New Zealand Regions Get Ahead

The new olive growing regions of New Zealand in Marlborough/Nelson and Hawkes Bay are as close to Paradise that some of us will ever get. Interspersed amongst the world famous vines giving us great whites and much improved reds, the olive groves produce a wide array of respectable, and occasionally exceptional, olive oils.

During two-day seminars in Blenheim (South Island) and Napier (south east of the North Island) I had the pleasure of meeting the enthusiastic producers, distributors and retailers of these regions and tasting their new season olive oils. The purpose of the seminars was to provide taste training, evaluation of olive oils and blending - all from a market perspective.

Data for the size of the New Zealand market, and the local markets in each location, was scratchy. However, data purchased by Olive Business from the New Zealand statistical office shows that imports of olive oil were around 4,000 tonnes a year and local production was estimated to be around 400 tonnes. Approximately 30-40% of imports are extra virgin olive oil (EVOO), add the local production to this and we get an estimate of 1500 tonnes of EVOO consumed every year in New Zealand. This is more than three times current local production, showing that many New Zealanders are already ‘educated’ in the use of extra virgin olive oil. This makes the marketing task easier – shifting usage to New Zealand product as opposed to getting consumers to use a new product.

To Market, to Market

The first day of the seminars examined this market environment and participants tasted their own oils with special emphasis on style and flavour. Each oil was also given a commercial assessment and some interesting trends emerged. Most of the olive oils from both locations were assessed as medium or robust. There were few delicate oils and even those were on the medium side of delicate. The oils from particular varietals were generally similar. In both locations there were olive oils that had well differentiated, even outstanding, flavour profiles – but these were the exception.

Hawkes Bay seminar underway

The olive oils available were mostly of Italian varietal origin – frantoio, leccino – with some picual, koreneiki, barnea and picholene. The Spanish varieties (picual and nevadillo blanco) did not exhibit the aromatic tropical fruit characteristics expected and given that consumers are used to this style for imported oils there is an opportunity for development in this area. The absence of a range of complex delicate oils usually associated with later harvesting creates a further opportunity.

In Hastings imported olive oils off the local supermarket shelf were slipped into the blind tasting to test the ‘all imported oils are faulty’ slogan. No rancidity was detected – however the floral-ripe tropical fruit aromas of the Spanish oils, imparted presumably by the Picual, Hojiblanca and Picudo varieties in the blends, disconcerted some of the tasters.

The price difference between the imported and local brands in the supermarket is closing but still significant. In some of the smaller supermarkets the local brands were on the bottom shelf, a sure sign that they were not moving, and the packaging was mainly in 250ml bottles, a sure sign that the product is expensive.

Given all these considerations – the limitations of local production, the style of the oils, price points to compete with imports and consumer preference – seminar participants worked in teams to develop a market brief and blend oils to meet the brief.

The Blenheim ‘blokes’ team works on its blending brief

This exercise was most revealing. The openness of the participants and the determination to take the industry from its current adolescence to maturity was most productive. The briefs developed were varied, practical and all could be implemented. The process revealed the valuable collective knowledge of the teams. Gaps in the range of oils available were identified and the advantage from a taste and volume perspective of blending became apparent.

Pricing

Visits to a number of groves, including some of the largest, revealed the horticultural limitations that define productive capacity and oil characteristics. Early frost, pruning, disease, harvesting, and processing method and capacity affect the oil profile as much as the variety. Most accepted there was work to be done in these areas to achieve optimal efficiency and reduction of end price.

In the grove with (l-r) Bob Marshall, Shona Thompson, Rachael Speedy and Chris Crompton-Smith

It was acknowledged that price was both the determinant of profitability for the producer and the most important consideration with consumers. The presence of retailers brought reality to the discussions with the simple message that the price expectation of producers was too high and there needed to be adjustments to the supply chain to bring the retail price down within consumer expectation set by imported brands.

One way of reducing the price, obtaining more delicate oils and insuring against crop failure is to retain a proportion of oils from previous seasons. Generally the oils tasted were robust enough to do this. This also enabled ‘back-blending’ to reduce price and preserve particular traits for consistency. Blending with refined oils and other vegetable oils were also discussed to produce products which will compete directly with the imported ‘pure’ and light olive oils in supermarkets.

