`'No Financial Difficulties' For Spanish Olive Oil Giant Hojiblanca, CEO Says - Olive Oil Times

'No Financial Difficulties' For Spanish Olive Oil Giant Hojiblanca, CEO Says

By Julie Butler
Nov. 3, 2011 22:11 UTC

It’s already the world’s biggest pro­ducer of olive oil but five years from now, Spain’s Hojiblanca group plans to have increased its turnover from last year’s €450 mil­lion ($627m) to as much as €1 bil­lion ($1.38b).

Increased sales of home brand’ olive oil — through its Mercaóleo joint ven­ture with North American agri-busi­ness giant Cargill — is ear­marked as one source of growth and, hope­fully, increased exports to the U.S. and other coun­tries includ­ing Brazil, Mexico and China.

In an inter­view pub­lished recently in Spain’s El Economista, Antonio Luque, for­mer farmer and now Hojiblanca’s man­ag­ing direc­tor, vowed to keep on grow­ing.”

I think it’s essen­tial that in 3 – 5 years we achieve turnover in the realm of half to one bil­lion euros, which we see as the size nec­es­sary to guar­an­tee an ade­quate return for our mem­bers and for posi­tion­ing in the national and export mar­kets.”

With Spain’s eco­nomic cri­sis and olive oil prices below pro­duc­tion cost notwith­stand­ing, the Málaga-based group has no finan­cial dif­fi­cul­ties, we could even con­sider new trans­ac­tions of up €20 – 30 mil­lion with no prob­lems,” Luque said.

Mergers and Acquisitions
In terms of pos­si­ble fusions or new assets in the olive oil sec­tor, the group would be most inter­ested in pack­ag­ing or refin­ery oper­a­tions. And he could not rule out” fur­ther deals with Deóleo (the for­mer SOS Corporation and owner of the Carbonell, Bertolli, Carapelli brands), which in July sold its 99.93 per­cent stake in table olive pro­ducer and packer Acyco to Hojiblanca for €13 mil­lion.

Last month Hojiblanca also diver­si­fied into live­stock through its fusion with fel­low Andalusian agri­cul­tural leader, Agropecuaria del Sur. And in February it bought the Fedeoliva pack­ag­ing plant, in Jaén, for €2.95 mil­lion.

Foreign Markets
Hojiblanca already has offices in China and Brazil and trades in 60 coun­tries, export­ing 40 per­cent of its pro­duc­tion. Luque said it was care­fully con­sid­er­ing a medium-term strat­egy to increase its exports to the USA. It was eas­ier to achieve sales growth in Brazil, since the dis­tri­b­u­tion side was not as con­cen­trated as Spain’s. Mexico is also key as it is our main over­seas mar­ket for bot­tled olive oil.” As for China, When the time comes, we’ll have to con­sider whether to do pack­ag­ing there, given it is much cheaper than here, for var­i­ous rea­sons.”

White Label’ Products
Sales of super­mar­kets’ own-brand olive oil have seen spec­tac­u­lar growth in Spain and are really hurt­ing big name brands, includ­ing the Hojiblanca brand, Luque told El Economista. Practically two out of every three bot­tles sold in Spain are store brand.” In con­trast, only a third of Hojiblanca’s turnover cur­rently comes from such prod­ucts and the rest from its own brands, but it plans to increase pro­duc­tion of the for­mer in Spain. Hojiblanca had lit­tle exper­tise in store brand pro­duc­tion, which is why it joined with Cargill to form Mercaóleo, he said.

However, we’re going beyond the store brand, not just in the Spanish mar­ket but ulti­mately also in wider Europe and, hope­fully, the U.S.. The sit­u­a­tion is basi­cally that we can keep sell­ing (olive oil) in bulk to those who then pack­age and sell it as their own brand, or we can gain more mar­gin by doing the pack­ag­ing our­selves in part­ner­ship with Cargill.”

Mediterranean Competitors & Portugal’s Position
One of Hojiblanca’s main rivals is the Portuguese agri-busi­ness group Sovena, which in 2009 replaced it as the sup­plier of home brand olive oil in Spain for super­mar­ket chain Mercadona.

Asked if the grow­ing strength of other Mediterranaen pro­ducer coun­tries was a threat or an oppor­tu­nity, Luque said it under­lined the need for Spain to work from the farmer to the fac­tory” to reduce costs, because it was up against coun­tries that were more com­pet­i­tive. Among them, Portugal had grown the most, in both vol­ume and com­pet­i­tive advan­tage, how­ever there had been a lot of Spanish invest­ment there, he said. Nevertheless, it was in Spain that pro­duc­tion, and growth, remained high­est.

Problems with Provincial Mindsets
Luque spoke frankly of his frus­tra­tion with bar­ri­ers to struc­tural changes on the pro­duc­tion side in Spain. We still have more than a thou­sand co-ops sell­ing olive oil inde­pen­dently but they are up against just five com­pa­nies that buy 60 per­cent of all the olive oil sold world­wide. If we formed a big­ger group the mar­ket dynam­ics would change and we could get a bet­ter price.”

In Andalusia we are one of 800 com­pa­nies sell­ing olive oil. Could all 800 of us go to Beijing to sell it?”

The global price ref­er­ence for olive oil depends on pro­duc­tion in Spain, essen­tially in Andalusia.” If there were just two or three com­pa­nies there each han­dling 800 – 900 mil­lion tons of oil then they could nego­ti­ate higher prices, Luque said.

Instead, there was a lack of trans­parency and unwill­ing­ness to tran­scend local inter­ests (to improve the health of the sec­tor as a whole) among the man­age­ment in some co-ops.

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Often, what impedes inte­gra­tion (of co-ops) is not the law but the parochial­ism and per­sonal inter­ests of the peo­ple run­ning them,” Luque said.



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