Olive Oil -- The Global Marketing Industry
An overview of global olive production and consumption, with predictions of future trends and a discussion of how Australia fits into this scene.
About 2 years ago someone approached me to say they were putting on a big olive project and they would like me to be their technical director. Of course, I accepted, because it is a very interesting project, Olea Australis. I am the technical director and agronomist of this project that has just been listed on the stock exchange. It is going well. In one month or so, we are going to start the second planting.
The project is in Dandaragan, near Moora, about 185 km from Perth. There are 500 hectares, 200 of which have already been planted in November and December. That was the first stage. Now we are going to list the second stage, and the second 200 hectares will be planted in May and June.
Olive oil markets. This one is the estimation of the International Olive Oil Council in Madrid, Spain. The world production in 2001 is about 2.6 million tonnes. It is up about 13% when we compare with 1999-2000. The world consumption in 2001 is about 2.5 million tonnes, which is up 2.4% when we compare it with the consumption of 1999-2000. As you can see, it is a big business. The wholesale value of the oil is about 25 billion dollars (Australian). The wholesale of table olives is 10 billion dollars. In other words, it is a business worth 35 billion dollars.
Of the world production of 2.6 million tonnes, 1.9 million tonnes are produced in Europe, 72% of the total production. Other countries represent 0.7 million tonnes, or 28% of the total production. The other countries producing olives are mainly in Africa, South Africa, Morocco, Tunisia, Turkey. We still don't talk about Argentina, Australia and South Africa, because they are emerging countries. When we talk about European production, Spain, Italy and Greece produce 96.8%, or 1.48 million tonnes. There has been a continuous increase in production of olive oil since 1985, and the prediction is that it will continue.
(references to graphs of production)
If we focus on Italy, production is about 22% of the total, and consumption is 35%. In other words, they use a lot more oil than they produce. They are the biggest exporters, as well. What is happening is that Italians buy the olive oil from other countries, most of which is not of very good quality and they somehow adjust this oil. They refine it, mix and blend it with good olive oil that they produce in Italy, and they export it overseas. I can guarantee you that the best oil remains in Italy, because Italians want very good quality oil. It is going to be interesting in the future when we will see big production in Western Australia.
In Italy, consumption of olive oil is about 12.5 litres per capita per year, followed by Spain and Greece, and then followed by the USA. I am surprised not to see any Asian countries represented, but Japan is increasing consistently.
The trends predicted for 2005 by the International Olive Oil Council: production will increase in Spain and Portugal about 65,000 tonnes. There will be a light increase in Syria and Turkey, stable in Italy and Greece. And there is a question mark about emerging countries like Argentina and Australia because not much is known about them. I can tell you the Italians are scared about Australia and Argentina. Consumption is going to double in the USA. Japan will treble. Canada will increase 53% and 44% in Australia.
What are the issues with the current supply? In Italy there are a lot of small growers and mixed crops. There is not a lot of land available, so they put together olives on quite a big distance, maybe 20 by 20 metres, with other crops such as citrus, grapes, and vegetables, potatoes, tomatoes and so on. It is not specialised for olive oil production; it is a lot of trouble to manage them in this kind of system. Just think about the harvesting. There are many locations where you can't mechanise because of the topography. Shakers are the main machine used for machine harvesting. They are also trying a machine similar to ones used to harvest grapes. A problem is that there is not simultaneous ripening of the olives. There are very few large-scale integrated producers. They are more often in central and northern Italy and Sicily. The topography dictates the kind of operation. Production is subsidised, and that is how the small producers can survive. They get some help from the European Community.
There is another problem in Europe that we don't have here so far, fortunately: the Mediterranean fly that I consider to be the most harmful olive pest. As soon as it attacks the olives, the quality deteriorates because the acidity increases. You may say, the Mediterranean fly will arrive here. Yes, it might. But it is a long distance, and the environment here is not optimal for the fly. It requires high humidity in the air. Here, fortunately, it is quite dry.
One of the main factors that influences demand is the marketing done by the International Olive Oil Council. They are pushing too much, because olive oil is a fantastic product. I think that once you understand the good points...I could drink olive oil continuously. It is just my opinion. Olive oil has beneficial effects. It is a fashionable product. The taste is particular. It is the only oil coming from a fruit. You can talk about canola, almond, whatever, but the quality and characteristics of olive oil are unique. That is the health value of olive oil...it has a lot of good cholesterol and a minimal amount of bad cholesterol. Also it has been scientifically proven that it acts positively within the central nervous system, aids digestion, and because of the tocopherols and phenols it is a beneficial product for your skin.
Now, what is the situation in Australia? $119 million business, approximately $98 million in oil and $21 million in table olives. It is a very good business. So, what do they perceive of Australia overseas? First of all, it is a clean and green country, the environment is the most known thing about Australia. We know there is a lot of land here, quite inexpensive when we compare it with land in Europe. Here we are in a condition to go ahead with a fully integrated project such as the one I am involved with. We have chosen the land, planted the trees and we will sell the final product, so it is a fully integrated project. We have the possibility of economy of large scale, and last but not least, there is this counter-season production. As you know, in the first six months the olive oil is considered at its best. It is different for wines: we usually say, drink young olive oil but old wine. When we produce olive oil here in Australia, the European oil is getting old. So, lots of people believe that there will be a big demand for fresh, young olive oil.
It is a multimillion dollar global industry. Here in Australia, we can adopt best practice from Day One. It is really an ideal environment, not only because it is green and clean, but also because there are very good soils. You may disagree; there are a lot of sandy soils around, but we can improve those. There is also very good rain. We don't want heavy soils, because that is the only problem with olives. Also, the Mediterranean diet is becoming quite common in Australia. And, Australians are very enthusiastic. I am sure that olive oil can play a very significant role for the Australian economy in the future. Potentially, Australia may reach fantastic production, and I don't mean only quantities, but also qualities.
It is important to identify the right varieties to grow. Once we have identified the right varieties, we can produce superb olive oil here in Australia at very low costs of production. We can mechanise everything. I can see a little bit of risk about varieties, because people plant trees in thousands of hectares of one variety, or two varieties. This is why I always advise putting in several varieties. If we are good at putting good olive oil into the market, we won't have any problems. Problems may arise if we put mediocre quality oil.