Greeks Trade Down to Cheaper Olive Oil
Greek households are buying less olive oil and cheaper olive oil, according to a study of the sector by the business information group ICAP. Consumption fell about 6.1 percent, and demand for packaged branded oil dropped about 9.3 percent as buyers moved to bulk and to cheaper private label. In the country with the highest consumption per head in the world, that is a significant shift. Here is what the study says and what it means for Greek producers.
What the study found
Production in the 2009/10 season was about 4.3 percent lower than the season before, which the study puts down to the weather rather than the economy. Olive trees do not know there is a crisis; they alternate heavy and light years and respond to rain.
Consumption is the part the crisis touched. Household budgets shrank while the retail price of olive oil stayed relatively high, and demand fell about 6.1 percent. Standardized oil, the packaged branded product sold in supermarkets, fell further, by about 9.3 percent, as shoppers switched to bulk oil bought from a producer or a neighbor and to cheaper private label bottles from independent packers.
Why that hurts producers
Greece has a structural problem that the crisis has made worse. Roughly half of what is consumed at home is bulk oil that never carries a label, and most of what is exported is also bulk, mainly to Italy, where it is blended and bottled under other names. Every liter that moves that way earns the Greek grower the commodity price and hands the retail margin to somebody else.
So a shift from bottled to bulk inside Greece is not just a change in shopping habits. It moves yet more oil out of the branded trade, which is the only part of the business where a Greek producer can charge for quality. The study describes the market as mature and still carrying the weaknesses it grew up with.
- Bulk buying looks cheap and often is, but storage at home in warm rooms undoes the saving within months.
- Own-label and independent packers win in a downturn, in Greece as everywhere else.
- Greek oil is good enough to sell on its own name. The obstacle is packing and marketing, not the fruit.
The longer argument
This is the same debate Greek growers have been having for years, and the crisis has simply raised the stakes. Standardizing and bottling at home costs money that cooperatives do not have, and takes years of marketing to repay. Selling in bulk pays this month. When incomes fall, the short-term answer wins, and the country ends up exporting raw material again.
We wrote about the pressure on Greek producers before any of this began, and about the older grievance behind it, Greek oil reaching shoppers with an Italian label on the front. For the fruit itself, our field guide to Greek olive varieties is a reminder of what is being sold at commodity prices.
In a crisis the olive oil on the shelf does not usually get worse in any way a label would reveal. What changes is the blend behind the brand: more oil bought late, more of it from wherever was cheapest that month, less of it from the region on the front. The price stays put and the recipe moves. That is why harvest dates and single-origin claims matter more in a bad year, not less.
Sources
- Capital.gr: ICAP study on the restriction of olive oil consumption, December 2011
- Olive Oil Times: Greeks Turn to Lower Quality Olive Oil During Crisis, 28 December 2011 (archived copy)