Spanish olive oil market numbers

According to the Spanish “Agencia para el Aceite de oliva” the olive oil consumption has felt last months (I think because the higher price of the product). this is also aligned with what is said by the IOC. I'm going to put together all the information we have for this campaign (from October “10” to March “3” of 2013) and lets see what are the conclusions we can obtain.

In the next graph we can see the olive oil existences (Existencias), production (Produccion), and imports (Importacion), we also can see the exports (Exportaciones) and the internal local consumption (M. Interno) that I have added as consumption (Gasto).

The basic idea is to see graphically the amount of existences Spain has and to compare it with the demand for that active that exists in total, which is the local market plus the international one. The best idea to really understand the business where you want to sell something is to see what is the quantity you own and the demand that exits which is going to be what makes customers to come to you and to pay for your product. Lets see the next graph.

Spain starts October with 599K Tons of olive oil, existences that grow from November because the recollection campaign. In February when the the campaign is almost over, the existences are about 864K Tons. So when February comes, we have this amount of product and a monthly demand of around 100K Tons in October, (if we think that we need to provide to the local market with 38,7K Tons. and the international market with 68,6K) but going down to 85K Tons in February.

To me, the most important thing is that even keeping a demand on 100K Tons per month Spain needs 1200K Tons per year to satisfy this demand with no leftovers. This year will not have problem but Spain will be ready to produce almost 2 million Tons per year in a good one very soon, and then Spain will need 166K Tons of market demand per month.

So now being realistic, and seeing that in March Spain had a demand of only 63K Tons (far from the minimum 100K Ton needed for this year), and seeing that the drop comes because the falling in the exportations, I think that it is capital to recover the international market (never leaving the local one).

This year the production has been minimal in comparison with a normal one. That lack of product has made the local producers think that to a less amount of product a bigger price the distribution will have to be willing to pay leaving producers in Spain not willing to sell for less than almost 3000 € per Ton. This situation has obligated the distribution to get their product out of Spain (while there was the chance to find cheaper product) but now comes the moment that there is no more product out of here and the distribution will finally have to decide. If prices go higher in the retailers we are going to see how the demand falls even deeper (that has already happen here when local Spanish people have decided not to buy EVOO for more than 16€-20€ the 5L pet.). Do Spanish producers should allow the price of their product to go that high that the customers will no longer be willing to buy it? I personally think that 16-20€ is not that high price for a 5L pet of good EVOO, but it is not me who makes the market.

Countries start producing EVOO due to the rising demand.

This weekend I had a conversation with a close friend about an important tech company and its problems to grow business in Latin America. Many countries prefer the companies to build up new confection plants in-site than importing finished devices from abroad. The countries have risen the border tariffs (to provoke the companies to invest locally) and these companies can not compete against the other companies that actually do have local confection plants. I was still thinking about the different ways a country has to protect its interests inside their own local market when I saw this link in Olive Crazy . “There is money to be made in olive oil” was the sentence that made me realize I was in front of something that could easily grow inside the USA. USA is the most important market out of the Mediterranean area and is of their own right starting to produce their own products and profit in this way, alike the example with tech companies.

I don’t know how far the Americans can go or how fast they can come to produce the EVOO (I suppose the weather and the soil have something to say about), but the market is going to change for sure and all producers are going to feel it. EVOO producers back in Spain (an world wide due to the fact that the market is global) have another reason to rethink their position and to take a more active role into the distribution. What is going to happen if the biggest consumer actor in the international market starts to auto provide itself? What if the other countries come to the point that don’t need anymore to go abroad for EVOO supply? What happens with the new EVOO producers countries in the Mediterranean?

Whatever it is the answer, we will all need again to compete in price and quality with the rest of producers in the world for consumers to be more interested in going outside than producing it inside. You may think this is crazy but this is actually what is going on these days in Spain, big local distribution companies find more interesting to import EVOO from outside even though Spain is the biggest producer in the world. What is crystal clear is that producers just cannot expect any importer/distributor to come right to the door to take away their stuff. The good news about it are that if countries like USA, China and India are researching new methods to grow olives it is because they see demand inside their market. This history of producing something and not caring about how it is distributed because there is a secure demand is over.

