deficits and boosted Deoleo’s sales.

See Also:CEO of Largest Olive Oil Company Says the Industry’s Business Model is Broken

The company’s resur­gence has allowed the for­mer Unilever and Schweppes Suntory exec­u­tive to begin plot­ting the future tra­jec­tory of Deoleo, address­ing some of the most press­ing issues fac­ing the global olive oil sec­tor.

One of the strate­gies Silva employed was to stop view­ing Deleo as a sin­gle global com­pany and begin focus­ing on indi­vid­ual mar­kets.

Most deci­sions are made in local mar­kets, at the price level, at the pro­mo­tion level and the brand posi­tion­ing level,” Silva told Olive Oil Times.

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Ignacio Silva

Taking tai­lored approaches to each mar­ket is becom­ing increas­ingly impor­tant as the sec­tor inches away from tra­di­tional olive har­vest­ing in Greece, Italy and Spain to high-den­sity and super-high-den­sity har­vest­ing in North Africa, Turkey, South America, Australia and California.

The map of pro­duc­tion is chang­ing,” Silva said. The costs of col­lec­tion and pro­duc­tion in the tra­di­tional method, which is the major­ity of pro­duc­tion that exists in Spain and other coun­tries such as Greece, is infi­nitely higher than the cost of pro­duc­tion of super-inten­sive or irri­gated crops.”

Simply put, Silva believes that com­pa­nies such as Deoleo need to adapt to this change.

It is eas­ier said than done. Across south­ern Europe, there has been plenty of push­back against the mod­ern­iza­tion of olive groves.

Lobbying from Spain has helped enshrine tra­di­tional agri­cul­tural pro­duc­tion as one of the three core ten­ants of the lat­est iter­a­tion of the Common Agricultural Policy.

While the future of olive oil pro­duc­tion will be dri­ven by the trans­for­ma­tion to mod­ern olive groves, Silva believes tra­di­tional har­vest­ing done sus­tain­ably will remain an essen­tial part of the global olive oil mar­ket.

They pro­duce a series of vari­eties that are very impor­tant in our blends,” Silva said. We need vari­eties that do not live well in the inten­sive sys­tem, in the irri­gated sys­tem, which are vari­eties that have much less sta­bil­ity, and there­fore have a much shorter shelf life.”

We have to con­tinue sup­port­ing diver­si­fi­ca­tion and spe­cial­iza­tion in high moun­tain cul­ti­va­tion… in coun­tries such as Spain, Italy and Greece,” he added. We have to help them improve their pro­duc­tiv­ity; we have to help them to mod­ern­ize, to develop new vari­eties, vari­eties that are dif­fer­ent and there­fore spe­cial and have a dif­fer­en­tial value. We have to pay them more for that pro­duc­tion.”

Silva said the pro­mo­tion of tra­di­tional pro­duc­tion and sus­tain­abil­ity go hand-in-hand. In January, the com­pany will announce its lat­est sus­tain­able strat­egy. Among its goals is to help tra­di­tional pro­duc­ers become more prof­itable while fol­low­ing agri­cul­tural best prac­tices.

There are two solu­tions,” Silva said. One is to change to a model sim­i­lar to what Portugal has done, a par­tial solu­tion. But I believe that there is another solu­tion that has to do with sus­tain­abil­ity and that the two have to go together.”

That is, to defend the small pro­duc­ers, as long as they are able to mod­ern­ize, dig­i­tal­ize and above all to diver­sify,” he added.

Regardless of the type of pro­duc­tion, Silva sees the lack of tech­no­log­i­cal mod­ern­iza­tion as some­thing else that holds the olive oil sec­tor back at all lev­els.

I believe that the sec­tor, in gen­eral, is a fairly old-fash­ioned sec­tor, with out­dated prac­tices and there­fore using dig­i­ti­za­tion, for exam­ple, to con­trol the pro­duc­tion process and con­trol trace­abil­ity, are very rel­e­vant aspects,” he said.

Silva cited the use of tech­nol­ogy to antic­i­pate har­vests as some­thing that would help rev­o­lu­tion­ize the sec­tor.

He said Deoleo is work­ing with the University of Córdoba on tech­nol­ogy to help pro­duc­ers antic­i­pate how much olive oil they will pro­duce at the begin­ning of the crop year instead of find­ing this out in December or January.

Silva argues that this would help pro­duc­ers plan for the future by antic­i­pat­ing prices at ori­gin and qual­ity.

