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

Headwinds for Europe's olive oil market appear to bode well for California's growing industry.

Mar. 1, 2017
By Michelle Smith

Recent News

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.



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