EVOO in the FMCG business worlwide

Unlike most products in the FMCG sector, the EVOO producers have a sort of protection in the market just because the very nature of the product they produce, which is that the EVOO has to be elaborated hours after the olives are picked from the three. That characteristic makes the EVOO elaboration process impossible to be taken abroad because the olive will be perished during the transportation. Being like that, any distribution company willing to import EVOO to the market that it covers, will have no other way but to find a producer anywhere to buy their product and collaborate together. Some distribution companies have constructed storage and bottling plants but they have still to buy a finished product whether it is to mix with other oils or to bottle it pure. That should leave the producer with the whole control of elaboration and should allow the grove owner to play a more important role when it comes the moment of distribution.

Today, worldwide, the olive oil has two main ways to do business with: The first one is entering in the retail channel by price. Many big distribution companies are getting a source of cheap product and bottling it with their own brand and selling it (knowing that demand is rising everywhere) for prices difficult to compete with. The second way to do business is by getting a product of quality that is going to be sold by a bigger price. Certain producers will have no other choice but to bet for the quality way because by price would be impossible to compete against the big distribution.

The good thing about it is that because its nature (and the rising demand going on in the world) the EVOO producers have the control of the elaboration process and investing in quality they would get a different product that will be of high quality and will attract its share of consumers. Countries like China, India and Brazil have just discovered the product (ones sooner that others) and soon will become bigger consumers in the world. I think that there is an opportunity of good business ahead (because more people start consume the product and because among them there will be a community of customers willing to pay a bit more for a better quality product) but producers will have to be willing to play more important role when it comes to the distribution. The reality is that EVOO is produced today (we will see in the future) in few countries in the world and that producers in that places are still not in the distribution channel. Producers need to risk/invest resources and travel and offer their products abroad where the demand is rising, it is going to be though but once they are in the destination the EVOO producers will be in a market where only them have the source of the product they trade because unlike wine, milk, beer, even coffee can be bought in origin and toasted and finished abroad, EVOO elaboration can not be deallocated.

The conclusion is that everyone in FMCG sector interested in working with EVOO should start informing about the real qualities that the product has (and fight cheating and scamming) and that both the big distribution and the producers should have a proper and fair share of a market that will never stop evolving. We will see what the future brings but today is all about promoting the product.

Don't be fooled by the price

It has taken few months in the market to feel first hand (as distributors) what are the two main characteristics about olive oils and the olive oils distribution... Not in vain today (less than one year after its global launch) Kaltur can be found more and more in restaurants, stores, groceries... you name it in Spain, the UK and Russia. And we are getting in contact with wholesalers in the Central European area who are giving us feedback about the very same market. Two are then these characteristics:

EVOO is a healthy product to be consumed dairy: Indeed there are plenty of studies which demonstrate it and thousands of references in the media every day for people interested to learn why you should always have a bottle of extra virgin olive oil for you and your family. More people consume it worldwide each year.

Doubts about the real stuff inside the bottle: It is common to find products out there which claim to be EVOO which actually they are not. Many people distrust the product because it is not rare to find fake products in the market.

So, that is the reality we all find in the market whether we want to sell (unfair competence which make real EVOO almost to be impossible to sell because its higher cost) or to buy (cheating products that offer no warranties to be consumed).

Today I found this link in LinkedIn The Unadulterated Truth About Olive Oil which makes reference to this book: "Extra Virginity: The Sublime and Scandalous World of Olive Oil" that deepens into the topic.

