"The challenge of the olive sector: prices, cooperativism and the global expansion of consumption"

Manuel Parras, Professor of Marketing and Market Research at the University of Jaén

Recently, the Caja Rural de Jaén José Luis García-Lomas Hernández Chair of Economics, Marketing and Olive Cooperativism of the UJA has presented its Annual Report on the Olive Sector 2024. In your opinion, what do you consider to be the most relevant aspects of this document?

The Report is very extensive, but I would focus on several topics that we have highlighted, both in the issues that we repeat year after year: analysis of supply, demand, foreign trade, ICTs and olive oils, value chain, etc., and in the two monographs, one on the CAP and the other on Oleotourism.

Starting with these two final topics, the main conclusion on olive oil tourism is that we must not confuse having tourism resources in olive oil tourism - olive groves, oil mills, bottling plants, tasting rooms, etc. - with tourism products, which is a much broader concept. I will give an example that everyone will know how to apply to olive oil tourism. A city can have a splendid cathedral - a tourist resource - but if it does not have hotels, tourist guides, restaurants, etc. it does not have a tourist product. The same applies to olive oil tourism, and projects must be well thought out with all these elements attached. That said, the supply of good olive oil tourism is growing and is becoming not only a new source of income, but also a fundamental pillar for disseminating olive-growing culture.

With regard to the CAP, the response of Andalusia and the province of Jaén to the eco-regimes has been extraordinary, with almost 100% of the possible hectares benefiting from the three possible schemes, especially those with vegetation cover - inert or living -. This is very good news.

Another important issue is the enormous impact of the increase in prices on the consumption of olive oil in Spanish households, the loss of weight of the cooperative mills in the olive oil value chain to which we will refer later, the increasing presence of producers from Jaén in the packaged oil markets, the increase in the surface area and production of olive oil in Spain, the increase in the number of olive groves in Spain, the increase in the production of olive oil in Spain, the increase in the number of olive oil mills in Spain, the increase in the number of olive oil mills in Spain, and the increase in the number of olive oil mills in Spain, the increase in the surface area and production of intensive and super-intensive olive groves and the fall in consumption in EU member states, while it is increasing in countries with little or no production such as the USA or Brazil, and the deployment of ICTs in olive growing, among other issues.

In the report, the drop in demand is mentioned, especially in households. What do you attribute this decrease in olive oil consumption to?

In the short term, it is due to the increase in prices, as a consequence of low supply caused by adverse weather conditions. The drop in olive oil consumption, in general, and extra virgin olive oil (EVOO) in particular, has been extraordinary. In 2023, EVOO consumption was 23.84% lower than in 2022. From January to November 2024, EVOO consumption was 17.10% lower compared to the same period in the previous year. Despite the negative aspect, this is a good indicator showing that the decline is being cushioned. To see if there is a recovery, we will have to wait a bit longer.

However, this short-term behavior should not make us forget that, in the long term, consumption in Spanish households has decreased, even in periods with very low prices. This has also happened in Greece and Italy, with greater intensity in these countries. I believe it is due to the aging population. The largest consumers of olive oil in Spain are the elderly—there is a direct correlation between consumption and age—and it happens that as we grow older, we consume less fat—less fried food, etc.—and, logically, demand falls because it is not counterbalanced by the consumption of younger people or other groups we refer to later.

What impact has the recent legislation had on the commercialization of olive oil? What legislative changes do you think are necessary to better support the sector?

I will refer to two issues to choose from. The legislation on the value chain is well-intentioned, but in my opinion, it requires a thorough review. The concept of the effective cost of production is a good one, but in the olive oil sector, many companies do not know how to calculate costs. And even if they know, there are olive groves that produce olive oil at 1.5 euros per kg and others at 4.5 euros. Obviously, buyers, if they have to pay the effective cost of production, will first go for the 1.5 euros ones. So, what happens with the ones at 4.5 euros, who survive thanks to PAC subsidies and family labor? I believe the law needs a deep debate because the idea behind it is good and fair, as it aims to rebalance power between the agents in the value chain.

Another element showing that sometimes we don't need more legislation, but enforcement of the law, is the issue of refillable bottles. We still see oil dispensers and bottles without labels. Refilling continues, although fortunately, much less. It is not a matter of the law, but of the authorities with consumer oversight carrying out inspections. We, at the IGP Aceite de Jaén, as a continuation of the campaign by the Interprofessional, have done another one with the hospitality industry in Jaén, because Jaén must set an example.

