CEO of Largest Olive Oil Company Calls the Industry's Business Model 'Broken'

Summary

The exec­u­tive chair­man of Deoleo, S.A., Pierluigi Tosato, stated that the olive oil indus­try’s busi­ness model is bro­ken due to falling con­sump­tion and over­pro­duc­tion, address­ing atten­dees at a con­fer­ence near Chicago. Tosato crit­i­cized pro­tec­tion­ist prac­tices, lack of con­sumer trust, and the use of olive oil as a loss leader by retail­ers, call­ing for a uni­fied global stan­dard and sus­tain­able pro­duc­tion to com­bat the indus­try’s chal­lenges.

The exec­u­tive chair­man of the world’s largest olive oil com­pany said today that the busi­ness model for the olive oil indus­try was ​“bro­ken,” and the next few years will be crit­i­cal as con­sump­tion slumps in tra­di­tional mar­kets and a sce­nario of over­pro­duc­tion with dwin­dling demand looms.

Pierluigi Tosato was address­ing the 50 or so atten­dees of a con­fer­ence near Chicago orga­nized by the North American Olive Oil Association, most of whom had been in the olive oil busi­ness far longer than the fea­tured speaker.

Tosato joined Deoleo as its chief exec­u­tive just two years ago, bring­ing a bev­er­age indus­try back­ground to lead the com­pany that pro­duces the Bertolli, Carapelli and Carbonell brands.

“Consumers are mov­ing away from olive oil,” Tosato declared in his open­ing remarks. ​“We will have an excess in pro­duc­tion in the next years. The demand is not going the way it should go.”

Dressed in jeans and sneak­ers, the CEO of the Spanish multi­na­tional denounced what he said were the pro­tec­tion­ist prac­tices that have dam­aged the indus­try and caused con­sumer mis­trust.

“Consumption is falling because con­sumers have a lack of con­fi­dence and they don’t trust any­thing,” Tosato said, using his native coun­try, Italy, as an exam­ple. ​“There is not enough olive oil [made in Italy] no mat­ter what they say. They try to [dis­par­age] imports but by doing that they have harmed the cat­e­gory.”

Aside from pro­duc­ing coun­tries bad­mouthing imports, Tosato sees pri­vate brands and retail­ers using olive oil as a loss leader as major fac­tors dri­ving the sec­tor down­ward.

“In Spain, inter­nal demand dropped, the mar­ket is dom­i­nated by pri­vate label. Olive oil is per­ceived as a traf­fic builder by the retail­ers and of course, vol­ume is more impor­tant than value. And the retail­ers are ask­ing only for a promo price because they see the cat­e­gory as a traf­fic builder — noth­ing more than that.”

Tosato pre­sented some slides of what appeared to be typ­i­cal olive oil sec­tions in gro­cery stores. ​“I’m com­ing from other cat­e­gories. This is really bad,” he said to the group rep­re­sent­ing com­pa­nies who filled those shelves.

“There’s some­thing we have been doing wrong in this cat­e­gory for many, many years, sorry to say,” said Tosato, who ran a bot­tled water busi­ness, Acqua Minerale San Benedetto, and was pre­sum­ably used to bet­ter-look­ing dis­plays.

And while the olive oil sec­tor has been bank­ing on U.S. con­sumers to catch on to the prod­uct and reverse the bleak trends in tra­di­tional mar­kets, Tosato implied it was lit­tle more than a mirage, for now.

“So far we have very lit­tle con­sump­tion per capita, but the pri­vate label is grow­ing. This is dri­ving the prof­itabil­ity of the cat­e­gory down. So [the U.S.] is fol­low­ing the same path as Spain and Italy. Is that good? I don’t think so.”

After con­demn­ing pri­vate label­ing to a room full of pri­vate label­ers, Tosato was­n’t through. Next on his list was the lack of a uni­fied global stan­dard for the cat­e­gory.

“Even though we are deal­ing with a unique prod­uct, fan­tas­tic prod­uct, in my opin­ion, we are con­fus­ing the con­sumers. We are just con­fus­ing them. There is no for­mal stan­dard — it’s a mess,” he said.

“The European Union has its own rules, International Olive Council has stan­dards, but Australia has its own, and in the U.S. there is no stan­dard — no com­mon rules, noth­ing. And in this vac­uum, the bad guys are win­ning. The bad guys are trans­form­ing this indus­try into a com­mod­ity. Because we don’t talk to each other. We don’t trust each other,” he said.

“Olive oil is a bro­ken busi­ness model. We need to change it.”

He laid out his com­pa­ny’s roadmap that included offer­ing incen­tives to farm­ers for pro­duc­ing bet­ter fruit and har­vest­ing ear­lier. ​“We need to sup­port sus­tain­able pro­duc­tion, not only super-inten­sive. Traditional pro­duc­tion is giv­ing jobs to local com­mu­ni­ties, which is fine.”

Tosato called for an agree­ment on one set of global stan­dards, what­ever they may be, and he defended the role of organolep­tic assess­ment for cer­ti­fy­ing qual­ity. ​“This is the best way to defend olive oil for the future.”

Finally, he said, ​“We need to fight like hell against the bad prac­tices. This is a bad indus­try.”

After his speech, he pre­sented a short video in which the CEO sat in an olive field and said, ​“We have been fac­ing attacks and a lot of fake news on the inter­net. We are deny­ing all these alle­ga­tions and what we want to do is come up in front of con­sumers and show them exactly what we are doing.”