Differentiation

Differentiation in markets for the olive oils for the two regions can be achieved through Denomination of Origin (PDO) certification and ‘tested to international standard’ labelling. The testing to international standard would provide a range of chemical data to further define the health attributes of the fatty acid profile and anti-oxidants of the olive oils. The polyphenol levels from the analysis will provide data for blending for longer shelf-life.

The ‘tested to international standard’ branding would also position the complying oils ahead of the existing ‘ONZ Certified Extra Virgin’ mark which has a far less rigorous testing regime.

The ‘girls’ teams in Blenheim differentiating their oils through blending

To round off the regional advantages for marketing, both regions have well established wine and tourism industries on which to build the olive oil profile. The food culture is well developed and in most restaurants at least two local extra virgin olive oils are used. Visits to retailers showed some reluctance to stock and promote local oils because of price. There is an adage which says ‘if you cannot win in the local market you won’t win in other markets’. The intention expressed by participants is to work on this through collection and analysis of market data and more cooperation along the supply-chain.

Kiwi Oil

On a lighter note, while enjoying delicious fish and chips on the sunny harbourside in Napier, we noticed an offering of ‘green salad drizzled with Kiwi Oil’. Was this a new product to compete with Emu Oil we asked the waitress? With the confidence of youth she told us it was the oil extracted from the Kiwi fruit. We smiled when we realised that the oil is in fact a locally produced olive oil called ‘Kiwi’. There is work to be done with foodservice too.

Harnessing the Assets

The Marlborough/Nelson and Hawkes Bay olive industry in New Zealand, as reflected by participants in the seminars, is determined and talented. Their olive oils are good quality and market success will come through differentiation through taste, price and innovative marketing. The teamwork during the seminars shows that there is the cohesion, resourcefulness and increasing knowledge to make this happen.

These are the assets of the industry which when harnessed will bring its success.

Align all this with the already established local food and wine culture attracting tourism and the worldwide profile of the wines – Marlborough/Nelson and Hawkes Bay will be Paradise regained.

Acknowledgment
Thank you to all who showed typical Kiwi hospitality and endless humour, especially Phyllis and Mark Heard of Awatere River Extra Virgin Olive Oil who took the initiative to organise the seminars, and Rachael Speedy and Nigel Macintosh of Paul Holmes Extra Virgin Olive Oil who promoted the Hawkes Bay seminar. Thanks also to Andrew and Delyth Taylor of Olive Culture who took me to many groves in Hawkes Bay and taught me a lot about pruning and how to drive up frighteningly steep hills.

Australian EVOO Import Prices Down 19%

The latest statistics for imports of olive oil into Australia show a decline of 19% in the price for packaged virgin olive oil from February to May 2009. The average price per litre in May 2009 was $5.01 for packed virgin olive oil. The price of $3.66/litre for bulk virgin olive oil is a drop of 37% from the high of $5.82/litre in January 2009.

These reduced prices reflect the low prices in oversupplied European markets which are expected to continue for some time.

Quoted prices for bulk olive oil in the Australian market can be expected to fall with some anlaysts predicting an increase of 5,000 tonnes over last year for the current harvest. Prices will possibly be further driven down by the fire sale of substantial quantities of olive oil from the MIS groves in administration and the off-loading of carryover stocks from last season.

While this is not encouraging for producers, it is good news for conumers who will be able to purchase Austrlian olive oil for less. In the long term this will benefit the industry as those consumers who abandon traditional imported brands for Australian oil are likely to continue to buy the local product as prices rise again.

Australian Import Prices Continue Downwards

Source : Australian Bureau of Statistics

Prices of virgin olive oils imported into Australia in April continued the downward trend with packaged olive oils dropping 4.52% to $5.38/litre (customs value) and bulk virgin olive oil dropping 14.64% to $4.09/litre (customs value).

The International Olive Council (IOC) reports that despite prices starting to level out in Europe, the price of virgin olive oil has dropped 29% in Spain and Greece and 25% in Italy over the past year. The final tonnage for the Spanish crop is expected to fall below predictions this year due to adverse weather conditions.

