Pierluigi Tosato (Deoleo): 'Olive Oil is a Crazy Business and a Suicide Model'

Pierluigi Tosato (Deoleo): "Olive Oil is a Crazy Business and a Suicide Model"

2017/02/10 - The President and CEO of Deoleo, Pierluigi Tosato, intervened last Friday in a training workshop organized by QvExtra! International in Cordoba, where he offered his personal point of view on the current business model of olive oil, a "very complicated" sector, in his opinion, in which his company "is playing with people who have marked cards."

In this meeting, Tosato was part of a roundtable on the vision of the International Market of Extra Virgin Olive Oil. Here are some of his reflections:

"Olive oil is a Commodity"
For the President and CEO of Deoleo, olive oil is a commodity. "The market simply consists on having lots of money to buy oil when the price comes down and nobody wants to sell. Italian producers have a saying: "sometimes you have to accept your mistake and lose money, because you will win tomorrow."

"This business takes many risks like future selling without guarantees and future buying without closing sales contracts. This, which in this sector seems normal, if we analyze it is a crazy business; moving so much volume with very big risks means not winning at all. As my fellow Italians say, we do it because we have the oil in our veins, we are producers and we like it,"he said.

Tosato then referred to the pressure that the distribution exerts in the value chain and stated that it "asks you for prices to reach the public below the price at origin." "The market share goes up or down depending on point-of-sales promotions. Here, you are or you are not. You can't lose volume because if you don't I do it your competition will," he highlighted.

"This business Model is Speculation"
Tosato said that this business model is "to speculate on a commodity, and this commodity can't be anonymous, without differentiation and without consumer segmentation. It is a model based on normal conditions of rainfall, because Spain is suffering a three-year major drought, and if it rains this business model will surely fail, because it leaves no business margin for anyone."

"It's a suicidal model and I tell the farmers all the time that it is not a viable solution to think about withdrawing oil from the market when one day the price goes down because the competition will not allow it," he said.

"We are using Olive Oil as if it were a Worthless Product"
According to the CEO of Deoleo, "all of this happens despite the fact that olive oil is a very beneficial product and the healthiest vegetable fat in the world. It strikes me that we are not able to explain this concept to the consumer both in Spain and Italy, where good eating is a religion, even more important than the Catholic. The consumer has no idea of ​​ quality, which is an idea limited to a group of panelists and tasters; If its not even clear to us will wont we be able to explain it to the consumer."

"We have been using green gold as a worthless product for many years, even though olive groves are part of our history and classical culture. But some dreamers imagine that one day we will be able to convince the consumer and that it really makes sense to judge a liter of quality oil at the same price as a good bottle of wine. There are people who have the illusion that you can enjoy a simple and healthy cuisine with a very good oil because the Mediterranean Diet is cool in many countries of the world and because there are consumers who will pay it of it is sold, well communicated and good produced; but there are also many people, like us, who think that the current business model is totally wrong and must be transformed," he explained.

On the other hand, according to Tosato, "you have to excite the consumer, tell them stories... stories of precious places like Andalusia and Extremadura in countries like the United States, China or India; and invest in traceability to bring transparency to the consumer and convince it of the value of the product, because he doesn't believe it and doesn't trust this market."

"It's Important to know the Rules because if you don't, you are just a Dreamer"
For Tosato, "in the end we are realistic, we are competing in a sector where olive oil is where it is, and it is important to know the rules of the market because if you don't you are just a dreamer. We struggle every day to compete in this market. Deoleo is an oil company and we have the illusion of transforming this sector in the medium term because we see that there are many things still to be done. But we find a lot of resistance, many lobbies both in Spain and Italy, and it's very difficult to make the difference."

An example of this, in his opinon, is a traceability law as there is in Italy or the test panel issue, "which is an incredible legal uncertainty. I think that we should invest in a more objective analytical method such as the method of volatiles."

"Deoleo is playing with People who have Marked Cards"
The President of this company considers that "you have to change the rules of the game because Deoleo is playing with people who have marked cards, and that is very complicated."

"The biggest challenge I have in Deoleo is not only improving the company's situation, but also transforming the sector, and we can do it if we work together," he added.

"We are also contaminating the United States and exporting the bad business model. How long will the US market take to become a commodity market? And how long will it take the Californian lobby to hurt us?," he wondered.

"Italy has lost the War, and Spain has Won"
Finally, Tosato indicated that "there are many things that we have to do and, in this match, Italy has lost the war, it's out. Spain has won the war, and that is good for this country, but we have to transform the Spanish model and learn, because otherwise we will export the model that I call Private label-Mercadona."

"Quality has no origin. Protectionism does not work. We have to change the rules of the game, if we don't change them we will fight within the bad rules, but I see a future of commodity and, if one day it rains, we will produce two million tons and everyone will lose money" , he concluded.

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