Producers in Spain Prepare for New Reality as Crisis Grinds On

The immediate economic impact of the coronavirus crisis is being felt by producers in Spain to varying degrees as they gauge its lasting effects on the sector.

Apr. 17, 2020
By Pablo Esparza

With 184,948 coro­n­avirus cases and 19,315 deaths as of today, Spain is one of the worst-hit coun­tries by the pan­demic, only after the US and Italy in terms of the total num­ber of casu­al­ties. Since March 14, the European coun­try has been under a state of alarm that has imposed a severe lock­down which will last until at least the 26th of April.

The hos­pi­tal­ity indus­try is going to change a lot after this cri­sis… that will affect the olive oil sec­tor and we will have to adapt to those changes.- Jorge Petit, Masia El Altet

Spain’s excep­tional mea­sures mir­ror those imple­mented in other coun­tries around the globe. Most shops have been closed for over a month, as well as bars, restau­rants, schools and uni­ver­si­ties.

Unlike other neigh­bor­ing coun­tries such as France of the United Kingdom, cit­i­zens in Spain are not allowed to go for a walk or prac­tice sports out­doors.

The eco­nomic prospects for Spain look grim, with the IMF warn­ing of an 8 per­cent decrease of the GDP in 2020, one of the worst fore­casts along with Italy’s (9.1 per­cent) among the large economies in Europe, and well above the 5.9 per­cent drop pre­dicted for the USA.

According to pro­vi­sional offi­cial data, Spain pro­duced 527,608 tons of extra vir­gin oil in the 2019/20 cam­paign. Despite a 35.15 per­cent reduc­tion com­pared with the pre­vi­ous year, the coun­try solidly holds its posi­tion as the world’s lead­ing pro­ducer.

When this all started, the har­vest cam­paign was almost over,” Rafael Pico, man­ag­ing direc­tor of Asoliva, the Spanish olive oil and pomace olive oil exporters asso­ci­a­tion told Olive Oil Times. Besides, the olive oil sec­tor has been largely spared of the lock­down restric­tions since the pro­duc­tion, dis­tri­b­u­tion and trade of food are con­sid­ered essen­tial activ­i­ties. Work in the olive groves, olive mills and bot­tling plants has not been affected. We’ve had to solve cer­tain issues very quickly such as find­ing providers of pro­tec­tion mate­ri­als for the worker’s health and safety. That has been the main issue for us.”

Beyond the impact in the fields and fac­to­ries, the con­sump­tion of olive oil dur­ing the last weeks in Spain shows a con­tra­dic­tory pic­ture.

The shut­down of restau­rants has led to a reduc­tion in sales in that area. However, the demand has increased at a house­hold level,” Pico said.

We have to bear in mind that we are miss­ing the mil­lions of vis­i­tors that come to Spain for tourism and who are also poten­tial cus­tomers.- Luis Montabes, Monva

According to data released by the global mar­ket­ing research firm Nielsen, olive oil pur­chases in Spain had risen by 11.8 per­cent by the end of March.

However, as some ana­lysts point out, this growth might well be the effect of the con­sumer stock­pil­ing dur­ing the first days of the lock­down and the trend could reverse if the sit­u­a­tion extends.

Meanwhile, the increase of con­sump­tion is hav­ing a dif­fer­ent impact on big pack­ing and pro­duc­ing com­pa­nies and on small- and medium-sized pre­mium extra vir­gin oil pro­duc­ers.

Big pack­ers have been work­ing triple shifts,” Luis Montabes, co-owner and sales man­ager of Monva, a pro­ducer in Jaén, Andalusia’s main pro­duc­ing province, said. The mar­ket for qual­ity olive oil is slower.”

For many Spanish qual­ity extra vir­gin olive oil pro­duc­ers, the hos­pi­tal­ity indus­try is a key dis­tri­b­u­tion chan­nel in a coun­try where 12 per­cent of the GDP depends on the tourism sec­tor.

