`Where Olive Oil Demand is Waxing and Waning - Olive Oil Times

Where Olive Oil Demand is Waxing and Waning

May. 7, 2013
Julie Butler

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The spec­tac­u­lar surge in demand for olive oil in devel­oped and emerg­ing mar­kets beyond the Mediterranean will last at least the next five years, largely dri­ven by health inter­ests, a Rabobank report says.

The bank’s food and agribusi­ness research unit sees mar­ket expan­sion oppor­tu­ni­ties for big, global brands and also for cost lead­ers who tap pri­vate label growth and set up dis­tri­b­u­tion deals in China.

But all need more inte­grated sup­ply chains, to adapt their busi­ness mod­els to suit dif­fer­ent mar­kets, and to diver­sify and strengthen their sourc­ing amid increas­ing price volatil­ity, it said.

The main play­ers in global olive oil sales

In Globalization of Olive Oil Demand,” Rabobank divided the retail mar­ket into three groups:

- global branded bot­tlers, e.g. Deoleo/Bertolli, Salov/Berio and Borges brands;
 — cost leaders/private label sup­pli­ers, e.g. Sovena and Hoijblanca, and coun­tries such as Spain, Morocco and Tunisia;
 — high-end niche pro­duc­ers.

Distribution key to crack­ing China

It said the big bot­tlers would suc­ceed with A‑brands and in emerg­ing coun­tries.” But while the mar­ket could not do with­out strong A‑brands, B‑brands can’t match their inno­va­tion and mar­ket­ing clout and will be the first to lose shelf space.

Big European olive oil brands have been gain­ing trac­tion in pre­mium super­mar­kets in Beijing, Shanghai and Guangzhou but China’s dis­tri­b­u­tion chan­nels are frag­mented and con­sumers lack brand loy­alty. Access to dis­tri­b­u­tion is crit­i­cal if for­eign branded play­ers are to reach more peo­ple.

Cost leaders/private label sup­pli­ers

China, where sev­eral major state-owned enter­prises have been increas­ing their imports of bulk olive oil to mix into new own-branded blends, is also one of the oppor­tu­ni­ties for cost lead­ers (who exploit hav­ing lower oper­at­ing costs).

Cost lead­ers should con­sider part­ner­ing with local brands that have exist­ing dis­tri­b­u­tion capa­bil­i­ties,” Rabobank said.

But for those who enjoy big economies of scale, sup­ply­ing pri­vate label (PL) prod­ucts (such as store or own brand olive oils) offers the most promise.

PL share in the over­all food sec­tor is fore­cast to dou­ble to 50 per­cent by 2025 and in the United Kingdom is already near that for olive oil. However, in the United States and Italy it accounts for just 25 and 20 per­cent, mak­ing for an inter­est­ing out­look.”

Niche mar­ket diverse and strong at the high end

Niche play­ers already do well in the high-end mar­ket with olive oils dif­fer­en­ti­ated by being extra vir­gin, from a European Union Protected Designation of Origin (PDO), aro­m­a­tized, and so on.

All these prod­ucts are record­ing very high growth, par­tic­u­larly in devel­oped coun­tries and tra­di­tional mar­kets,” Rabobank said.

Global growth fastest in emerg­ing mar­kets

The global mar­ket had a com­pounded annual growth rate (CAGR) of 3 per­cent from 2008 to 2012, but the rate in emerg­ing and devel­oped mar­kets was described as spec­tac­u­lar.

The devel­oped mar­kets — of which the U.S. then Japan are the biggest — grew at a CAGR of 4 per­cent and should repeat the feat in the next five years, thanks mainly to olive oil’s health ben­e­fits.

Twenty years ago they accounted for a tenth of world con­sump­tion and now they devour a quar­ter of it.

And they are also the most impor­tant in value terms, account­ing for 41 per­cent of the global mar­ket.

Though they started from a lower base, the emerg­ing mar­kets — includ­ing Brazil, Russia, India and China — have expanded three times as fast. They logged a CAGR of 13 per­cent in the last five years and Rabobank expects sim­i­lar dou­ble digit growth to con­tinue in the next five.

Countries in the Middle East and North Africa (MENA) region have lower per capita con­sump­tion but soak up 19 per­cent of olive oil sold.

And across the sea, the north­ern Mediterranean still has the world’s high­est con­sump­tion rate but a very mature and stag­nat­ing mar­ket. Rabobank expects retail sales to drop off a lit­tle in Greece and only inch up in Italy and Spain.


Spain accounts for 45 per­cent, and the Mediterranean region 97 per­cent, of global olive oil pro­duc­tion. Spain is said to have a long-term poten­tial of 1.8 mil­lion tons a year but cur­rently aver­ages 1.3 mil­lion.

Greek and Italian pro­duc­tion has fallen since 2002 and while Italy has acquired a con­sid­er­able rep­u­ta­tion in the export mar­ket thanks to his­toric brands,” it is not yet self-suf­fi­cient. Italian olive farm­ing remains very frag­mented and char­ac­ter­ized by a lack of coop­er­a­tion that ham­pers growth,” Rabobank said.

Among the MENA coun­tries, Morocco and Tunisia were sin­gled out as hav­ing high poten­tial for fur­ther growth.

Olive oil grad­ing

With a con­cern like that recently aired by Deoleo, Rabobank said the cur­rent International Olive Council (IOC) cat­e­gories for olive oil related to the pro­duc­tion process and many con­sumers lacked the refined palate sen­si­tiv­ity required to appre­ci­ate the dif­fer­ent kinds of olive oil.”

The clas­si­fi­ca­tions of the IOC might not be the only fac­tor suit­able to fur­ther­ing mar­ket devel­op­ment,” it said.

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