Report: Only One-Third of Italian Olive Oil Producers Are Competitive

A new report from the Institute of Services for the Agricultural and Food Market (Ismea) has laid bare Italy’s grow­ing olive oil trade chal­lenges.

In the past sev­eral crop years, Italian olive oil pro­duc­tion has expe­ri­enced a down­ward trend. Meanwhile, olive oil con­sump­tion con­tin­ues to far out­weigh pro­duc­tion, which means imports are required to sat­isfy inter­nal demand.

As a result, olive oil imports are con­sid­er­ably higher than exports, and the sec­tor has con­sis­tently endured a neg­a­tive trade bal­ance, with 2020 serv­ing as a rare excep­tion.

According to Ismea, national pro­duc­tion, on aver­age, reached 288,000 tons in the last four crop years, about one-third of all the olive oil pro­duced, traded and mar­keted by Italian com­pa­nies.

In the same period, olive oil imports amounted to an aver­age of 566,000 tons, with 478,000 tons des­tined for local con­sump­tion. Separately, 344,000 tons of olive oil are des­tined for export, with the remain­der going to indus­trial activ­i­ties.

The immense dis­par­ity among the dif­fer­ent types and sizes of olive oil pro­duc­ers in Italy is part of the rea­son for the cur­rent mar­ket sit­u­a­tion, accord­ing to Ismea.

The sec­tor is com­prised of more than 600,000 com­pa­nies, only 11 per­cent of which are con­sid­ered ​“highly com­pet­i­tive.” Twenty-six per­cent of those agribusi­nesses are con­sid­ered ​“poten­tially com­pet­i­tive” due to their spe­cial­iza­tion in olive grow­ing or their abil­ity to reach the mar­kets which pro­vide space for growth.

The remain­ing 63 per­cent of all olive oil-pro­duc­ing com­pa­nies are con­sid­ered ​“mar­ginal.” These are medium busi­nesses that are not spe­cial­ized in olive oil and do not do what is nec­es­sary to reach the mar­ket and expand their activ­i­ties.

Another por­tion of the ​“mar­ginal” pro­duc­ers are small busi­nesses focused on olive grow­ing part-time or fam­ily-run small farms that reach the mar­ket but do not pro­duce rel­e­vant vol­umes.

Small pro­duc­ers whose activ­ity is focused on self-con­sump­tion or direct sales to small local cus­tomers are also accounted for among the ​“mar­ginal” pro­duc­ers. Of all sales to fam­i­lies, which account for 70 per­cent of Italian olive oil sales, 26 per­cent go to self-con­sump­tion or direct sales.

The Italian Association of the Oil Industry (Assitol) con­firmed that the rela­tions within the pro­duc­tion chain and the lack of effi­cient inte­gra­tion are the sec­tor’s weak­est points.

“If both new and tra­di­tional com­peti­tors pros­per today, that hap­pens because they know how to act as a whole, deploy­ing inno­va­tion and, more recently, giv­ing value to sus­tain­abil­ity,” Anna Cane, Assitol’s olive oil group pres­i­dent, told Olive Oil Times.

She added that those are the rea­sons why the Inter-pro­fes­sional Olive Oil Organization (FOOI) was recently founded. The orga­ni­za­tion focuses on help­ing all types of olive oil pro­duc­ers increase their com­pet­i­tive­ness in the mar­ket.

“The road is still very long, but we did already man­age in a few cases to exper­i­ment with new agree­ments which are bring­ing good results,” Cane said.

According to Ismea, the seg­men­ta­tion of the Italian sec­tor becomes evi­dent just by look­ing at the oil mill num­bers.

“In Spain, where olive oil pro­duc­tion greatly exceeds one mil­lion tons, there are between 1,600 and 1,700 oil mills,” Ismea said. ​“In Italy, there are 4,470 oil mills… only 20 per­cent of which are coop­er­a­tive oil mills.”

Still, Ismea said the prox­im­ity of the oil mills to the pro­duc­tion areas is of such rel­e­vance that even the high costs might be jus­ti­fied.

“Seventy-six per­cent of Italian oil mills oper­ate with less than 500 tons of olives,” Ismea said. ​“Even if their high num­ber inflates the cost of the over­all sec­tor, their avail­abil­ity in the vicini­ties of the pro­duc­tion areas allows olive trans­for­ma­tion within 24 hours from har­vest, an essen­tial qual­ity fac­tor.”

