Is a Perfect Storm Brewing for California's Olive Oil Industry?

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In recent years, California’s olive oil indus­try has been grow­ing and gain­ing recog­ni­tion. Headwinds in Europe, which range from bad har­vests to food scan­dals could pro­vide addi­tional trac­tion for pro­duc­ers in the state.

US con­sumers’ have long equated olive oil from Europe with higher qual­ity for lower prices. But California pro­duc­ers say the tides are chang­ing. ​“California is being rec­og­nized for pro­vid­ing great extra vir­gin olive oil in a range of prices and fla­vor pro­files,” said Patricia Darragh, exec­u­tive direc­tor of the California Olive Oil Council.

Meanwhile, Europe is expe­ri­enc­ing a bar­rage of prob­lems with its sup­ply and attacks on its cred­i­bil­ity, and this year, the region is also at risk of los­ing ground on com­pet­i­tive pric­ing.

Global olive pro­duc­tion is expected to decline 8 per­cent this year, and it’s largely due to weather-induced prob­lems in Europe. Italian farm­ers expect their yields to be cut in half. Greek farm­ers are brac­ing to lose over a quar­ter of their crops, and floods in Spain wreacked havoc on the coun­try’s most fer­tile olive-grow­ing regions.

As sup­plies tighten, prices for European olive oil are ris­ing. Since October, extra vir­gin olive oil in Spain, Greece, and Italy has jumped 10 per­cent, 17 per­cent, and 30 per­cent, respec­tively. In Britain, prices are at the high­est lev­els in at least seven years, the Washington Post reported.

US con­sumers are wield­ing a strong dol­lar, which has shielded them from major price hikes thus far. But European olive oil is expected to keep get­ting more expen­sive, which means the US mar­ket is likely to see at least a mod­est price increase. Ultimately, the impact on con­sumers’ wal­lets will be deter­mined by fac­tors includ­ing cur­rency val­ues and how much of the cost increase retail­ers choose to swal­low, said USA Today.

As US con­sumers face the prospects of scarcer, more expen­sive European olive oil, they’re also increas­ingly con­fronted with reports of shady prac­tices asso­ci­ated with those prod­ucts. Reports and data sug­gest mis­la­bel­ing is still a prob­lem. Products mar­keted as being pro­duced in one coun­try are often made with oils from other ones.

In January, for exam­ple, Italian forces arrested 33 mafia sus­pects linked to a crim­i­nal enter­prise that allegedly imported and sold fake extra vir­gin olive in major US cities.

“Many con­sumers are con­cerned about trace­abil­ity and that is often a com­mon buy­ing con­sid­er­a­tion,” said Darragh. As those con­cerns have grown, California has seen a dra­matic increase in demand for its olive oils.

Currently, the state’s pro­duc­ers sup­ply about 6 per­cent of the extra vir­gin olive oil sold in the US. That’s up from less than 1 per­cent ten years ago. Darragh said she believes that growth is based on the pub­lic’s demand for authen­tic­ity.

Lower prices for European prod­ucts does­n’t have the same sway as in the past and con­sumers and retail­ers are will­ing to pay a pre­mium for local extra vir­gin grade olive oils from California, Darragh said.

With con­sumers’ grow­ing appetite for healthy ingre­di­ents and their grow­ing affin­ity to sup­port locally-pro­duced prod­ucts, California’s olive oil indus­try is pro­jected to see rev­enues, profit and demand con­tinue mov­ing on an upward tra­jec­tory. That explains why the largest American pro­ducer, California Olive Ranch, recently increased its farm­land hold­ings with a $9.2 mil­lion acqui­si­tion in Yolo County.

Throughout the state, mar­ket play­ers are posi­tion­ing to cap­i­tal­ize on their grow­ing suc­cess. Mills are being built and expanded and pro­duc­ers are expected to plant about 3,500 acres every year through 2020, accord­ing to the COOC.

Nevertheless, with the United States demand­ing more than 300,000 tons every year, and as con­sumers learn to appre­ci­ate the unique taste char­ac­ter­is­tics of dif­fer­ent vari­eties of extra vir­gin olive oils from dif­fer­ent regions, California’s cur­rent tail­wind is unlikely to cause too much wor­ry­ing among its estab­lished inter­na­tional com­peti­tors, at least for the moment.

• Washington Post


• USA Today