Olive Oil Price Trends

Australia

The import prices (cv) for packaged virgin olive oils into Australia during March declined for the first time in 4 months while the bulk price continued to decline.

The average price for packaged virgin olive oils dropped to 8.5% to $5.63/litre and bulk virgin olive oil dropped 5% to $4.79/litre.

The falling prices can be expected to continue with an improving Australian dollar, weak prices in Europe and the global financial crisis slowing the movement of stock.

The lowering of import prices will continue to put downward pressure on prices of Australian olive oil.

Source: Australian Bureau of Statistics

World Prices

The graph below shows a steep downward trend in producer prices for extra virgin olive oil in the European markets which set the prices for international trade.

The upside is that the reduction in price of olive oil will encourage consumers to increase consumption. Another positive is that with lower production of competing vegetable oils through application of less fertiliser, and sustained consumption driven by more fried food being consumed in China and palm oil being used to generate electricity, the price of vegetable oils may well increase. This could mean olive oil increasing its share of the international edible oil market.

The futures exchange in Jaen Spain, Sociedad Rectora del Mercado du Futuros del Aceite del Oliva SA, Jaen (MFAO) shows that there is little confidence in prices increasing over the next year with quotes as low as €1585 per tonne. This price is well below the price of production and converts to €1.44/litre (approximately AU$2.88/litre).

Is Australian Olive Oil Almost Entirely Extra Virgin?

It is not logical to state that Australia produces almost entirely extra virgin olive oil, and then argues in international forums that trade standards should be eased to allow ‘a significant proportion’ of currently non-complying olive oils to comply with extra virgin classification.

Non-compliance of Australian olive oils

The survey of Australian Olive Oil Cultivars to Determine Compliance with International Standards (RIRDC Publication no: 08/167) October 2008 (Survey on Compliance) casts doubt over the compliance of varietal Australian olive oils with the International Olive Council International Trade Standards.

The research was funded by the Australian Government and industry funds from the Australian Olive Association (AOA) and is available at www.rirdc.gov.au .

The survey reports that of 143 samples of olive oil tested over 2 years, 87 did not comply with one or more of the chemical tests required for extra virgin olive oil. The tests are directed at assuring quality and detecting adulteration with refined olive oils and other vegetable oils.

Of 143 samples of olive oil tested, 87 did not comply with one or more chemical tests for extra virgin olive oil

According to the Australian Extra Virgin Brand (the Brand) website ‘Australian olive oils are almost entirely extra virgin olive oil.’ (www.australianextravirgin.com.au)

This assertion will be difficult to substantiate with supporting data as not all Australian olive oils in the market undergo the full range of International Olive Oil Council (IOC) quality, purity and sensory tests required for classification as extra virgin olive oil to International Trade Standard.

In fact, so confident is the AOA that Brand olive oils are ‘almost entirely’ extra virgin, that it does not require the full range of tests to comply with international standards. Or could it be that the tests are not required for fear an embarrassing number of olive oils do not meet the extra virgin criteria. The survey on compliance shows that this is quite possible.

Or could it be that the tests are not required for fear an embarrassing number of olive oils do not meet the extra virgin criteria. The survey on compliance shows that this is quite possible.

Australia is vocal in the international olive oil standards scene in its attempts to broaden the Codex Alimentarius trade standards for olive oils. Australian delegates regularly attend the Codex Committee on Fats and Oils, the most recent was held in Sabah in February. On the agenda was “The proposed draft amendment to the Standard for Olive Oils and Olive Pomace Oils: Linolenic Acid Level”.

Australia features prominently in the ‘general comments’ of the agenda papers. Under discussion are; the linolenic acid limit of 1.0%, and campesterol levels in olive oils specified by the Codex Standard.

Australian delegates argue that there are regional differences in the chemical analysis shown by authentic olive oils which should be allowed for in the Standard. For example the papers state ’that a significant proportion of Australian olive oil samples do not meet the 1.0% limit for linolenic acid’. This comes from research presented by Australia that showed from crop years 2002, 2003 and 2004, of 754 samples of olive oil tested from all states, 4.2% were outside the standard.

