Rising Prices, New Technology Attract Private Equity Interest in Olive Oil

Analysts are eyeing promising financial returns in the olive oil market, particularly in Spain and Portugal.
Alentejo, Portugal
By Ofeoritse Daibo
Oct. 23, 2023 16:39 UTC

Despite the heat and drought, south­ern Europe’s olive oil pro­duc­ers have sparked inter­est from pri­vate equity firms.

While olive farm­ing and oil pro­duc­tion are not usu­ally seen as high-return invest­ments, cur­rent con­di­tions in Spain and Portugal and new agri­cul­tural tech­nolo­gies and prac­tices have spot­lighted the olive oil sec­tor.

There is more and more inter­est in invest­ing in (the olive oil) sec­tor. A well-man­aged farm is good busi­ness.- Fernando de la Vega, man­ag­ing direc­tor, Beka Finance

Due to con­tin­ued macro­eco­nomic uncer­tainty and ris­ing inter­est rates, pri­vate equity firms remain focused on act­ing oppor­tunis­ti­cally to invest in high-qual­ity assets in spaces with clear long-term sec­u­lar tail­winds,” accord­ing to research by Pete Witte, lead pri­vate equity ana­lyst at Ernst & Young.

Among the deals is the recently con­cluded acqui­si­tion of Spanish olive oil pro­ducer Innoliva by Canadian-based Fiera Comox Partners. Innoliva is one of Europe’s largest pro­duc­ers. It was sold to Fiera Comox by London-based Cibus Capital, which acquired the com­pany in 2018.

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According to media reports, Fiera Comox’s agri­cul­ture invest­ment team fore­casts promis­ing finan­cial returns in the olive oil mar­ket, par­tic­u­larly in Spain and Portugal.

This opti­mistic fore­cast mainly relates to the increase in super-high-den­sity (super-inten­sive) olive groves in Spain and improved milling tech­nolo­gies.

Spain has devel­oped a huge mar­ket and clus­ter for the prod­uct, and this has spilled over to Portugal,” Alexis Martineau, head of European pri­vate equity at Brazilian Warrant Co. and the found­ing part­ner of Alentejo-based olive oil pro­ducer Quinta Solana, told Olive Oil Times.

In the early 2000s, there was a gold rush by a lot of Spanish olive oil pro­duc­ers into south­ern Alentejo, specif­i­cally,” he added.

According to Gonçalo Moreira, man­ager of the Alentejo Olive Oil Sustainability Program, the Portuguese region com­pris­ing about one-fourth of the country’s land area was respon­si­ble for 92 per­cent of Portuguese olive oil pro­duc­tion in the 2022/23 crop year.

Martineau attrib­utes the region’s rise in olive oil pro­duc­tion to new farm­ing tech­niques exported from Spain.

Investments are being made to cre­ate mod­ern, super-inten­sive olive groves in a coun­try where most farms are made up of small arti­sanal pro­duc­ers who har­vest man­u­ally and work col­lec­tively to pro­duce olive oil,” he said.

While south­ern Portugal has devel­oped inten­sive tech­niques, in other olive oil-pro­duc­ing regions of the coun­try, espe­cially those in the north, tra­di­tional meth­ods are still in place, with some using presses dat­ing from the 12th and 13th cen­turies.

However, invest­ments in super-high-den­sity groves have put Portugal on the path to becom­ing one of the world’s largest olive oil pro­duc­ers.

In the future, we will be able to sur­pass the record reached in the 2021 har­vest due to the increase in the area of mod­ern olive groves in hedgerows and because we have many new olive groves that are only now com­ing into pro­duc­tion, allow­ing us to increase the amount of olive oil pro­duced in Portugal,” Moreira told Olive Oil Times in a sep­a­rate inter­view.

Along with an increase in super-high-den­sity groves, a 2020 study from Juan Vilar Strategic Consultants and Consulai said invest­ments in tech­nol­ogy were also paving the way for Portugal to become the world’s third-largest olive oil pro­ducer.

According to Martineau, the cat­a­lyst for this rapid invest­ment in Portugal stemmed from the 2008 finan­cial cri­sis.


After the 2008 finan­cial cri­sis, when Portugal was strug­gling eco­nom­i­cally, Spanish olive pro­duc­ers found that the cli­mate and soil speci­ficity in Portugal was sim­i­lar to that of olive grow­ing areas of Spain, but the land was much cheaper,” Martineau said.

As a result, sev­eral banks sold land,” he added. The Spanish invested in thou­sands of hectares of land, val­ued at tens of mil­lions of Euros.”

Martineau said the com­bi­na­tion of low cost of land, gen­er­ous water sup­ply, pro­duc­tion effi­ciency, avail­abil­ity of highly skilled labor and prof­itabil­ity of the sec­tor, trig­gered mas­sive invest­ment.”

He added that Alentejo’s advan­tage com­pared to other parts of Portugal is access to water. The Aqueva dam, con­structed in the early 2000s on the Guadiana River, one of the longest in the Iberian penin­sula, has been the source of irri­ga­tion for farms in the region, chang­ing the face of its agri­cul­tural land­scape.

Experts pre­dict that inter­est in Alentejo will per­sist as fur­ther invest­ments are made in high-den­sity orchards and cut­ting-edge mills.

Fund man­agers are con­fi­dent enough in higher olive oil prices to make longer-term com­mit­ments to the sec­tor.

For exam­ple, Spanish invest­ment com­pany Beka Finance has launched its first fund with Portuguese indus­trial part­ner Bolschare to invest in super-high-den­sity olive and almond farm­ing.

Beka expects returns of up to 20 per­cent from the new fund in the next ten years, com­pared with its ini­tial fore­cast of 11 per­cent, due to prices ris­ing far higher than the fund ini­tially esti­mates.

There is more and more inter­est in invest­ing in this sec­tor,” Beka’s man­ag­ing direc­tor Fernando de la Vega told Reuters. A well-man­aged farm is good busi­ness.”

Along with his­tor­i­cally high prices, fund man­agers also see endur­ing value in olive oil demand as increas­ingly health-con­scious con­sumers seek the prod­uct out. Olive oil con­sump­tion is again expected to out­pace demand in the 2023/24 crop year.

However, Martineau does not expect the next few years to be smooth sail­ing for pri­vate equity invest­ments. Moving for­ward, he expects access to water to be a stick­ing point, but sim­i­lar to wine regions, some olive oil regions will increase their pro­duc­tion out­side the E.U., includ­ing Chile, California, Argentina, South Africa, maybe China and parts of Australia.”

He added that though the sec­tor remains prof­itable, the cost of debt has increased, mak­ing land pur­chases more expen­sive.

Martineau noted that, gen­er­ally, olive oil pro­duc­ers diver­sify into almonds to hedge their bets, as both crops are grown on the same kind of soil, although almonds require more water.

Soon, pri­vate equity investors in the olive oil sec­tor must adjust their return to reflect new world con­di­tions,” he said.


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