China Wants More Olive Oil and Italy Is the One Providing It, for Now

Summary

Italian olive oil exports to China increased by €40 mil­lion in 2017, sur­pass­ing Spain as the largest exporter to China due to the grow­ing mid­dle class and increas­ing inter­est in olive oil in the coun­try. This increase was also dri­ven by lower tar­iffs on Italian olive oil and decreased pro­duc­tion costs, mak­ing it more com­pet­i­tive in the Chinese mar­ket.

Italian olive oil exports to China increased by €40 mil­lion in 2017, accord­ing to the National Institute of Italian Statistics.

Spain has tra­di­tion­ally been the largest exporter to China, but the tides may be chang­ing, accord­ing to indus­try ana­lysts. As incomes in the world’s most pop­u­lous coun­try grow, so does the appetite for travel and olive oil. This increas­ing mid­dle class has opened the doors for other oil exporters, such as Italy.

“It is a devel­op­ing mar­ket that is expe­ri­enc­ing impres­sive annual growth and will become increas­ingly cen­tral [to the olive oil trade],” said David Granieri, pres­i­dent of Italy’s largest asso­ci­a­tion of olive oil pro­duc­ers, Unaprol.

“This is why it is essen­tial to pro­mote the cul­ture of con­scious con­sump­tion of high-qual­ity extra vir­gin olive oil and develop appro­pri­ate mar­ket­ing strate­gies to enhance the sym­bolic prod­uct of the Mediterranean diet.”

The increase of Chinese tourists vis­it­ing Italy has helped intro­duce many of China’s bur­geon­ing mid­dle class to olive oil. According to Eda Erbeyli of Daxue Consulting, a com­pany that ana­lyzes trends in the Chinese mar­ket, 1.4 mil­lion Chinese tourists vis­ited Italy last year. The European Union has also had its eye on the Chinese mar­ket for some time now and coop­er­a­tion between the two is on the rise.

“The President of the European Commission Jean-Claude Junker and the Chinese Prime Minister Li Keqiang have decided that 2018 will be the EU-China tourism year, in order to improve tourism and eco­nomic coop­er­a­tion between China and the EU,” she said. ​“This rise of tourism in Italy helps tourists dis­cover a vari­ety of Italian prod­ucts, such as olive oil.”

Italian min­is­ters Maurizio Martina and Dario Franceschini have also announced 2018 will be the ​“year of Italian food in the world” with the inten­tion of pro­mot­ing Italian cul­ture and food abroad. China is one of the mar­kets on which they are pri­mar­ily focus­ing and this is part of what has spurred the more than 40 per­cent growth of Italian olive oil exports.

Various eco­nomic fac­tors have also led to the increase, accord­ing to Erbeyli. In 2016, China low­ered tar­iffs on Italian olive oil that were long con­sid­ered pro­hib­i­tive for entry to the mar­ket. The decreas­ing cost of import­ing also coin­cided with cuts to pro­duc­tion costs in Italy. All of the sud­den, it made increas­ing sense for Chinese con­sumers and Italian exporters to do busi­ness together.

“Italy is con­sid­ered as a ​‘most-favored nation’ and its olive oil has a 10 per­cent tax rate [down from 30 per­cent prior to 2016].” Erbeyli said. ​“Then in January 2018, the pro­duc­tion costs [for Italian com­pa­nies] decreased by 2.9 per­cent com­pared to the same period one year ago. Lower pro­duc­tion costs improved the com­pet­i­tive­ness of exporters.”

In spite of increas­ing pro­duc­tion across the EU, olive oil exports from the trad­ing bloc to China are not pre­dicted to increase next year. Italy will be the only EU coun­try that expe­ri­ences an increase in exports to China.

“Italian food exports to China rose dra­mat­i­cally in 2017: the sales of Italian prod­ucts to China increased by 18 per­cent,” Erbeyli said. ​“Among them, olive oil exports have the biggest growth of 41 per­cent.”

Spain still dom­i­nates the Chinese olive oil mar­ket, mak­ing up 80 per­cent of olive oil exports, but is fore­casted to see its mar­ket share decrease. Drought in the heart of Spain’s olive grow­ing regions has been blamed for recent pro­duc­tion dips in the world’s lead­ing olive oil regions.

“Spain still dom­i­nates, by far, the olive oil mar­ket,” Erbeyli said. ​“However, Chinese imports of Spanish olive oil remained rel­a­tively sta­ble in 2016/17 and may decrease for the 2017/18 crop-year.”

Olive oil imports are expected to con­tinue to grow in China as well. However, com­pe­ti­tion for Italian oil increas­ingly will come from out­side of the EU.

“Tunisia is plan­ning to export 200,000 tons of olive oil for the cur­rent crop year: it is expected that their global expor­ta­tions will increase from 85,000 to 180,000 tons,” Erbeyli said. ​“There is a ris­ing inter­est in the olive oil from Tunisia in China.”

China’s small domes­tic olive oil mar­ket is also grow­ing and local farm­ers expect they will be able to com­pete with the tra­di­tional olive oil exporters in the next two decades. Olive trees are already being planted in Sichuan province, which is located in south-cen­tral China and has a sim­i­lar cli­mate to that of the Mediterranean basin.
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Robert Woo is an olive oil taster and mar­ket­ing exec­u­tive for the Olive Oil China Exhibition, an annual olive oil con­test held in Beijing. He said as the Chinese appetite for olive oil grows so does the desire for a dis­tinctly Chinese prod­uct.

“Regarding the grow­ing olive oil demand in China, the trend is going up,” he said. ​“We think the Chinese olive indus­try will affect the import of olive oil from the EU in 10 to 15 years because the area of olive plant­ing is still only 175,000 acres and many trees are very young.”

• Unaprol


• Daxue Consulting