Deal Could Stop Use of Olive Oil as Loss Leader

By Julie Butler

Mar. 4, 2013 07:24 UTC

Minister of Agriculture, Food and Environment, Miguel Arias Cañete meets with executives Cooperative Agro-food, the Spanish Federation of Industrial Manufacturers Olive Oil (Infaoliva), the National Association Industrial Packers and Edible Oil Refiners (ANIERAC) and the Spanish Association of Industry and Commerce Olive Oil Exporter (Asoliva) on February 21 in Madrid.

Use of olive oil as a loss leader for Spain’s supermarkets might be snuffed out under talks between the country’s government, retailers and olive oil sector.

On February 12, agreement was reached on protecting Spanish milk from heavy discounts designed to lure in shoppers but which were crippling the dairy industry.

Now it has been revealed there is hope of a similar deal for the similarly struggling olive oil sector.

Spain’s Agriculture Minister Miguel Arias Cañete discussed the move with representatives of olive oil cooperatives, manufacturers, bottlers and refiners at a meeting in Madrid on February 21.

According to EFEAgro, Fernando Burgaz, managing director of the food industry unit of the Spanish Ministry of Agriculture, Food and the Environment (MAGRAMA), said after the meeting that the ministry had been working for some months with both the retail industry and Spain’s Interprofesional del Aceite de Oliva, which represents Spain’s olive oil sector, to establish “a new framework of cooperation.”

Such an agreement would be designed to “improve quality control, promotional activities and consumer information,” he said.

“We have some draft wordings and we’re waiting for both parties to give their okay or feedback in order to reach agreement on a final document,” Burgaz said.

Olive oil and milk have been among the main loss leader products in Spain in recent years.

But as part of the “Sustainable Dairy Agreement,” major milk processing and delivery companies have pledged responsible trade and avoidance of activities that would undermine milk’s value in consumers’ eyes.

Agricultural unions say they have yet to see much improvement in milk marketing and pricing in supermarkets, however.

Meanwhile, about six in ten Spaniards buy their olive oil in supermarket chains and at least half the time choose a store brand.

The retail giants have the upper hand in bargaining because there is just a handful of them but more than 1,000 olive oil producer enterprises.

Ex-mill olive oil prices are now about €1 above this time last year — a rise which most attribute to drought decimating production this season. But for several years they were at levels that farmers claimed were below production costs, a problem they blamed partly on the big retailers’ pricing clout and use of olive oil as a loss leader.