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  • Published on: 14th September 2019
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✤ News and developments in principal production/consumption markets

Tunisia output increases dramatically-competitor of big 2 14-15

California olive oil on the rise-large growth-2015 record yield expected (EVOO)

Greek olive oil on the rise (2015 was a good year with many awards)-Greek olive oil taken and branded as Italian (good olive oil) due to taxes and no domestic bottle production ( Greece loses a lot of money from this).

The olive oil market for many years has been dominated by three countries, Italy, Spain and Greece, but in the last decade new competitors have emerged and are panicking these old-world producers. In this section the development and news of the major olive oil producing countries will be analysed.

EUROPE

Unarguably the continent with the biggest production and export of olive oil in the world, Europe includes the three largest producers/exporters located in the Mediterranean (First is Spain with the largest export power globally, followed by Italy and Greece, which are second and third in the world respectively). In 2015 the price of olive oil was raised by 20%(just-food, 2016) on average due to disease that plagued mainly the south of Italy and bad weather in the whole continent, dramatically affecting crop yield. Due to this increase it was calculated that consumers paid €231 million more last year (FT, 2016) as manufacturers tried to cover the extra cost.  The world production was dropped by 26% that same year (2.4 million tonnes) as it was heavily affected by the “Big 2” (Italy and Spain) whose crop yield was almost half from the previous season (2013-14) (IOC, 2016). Consequently sales fell across Europe, especially in Mediterranean countries like Greece and Spain (drop of 18% and 16.2% respectively) but not Italy (just-food,2016). Italy had to import olives from Greece and Spain to meet demand. While panic was spreading throughout the European Union, Tunisia had one of its largest crops until today, worsening EU's position.  Because in most countries in the EU olive oil is not used in everyday cooking and is seen as a “treat”, a drop in consumption accompanied the rising prices (FT, 2016).  In 2016 it is forecasted that Tunisia's olive oil output will drop and conditions in Europe will improve.

Another development is that private-label olive oil is affected more than own-label olive oil because more consumers will opt for lower quality oil or reduce their usage with higher prices. So any price increase is worse for private-label but in general there is no major change in consumption (especially in Mediterranean countries).

ITALY

As mentioned in the EUROPE section Italy suffered various setbacks in the 2014-15 season leading to its position getting eroded by Tunisia. First prices rose due the Xylella fastidiosa bacteria, destroying olive tries specifically in the south of Italy where more than one thousand trees were infected (Economist, 2015). The bacterial disease was brought to Italy by an insect form south America (Telegraph, 2016) and resulted to crops being reduced by an astonishing 50%, a twenty-five year low (FT, 2016).  Second after speculation of certain olive oil brands in Italy were misinforming the consumers either by stating that their olive oil was extra-virgin or it was 100% Italian.  An operation codenamed “Mamma Mia” was conducted in secrecy and uncovered producers in south Italy that used cheaper olive oil from Greece and Spain, either blended with domestic oil or just by itself (Telegraph, 2016). The Italian police confiscated £10 million of fraudulent oil. While it is legal to sell foreign oil, the culprits were committing an offence by mislabeling it as 100% Italian. Also because Italian oil is pricier compared to other countries due to its quality, especially extra-virgin olive oil which on average it is one third more expensive (Telegraph, 2016).  One of the large st companies involved was Bertolli and this whole situation hurts the pride and image of Italy, as it is one of the biggest exporters and producers in the world with a high quality product. This can be seen by the immense imports of olive oil and olives from Greece, where 60% of its olive oil output goes to Italy, and Spain according to Mckinsey (Washingtonpost, 2015). Lastly in March 2016 Italian lawmakers approved the recommendations to toughen the laws around olive oil counterfeiting. It was agreed upon that small fines are not enough to deter criminals from continuing their actions (Nytimes, 2016).

SPAIN

Traditionally Spain has been the number one producer and exporter in the world but new countries have been adapting and evolving in the last couple of years, like Tunisia and the US, threatening Spain's position. Bad weather has been the primary setback leading to the reduction of Spain's large production numbers (as mentioned in the ITALY part, output for Spain and Italy was approximately halved), which have given hope to the countries mentioned above to improve and be able to compete directly with the top three. Tunisia actually passed Spain in the export section of olive oil for the 2014-15 season but not in the production sector (FT, 2016). This will not be the case for the 2015-16 season as conditions have improved in Italy and Spain.

GREECE

Greece is Europe's third largest olive oil producer and exporter after Spain and Italy.  Greece was involved in the scandal of mislabelling olive oil in Italy, where Italian exporters and bottlers where using cheaper oil from Greece and Spain blended or on its own and claiming it was domestic olive oil (Telegraph, 2016). To show this, in 2012 60% of Greek oil was shipped to Italy. This means that Italy is making profit in behalf of Greek oil but Greece never sees the extra profit. Italian olive oil has an extra 50% premium on Greek olive oil (washinghtonpost, 2015). Greek Olive oil has been going through various problems the last decade due to the economic crisis and deteriorating position of Greece in all aspects (political, economical, technological, etc.) because of the large amount of money owed to European and International creditors. To be exact the Greek economy has shrunk by 25% over the last five years (ekathimerini,2015). In 2015 another very important problem surfaced when Syriza, the governing political party, put capital controls in place, making it harder for imports like fertilizers and pesticides to enter the country. One of the main problems of Greek producers is that they do not have the know-how and experience in effectively marketing and exporting their product outside Greece. Most of the producers do not use standardized procedures and are using more traditional ways of farming, resulting in smaller crops. To be exact only 27% of Greek production is standardized out of the 310,000 tons produced in 2014-15. (ekathimerini, 2016). Also it is difficult to find bottle manufacturers in Greece, acquire the loan to pay for the bottles if a bottle producer is found and taxes have been an increasing burden for producers. Although with technology and communications evolving in Greece, in addition to the passion the producers posses, they have been overcoming various obstacles and trying to earn the credit they deserve (ekathimerini, 2016). Many awards, domestic and international, were given to Greek olive oil in 2015 for its quality, which is starting to get recognized. Also the large amount of tourists that Greece and the Greek islands attract every year (25 million in 2015) is boosting the demand and recognition of Greek olive oil internationally.

USA

The United States are not included in the Old World producers (even though the first olive tree was planted in America during the 1700's) and were never a major oil exporting force until the last years where a small revolution is occurring in California. California has pulled off a similar act in 1976 when wine of superior quality was produced, which was able to compete with its Europe counterparts (Bloomberg, 2016). In California olive oil producers expect a 4 million gallons of extra virgin oil with the 2014-15 crop (almost double from the last season)(Fujiii, 2015), which can be explained by the growing numbers of oil trees planted. Consumption has tripled since 1990 in the US compared to the rest of the world where it is only doubling, showing the business side potential a US domestic production can capitalize on. This opportunity can be “exploited” from the moment that imports are not considered cheap and a domestic product would be cheaper and able to compete more effectively. Moreover after various scandals surfaced in 2015 and early 2016, with many brand of imported Italian oil not being up to standard or having a misleading label, demand for domestic olive oil with strict standards is rising (with some laws already being implemented)(eater, 2016). The difference with other oil producing countries is that producers in California are trying to standardize the entire olive oil procedure, which raises doubts about the quality of the olive oil that will be produced. Also the US will be part of a new organisation comprised of New World producers called the “World Olive Oil Trade Group”, which will include non IOC member countries like Australia and New Zealand and will supposedly have stricter quality measures in place (OliveTimes, 2016).  

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