I believe we don’t need more legislation, we need to enforce the laws, and if we see that they are difficult or impossible to comply with or have side effects, they should be modified as soon as possible.

Regarding the demand for olive oil, what strategies do you think could be implemented to recover household consumption and encourage the purchase of extra virgin olive oil?

Regarding strategies, in my opinion, there are several. The first is for denominations that consumers understand and infer quality without being experts. Years ago, we proposed something similar to hotel star ratings from the University of Jaén. AOVE, 5 stars; virgin olive oil, 4 stars; and “olive oil—contains exclusively refined oils and virgin oils,” 3 stars. The semantic jungle does little to increase AOVE demand. One of the best promotions could be this, although I am aware that there are many legitimate interests in the sector that are at odds with each other on this matter.

Secondly, there needs to be greater involvement of the producing sector in the packaged oil markets. And thirdly, there are three key market segments: millennials, who consume little AOVE; chefs, who also don’t consume much despite the good health of Spanish cuisine, and the role they could play in promoting the quality of olive oils among tourists; and public administrations, which, at least in olive-growing regions, should require those granting access to kitchens or dining rooms to cook with olive oil. This measure would be the best promotion they could offer.

According to the report, what role do Information and Communication Technologies (ICT) play in the olive oil sector?

Today, ICTs play an essential role. The report analyzes whether olive oil sector organizations have a website or not. The results show that 626 out of 1,029 companies in 2023 have a website (3.74 percentage points more than in 2022), and it is the cooperative societies that have a higher ownership of websites, increasing from 68.92% (286 cooperatives) in 2022 to 71.57% (297 cooperatives) in 2023, with a variation of 2.65 percentage points.

On the other hand, indicators related to the complete and secure purchasing process show that websites of companies from Jaén outperform those from the rest of Andalucía in all indicators analyzed by more than 20 percentage points: complete purchasing process, secure online transactions, and server interaction. The highest percentages in Jaén reflect a greater commitment to user experience and security in e-commerce. Regarding the types of companies more oriented towards e-commerce, non-cooperative societies in Andalucía lead the complete purchasing process category, with 70.52% compared to 63.30% for cooperatives. However, cooperatives outperform them in online transaction security and server interaction. These differences highlight that cooperative societies are behind in implementing online commerce, although when they do, they ensure security and user experience.

Finally, the report states that olive oils are the second products generating the highest volume of operations in e-commerce.

The report highlights the issues with cooperatives, but also mentions the resilience of the sector. What factors do you think have allowed the olive oil sector in Jaén to remain competitive despite the challenges?

We have been observing, and the report clearly shows, a loss of the cooperative movement’s weight in the transformation of olives into olive oil. The percentage of cooperative and industrial companies remains fairly stable, around 50%, although with a slight upward trend in industrial oil mills. However, industrial companies are significantly increasing olive oil production at the expense of the cooperative movement. In this sense, it would be interesting to investigate the reasons for the loss of weight of cooperatives in the olive oil market. It may be because they are perceived as less competitive than industrial ones, because of a shift of members to industrial oil mills for faster payment, a loss of member loyalty, or because cooperatives do not meet the needs of their members through their sections, etc. But we insist on the need to carry out a study to clarify this phenomenon.

Regarding the competitiveness of the Jaén olive oil sector, it must be emphasized that, as a region, the province of Jaén remains the most competitive in Spain. In Jaén, on average, 34% of Spain's olive oil production comes from the last eight harvests, despite Jaén only having 25% of the olive-growing surface. The data is conclusive. However, the intensification in Jaén is slow, and in some areas, it will be impossible to intensify. In medium years, part of the Jaén olive grove is not profitable unless it benefits from PAC subsidies and the contribution of family labor, which is not counted as costs.

Finally, how do you think this report can contribute to the future evolution of the olive oil sector?

When the Chair was created in 2019, we set two goals. First, to analyze issues with academic rigor, as it is a University Chair. And second, to be influential, without complexes, both in the public and private sectors. All of this with the aim of making the Jaén olive oil sector more competitive, which is the best way to mitigate the talent diaspora that we have been witnessing in Jaén. Therefore, we believe that the issues we address and the answers we provide respond to the demands of the sector and aim to guide it towards adopting the most relevant strategies to be competitive and, as a result, profitable.