Along with improv­ing prof­itabil­ity for farm­ers, Silva argues the sec­tor needs to add value to the entire olive oil sup­ply chain. He said this would stop the com­modi­ti­za­tion of olive oil, which empha­sizes pro­duc­tion at the low­est pos­si­ble costs and often sees qual­ity as col­lat­eral dam­age.

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Jaén, Spain (Photo: Hannah Howard for Olive Oil Times)

However, doing this requires com­pa­nies to focus more on con­sumers and less on their pre­con­ceived notions of what peo­ple should want in an olive oil.

What the com­pany has to do is put the con­sumer at the cen­ter of all our deci­sions and try to sat­isfy their needs,” he said. This way, I believe that we will achieve more sus­tain­able devel­op­ment of the cat­e­gory than we have so far.”

Silva repeated what olive oil pro­duc­ers of all sizes from all over the world have told Olive Oil Times, which is the need to edu­cate con­sumers about the dif­fer­ences between good” olive oil and bad” olive oil and why one is worth more money than the other.

I think there is a lot of work to be done there,” Silva said. I believe that one of the errors that the cat­e­gory has had in recent years is that it has not been trans­par­ent with the con­sumer, and that is some­thing that we are now pay­ing for in coun­tries such as Spain.”

Silva said the new leg­is­la­tion in Spain gov­ern­ing olive oil qual­ity and stan­dards is a step in the right direc­tion but could have been stronger.

The leg­is­la­tion includes a series of trace­abil­ity require­ments for bulk olive oil ship­ments, tighter con­trol on how the terms vir­gin” and extra vir­gin” may be used and a crack­down on blend­ing olive oils from dif­fer­ent crop years.

One ele­ment of the cur­rent olive oil mar­ket that the new leg­is­la­tion failed to address but Silva insists must be reformed was the role of tast­ing pan­els in deter­min­ing olive oil qual­ity.

The tast­ing panel was cre­ated to give con­sumers secu­rity, to guar­an­tee that the prod­uct they con­sume is a high-qual­ity prod­uct, and above all, it is a prod­uct that is exactly what the bot­tle says,” Silva said.

Now, I think it is not the best tool,” he added. It is a tool that gives bot­tlers legal inse­cu­rity because we con­trol only part of the chain.”

The qual­ity of the oil has to do with the col­lec­tion method, with the way the prod­uct is cared for at the source, how we bot­tle it and, above all, how it is stored and cared for at the point of sale,” Silva con­tin­ued. Therefore, we can­not be held respon­si­ble for the entire chain, being only partly respon­si­ble for one part.”

The con­tro­versy over the role of tast­ing pan­els has long been an issue in Spain. Supporters of the tast­ing panel said they are a fun­da­men­tal instru­ment” to ensure qual­ity.

Detractors argue that it is an anti­quated method that heaps legal risk on bot­tlers, exporters and retail­ers. In 2018, an audit from PricewaterhouseCoopers called sen­sory panel eval­u­a­tions an inap­pro­pri­ate qual­ity con­trol mech­a­nism that vio­lates the most ele­men­tal prin­ci­ples of the Spanish legal sys­tem, and gravely harms the pub­lic and the olive oil indus­try.”

For his part, Silva said the lack of con­sis­tency from tast­ing pan­els gen­er­ates inse­cu­rity in the indus­try. He wants to see more agency at every step in the olive oil sec­tor, from farm­ers to retail­ers.

I believe that the tast­ing panel has to be replaced by some­thing that bot­tlers them­selves have to take a step for­ward, offer, antic­i­pate and reg­u­late,” he said. We have to put an alter­na­tive method to the tast­ing panel that ensures that it guar­an­tees qual­ity to con­sumers, but that it does not use sub­jec­tive sys­tems.”

While Silva acknowl­edges plenty of chal­lenges face the olive oil sec­tor, he is opti­mistic that the mil­len­nia-old crop can con­tinue to pro­vide a decent liv­ing to every­one involved in its pro­duc­tion and com­mer­cial­iza­tion.

Despite warn­ings that high prices hurt exporters, Silva said that olive oil is as valu­able as peo­ple believe it to be. For every­one in the sec­tor to pros­per, they must take this approach.

I think the [profit] mar­gin issue has to do with the value we place on the prod­uct,” he said. If we do not value the prod­uct and find extra vir­gin oils of dubi­ous qual­ity for €3, it is impos­si­ble for the chain and all its agents to earn money.”

The prob­lem with olive oil is that there is a year that some earn and another year that oth­ers earn, but the chain does not gen­er­ate value in a sus­tain­able way, and we have to solve that,” he con­cluded.


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