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.