We have to bear in mind that we are miss­ing the mil­lions of vis­i­tors that come to Spain for tourism and who are also poten­tial cus­tomers,” said Montabes.

The clo­sure of bor­ders and the halt on flights is cer­tainly tak­ing a toll on the num­ber of for­eign vis­i­tors com­ing to Spain in 2020.

In 2019, almost 90 mil­lion tourists vis­ited the European coun­try, the sec­ond des­ti­na­tion in the world after France accord­ing to the World Tourism Organization.

Sales are very low and that’s due to the clo­sure of restau­rants and also to a slow­ing down of the exports,” said Jorge Petit of Masia El Altet, an olive oil pro­ducer in the Valencian Community, in Eastern Spain.

The hos­pi­tal­ity indus­try is going to change a lot after this cri­sis. They may have to install QR codes for the cus­tomers to read menus, there might be tem­per­a­ture checks and the capac­ity of restau­rants and bars will be reduced. All that will affect the olive oil sec­tor and we will have to adapt to those changes,” Petit said.

Spain is the largest exporter of olive oil in the world and around 60 per­cent of its total pro­duc­tion is sold abroad.

So far, the coro­n­avirus cri­sis has not impacted our exports. We’ve found just some iso­lated issues at cus­toms in India or Australia and in some coun­tries, such as China, the con­sump­tion has been slightly affected. But we hope it will recover soon,” Pico said.

Nonetheless, the shut­ting down of the hos­pi­tal­ity indus­try is result­ing in sharply reduced sales for many olive oil pro­duc­ers.

From my posi­tion as a drop in the ocean, which is what we are, I believe that this cri­sis is test­ing the capac­ity and com­pet­i­tive­ness of every com­pany. If you used to sell just to gourmet shops in your area, you risk los­ing every­thing. If you had a good export­ing net, you’ll deal bet­ter with the sit­u­a­tion,” Montabes said.

International mar­kets are suf­fer­ing the same restric­tions as Spain in terms of mobil­ity and, in many cases, restau­rants are closed, events have been can­celed, cater­ing ser­vices are not work­ing… all of that mat­ters. The sit­u­a­tion we’ve first had in Spain and Italy is now being trans­ferred to other coun­tries. That’s my impres­sion. Perhaps other pro­duc­ers, espe­cially large pack­ers, may say the con­trary,” he added.

One of the main con­cerns for the sec­tor is whether mobil­ity restric­tions will still be in place when the next har­vest sea­son starts — a process that largely depends on tem­po­rary work­ers, many of whom are either migrants or labor­ers mov­ing within the coun­try.

We are assess­ing how this goes on a daily basis. The next cam­paign won’t start until October,” Pico said. As for today, bor­ders are closed. If this doesn’t change, we’ll have a prob­lem.”

However chal­leng­ing the cur­rent sit­u­a­tion may be, Spanish pro­duc­ers see a bright side. At least, in the medium term. As coun­tries con­tinue to fight against the new coro­n­avirus, life goes on at the olive groves and a par­tic­u­larly rainy spring opens the path to a good har­vest.

We’ve had 150 liters of rain in March. It’s very impor­tant that it rains at this time of the year. If all goes well, the next cam­paign will be very good,” Petit said. On a per­sonal level, being con­fined at the estate is one of the good things about this cri­sis. We can spend all of our time with the olive trees and that allows us to have more direct con­trol over them.”

Montabes also believes that there are new oppor­tu­ni­ties com­ing out of this sit­u­a­tion.

Our importer in Japan, who has over 40 years of expe­ri­ence in the olive oil sec­tor in that coun­try, tells us that the cur­rent cri­sis is going to have a pos­i­tive out­come for extra vir­gin olive oil. He men­tions the proven ben­e­fits [EVOO] has for health. Maybe this cri­sis will help us to eat bet­ter, and extra vir­gin olive oil has a lot to say in that regard,” Montabes said.

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