Among the most com­pet­i­tive Italian olive oil com­pa­nies are the small agribusi­nesses that are highly spe­cial­ized and strongly focused on the qual­ity of their prod­uct. These com­pa­nies often depend on their own mill or work with nearby spe­cial­ized com­pa­nies.

“The Covid-19 pan­demic has brought pro­duc­ers and con­sumers closer to each other, as con­sumers increas­ingly look for true olive oil arti­sans,” Antonella Rosati, the owner of Tenuta Foggiali in Puglia, told Olive Oil Times.

“It is a trend that should be val­ued, that should not stop, and I see signs that it is tak­ing off thanks to many young olive farm­ers focus­ing on high-qual­ity pro­duc­tion,” she added.

Tradition and high-qual­ity prod­ucts cou­pled with the lat­est tech­nol­ogy are the focus of many medium and small pro­duc­ers who look at the inter­na­tional mar­kets where they show they can com­pete.

Still, the Ismea report empha­sized how extra vir­gin olive oils cer­ti­fied with Protected Designation of Origin (PDO) and Protected Geographical Indication (PGI) sta­tus rep­re­sent only a hand­ful of the total olive oil pro­duc­tion, ​“far beyond the poten­tial of the sec­tor.”

PDO and PGI oils account for no more than three per­cent of pro­duc­tion vol­umes and reach six per­cent of mar­ket value.

However, Cane added that there is a del­i­cate bal­ance that pro­duc­ers must strike between fol­low­ing tra­di­tional pro­duc­tion meth­ods and inno­vat­ing to remain com­pet­i­tive.

“If the sec­tor does not inno­vate we will not be able to fill the pro­duc­tion gap,” Cane said. ​“But in Italy, tra­di­tion has become a value to defend at all costs and has mar­gin­al­ized the best farm­ing prac­tices and sci­ence, which could instead help to cost-effi­ciently uplift pro­duc­tion vol­umes and the farm­ers’ income.”

While top qual­ity pro­duc­ers find their clients among those accus­tomed to or inter­ested in more expen­sive prod­ucts, many in the olive oil indus­try believe that good olive oil also needs to be brought to the mar­ket with the right mes­sage.

“Stating that good olive oil must be costly risks mak­ing extra vir­gin olive oil con­sumers flock away from the prod­uct,” Cane said. ​“The ade­quate val­oriza­tion of [olive oil farm­ers] is essen­tial. However, avoid­ing most extra vir­gin olive oil being dumped as a pro­mo­tion or under­priced prod­uct is too.”

Given its depen­dency on for­eign pro­duc­tion, olive oil prices are greatly affected by the imports in Italy. Still, the report showed that the sell­ing price does not change sig­nif­i­cantly over time. This is a sign that oscil­la­tions in the import prices unevenly affect the prod­uct chain.

“The retail prices fol­low dynam­ics that are more affected by the prod­uct dis­tri­b­u­tion chain than by the ups and downs of the pro­duc­tion,” Ismea said.

Between 2016 and 2021, extra vir­gin olive retail prices have shown a slightly neg­a­tive but sub­stan­tially fixed trend, with prices oscil­lat­ing between €5.50 per liter to the cur­rent €4.70.

In that same period, prices at ori­gin have fol­lowed a sub­stan­tially dif­fer­ent curve, with prices reach­ing €4.30 in 2017 and drop­ping to €2.50 in 2020.

“The strong oscil­la­tions in the prices at ori­gin are mostly absorbed by the indus­try and by the food retail­ers with the goal of offer­ing a sta­ble sell­ing price to the con­sumer,” Ismea said.

Among the other weak points high­lighted by Ismea for the sec­tor are excess bureau­cracy, lim­i­ta­tions in access to irri­ga­tion, slow gen­er­a­tional change at the high­est ranks of pro­duc­ing com­pa­nies, aban­don­ment of unpro­fes­sion­ally man­aged olive orchards, lim­ited access to credit and pro­duc­ers’ weak nego­ti­at­ing power with the food resellers.

However, Ismea added that there are oppor­tu­ni­ties in the grow­ing demand for qual­ity and sus­tain­abil­ity from con­sumers. The report said that there are also oppor­tu­ni­ties to extend olive grow­ing north­ward due to cli­mate change.

Expanding olive oil tourism activ­i­ties is another oppor­tu­nity that Ismea iden­ti­fied for pro­duc­ers to diver­sify their farm­ing activ­i­ties and sup­ple­ment their income.

• Ismea