I would like to say that we have found ourselves very often in discussions with our prospects (retailers and wholesalers) about price but not about quality. These ones know better than we do their own clients and they say that what people want is price and not quality. I think that the solution to end with fake products is in ourselves as EVOO buyers. Pure EVOO has a production cost and if we ever think that we can buy the same product for less money is just because we are buying a totally different product. When I buy soft drinks, chocolate, beer... I pay attention to the brand in order to get what I want. The same goes with olive oils. You, as buyer, can find great EVOO in Europe and America so is up to you to trust a brand and pay for it. When it comes to the food we all should be willing to pay enough to be calm that we buy what we want.

When we behave like that the retailers and wholesalers will start to pay more attention not only to the price but to the product quality also.

Getting some use of Comtrade

One of the sources where you can find information about international trading is UN Comtrade Database (check the external links on the right). This is an international trading information repository that can be used to make queries about good transactions between two countries. It helps to get information about the goods and markets where you want to trade. If you have to make any business decision about any market, Comtrade will give you more info to be used by you to better base your choices.

Since we do produce and exports olive oils, this site was one that we started to use to get information about these goods trading numbers. You can find out the amount of goods and their value in dollars traded in between two countries or imported/exported to and by one only country. For example today I used UN Comtrade to get information about the olive oils that Germany has imported in the last years, and this is what I found out:

Year    Process            Countries                    Code   Amount ($)          Amount (Kg)

2008    Import             Germany                     1509    $283,621,000     51,561,070     

2008    Export             Spain   Germany         1509    $27,135,654       6,018,465       

2008    Export             Italy    Germany          1509    $206,218,369     35,559,721     

2009    Import             Germany                     1509    $252,070,000    54,186,912

2009    Export             Spain   Germany         1509    $24,275,187      6,409,446       

2009    Export             Italy    Germany          1509    $180,343,619    36,731,754     

2010    Import             Germany                     1509    $236,453,162    58,505,800

2010    Export             Spain   Germany         1509    $25,027,587      7,197,907       

2010    Export             Italy    Germany          1509    $183,123,130    40,082,950     

2011    Import             Germany                     1509    $273,710,898   64,671,779     

2011    Export             Spain   Germany         1509    $24,148,753     6,970,664       

2011    Export             Italy    Germany          1509    $211,035,350   43,750,886     

That is the info I got. I checked the amount in kg of olive oil imported by Germany during the years 2008 to 2011, I also got the amount exported by Spain (because is the country where we produce our product) and Italy (because is where the most olive oils come from in Germany). This numbers tell me that the olive oil consumption rises in time in Germany, and that Italy takes advantage of it sending more and more product over there. Spanish olive oils do not get more market share.

When we think about what is going on in Germany and the production statistics published by the International Olive Oil Council  I can not but wander myself how comes that being Spain the main olive oil producer, it has that small market share in Germany when compared with the Italian one. I have been surrounded by olive groves all my live and today I can see the heavy factories working in olive oil production, but commercialization and international distribution is a whole different sector where Italian companies have got the result of the great work done in the past. The same history repeated… Spanish companies (with few exceptions) need to risk resources to go to commercialize their products abroad. This is a new task where most of the companies in all sectors are getting involved in; we will see in the future how it goes.     

Presentation

In this blog I’m going to share my opinions and experiences about the food distribution sector. I am going to try to share as much as possible in the future about what is going to happening to me in this new sector that I put myself in last year.

Right now I am contacting FMCG professionals in Central Europe in the aim of coming to the point where I can get myself a business date to present the products that we deliver to wholesalers and distribution companies over there.

I will transmit my experience in the art of sales and communication skills, controlling our evolutions with sales metrics. I also will talk about project management which I think is very interesting in the task of developing new products and business. I will also share news and opinions about IT tech and CRM systems. You will also find me here paying attention to the new trends in logistics and exporting sector due to the fact that I will be selling products in other countries.

 

This is what you will find in the blog. Keep in mind that I am about to start my second year in the sector and that even though I am Spanish this site will be in English because of the global scope I would like to specialize myself in.