Deoleo reports the devaluation of olive oil and warns that competing in price is a lost battle

Deoleo reports the devaluation of olive oil and warns that competing in price is a lost battle

2018/12/03 - The XIV edition of the Deoleo Report analyzes the situation of the olive sector and calls for a redisign of the current production and marketing model of olive oil, which has led to "the devaluation of the product". The company defends the integration with the production, while it considers that "only betting on the value against the price and volume strategy" the olive oil sector can grow both in Spain and in foreign markets.

Under the claim "The future is in our hands," the analysis of Deoleo's latest report denounces that olive oil has progressively lost value to the point of "having become a commodity, another fat that competes in price, a bait product for the distribution and an undifferentiated food for the consumer".

This has happened, according to the report, because the volume and the price have prevailed over the value and "the most surprising thing -higlights the report- that we have to blame ourselves, producers and marketers, with the opportune push of the distribution, guided by their own interest little by little, to destroy the value of olive oil and to undermine the growth potential of the category and the entire sector".

The document talks about the "trivialization of olive oil" so that in those markets with the highest consumption, such as the Spanish, olive oil has become an undifferentiated product of little value. As a result, the consumer only cares to buy at the lowest price and that is how, according to the report, the Spanish market has ended up being dominated by 65% ​​by the private label.

Another fact: 95% of the world's consumers are of fats that are five times cheaper than olive oil. In this context, for Deoleo "competing in price is a lost battle and only leads us to get caught in the vicious circle of devaluation".

Even more worrisome for the company is that this marketing model that dominates the Spanish market is being replicated in other markets that, beforehand, have great potential for olive oil consumption and until now were marginal markets, such as United States, United Kingdom, Germany or Holland.

As a result, for Deoleo this situation leads to two paths and "none of them bode well for the future of olive oil in Spain: on the one hand, protectionism against Mediterranean oil, and, on the other, the decrease in world consumption of olive oil".

This augury is supported, according to the company, by the last report of the International Olive Council (IOC) of November 2017, which reported a fall in world consumption of 6% in the 2016/17 campaign, reaching 2.8 million tons. The most marked decrease occurred in the European Union, with a decrease of 12%. Only in Spain, domestic consumption has fallen by more than 15% since 2000. At the same time, Spanish consumers are progressively replacing olive oil with other oils, such as sunflower oil, which last year came in at 5.5% of new homes and already represents 40% of the volume of oil consumed in the country.

Given this situation, the strategy that the sector should follow, according to Deoleo, is to establish "a new production and marketing model, with the search for quality and differentiation as a priority for the entire value chain". From the olive tree to the supermarket, "integration and value must structure all processes". The exchange of knowledge between producers and marketers, advice for best practices or work in conjunction with scientific institutions and universities, are some of the actions proposed by the company.

The analysis concludes with a call to reflection and a mea culpa: "we have to assume that it was us, producers, marketers and distributors, who, in our desire to sell large volumes, have deprived their value of olive oil. It is in our hands to return it to this product."

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