Olive Oil Giant Deoleo on the ‘Crucial but Cruel’ U.S. Market

Not just the vastness but also the profit margins make the United States arguably the most important olive-oil market in the world, Spanish-based olive oil giant Deoleo says in a new report.

The U.S. is the land of opportunities, but it is also a cruel market for those who are not prepared to fight.-Deoleo Annual Report

Deoleo said olive oil markets are usually high profit, low consumption or high consumption, low profit but in the U.S., both the market and unit profit margins are big.
“In contrast with (U.S.) retail prices of over $8/liter, in Italy prices are around €4/liter and in Spain, €3/liter,” Deoleo said in its 2013/14 annual report. The main reason is North American retail margins are very high, while in Spain olive oil is often used as a loss leader “which is extremely destructive for the category.”
The U.S. market is thus crucial because the profit there, apart from providing an outlet for production, helps finance development, innovation, and marketing which have a flow-on effect throughout the value chain, it said.

Half the olive oil really Spanish

If focusing on the areas where olive oil consumption is concentrated the U.S. – the east coast, west coast, Texas and around Chicago – “the per capita consumption in value is close to that of the traditional oil-consuming countries.”
While on paper Spain provides under a quarter of the about 300,000 tons of olive oil the U.S. market imports annually, when taking into account the level of processing, packaging and re-exportation of Spanish olive oil by Italy, Spain supplies about half of all olive oil consumed in America, Deoleo said, “so any fall in consumption would have a big impact on its ability to market national production.”