The papers point out that during the testing period, Australia accounted for 0.07% of world production and no more than 0.05% of world exports. This begs the question of the futility of investing valuable industry money in trying to change an international standard which affects 4.2% of Australian production – when there is ample (95.8%) oil available to blend the high level down.

Perhaps more significantly, Australia also argues against a reduction to 3.5% in the allowable level of less than 4% campesterol as a percentage of total sterols in olive oil. Australia asserts that ‘Data on sterol content reveal that levels for campesterol are consistently high in a significant proportion of authentic Australian olive oils’. Campesterol level is one of the indicators used to detect adulteration with vegetable oils such as sunflower and canola.

Non-compliance of the Barnea Variety

The Survey on Compliance shows that the mean value of campesterol for the tested samples of the variety Barnea is 4.5%.

Technically, these oils cannot be called extra virgin – they may be authentic, but not extra virgin.

Technically, these oils cannot be called extra virgin – they may be authentic, but not extra virgin. The definition of extra virgin olive oil is ‘virgin olive oil which has a free acidity, expressed as oleic acid, of not more than 0.8 grams per 100 grams, and other characteristics of which correspond to those fixed for the category in this standard’. The ‘other characteristics’ include the regime of chemical testing.

If an olive oil does not comply with the chemical standards, it cannot be called extra virgin. In fact it cannot be called olive oil, according to the IOC International Trade Standards. And it cannot be refined as the chemical standards for sterols in refined olive oils are very similar to extra virgin and a level of campesterol above 4.0% of total sterols is unacceptable.

Herein lies a problem for the Australian industry. Many varietal oils with small variations from specification which do not comply can be blended with compliant oils to result in an oil that fits the standards. However, the report identifies the variety Barnea as one with high campesterol levels, an average across samples tested of 4.5%, where the standard is 4.0%. This means that to blend this oil into specification, at least an equal volume of an olive oil with a campesterol of 3.5% or less is required.

According to the website www.boundarybend.com, Barnea is the most common variety planted in Australia, representing 41% of plantings.

We know that several large investment groves in Victoria and South Australia planted large numbers of the Barnea olive variety. The report ‘Bigger is Better at Boort’ in the Weekly Times (April 15 2009) states that of the 997,000 trees planted at the Timbercorp Boort Estate olive grove in Central Victoria, more than half are Barnea. Boundary Bend also reports that Barnea is a variety planted in the large northern Victoria groves under its management.

Coincidentally, the Survey on Compliance reports that ‘Central Victoria was the highest in campesterol. This is of concern as the majority of cv Barnea trees are grown in Central Victoria’. The implication of this is that there is a large quantity of olive oil being generated which is not extra virgin and will need to be blended with at least an equal quantity of other compliant oils.

The implication of this is that there is a large quantity of olive oil being generated which is not extra virgin and will need to be blended with an equal quantity of other compliant oils.

If we assume that 41% of Australia’s olive oil producing trees are the variety Barnea, and that Australian production in 2008 was the estimated 12,000 tonnes (AOA), as much as 4920 tonnes of olive oil produced from Barnea with high campesterol levels may not comply with international standards for extra virgin olive oil, and cannot be labelled as such.

The solution to the problem is to blend. At best this will take another 4920 tonnes of olive oil with lower than 3.5% campesterol. For any producer with a large proportion of Barnea, this could mean buying in substantial quantities of oil for blending. It will also place a premium price on olive oils with lower campesterol levels – an important incentive to have one’s olive oils tested for sterol composition.

It will also place a premium price on olive oils with lower campesterol levels – an important incentive to have one’s olive oils tested for sterol composition.

If then add the 4% of olive oils that have high linolenic acid levels, and take account of all the olive oils that are downgraded for sensory faults and high free fatty acid or peroxide levels, we may be looking at over 50% of Australian varietal production not being extra virgin by international standards.

we may be looking at over 50% of Australian varietal production not being extra virgin by international standards.

Are smaller producers being disadvantaged?

We need more accurate data and less unfounded assertion if we are to manage the Australian olive industry effectively. Testing of olive oils requiring classification should be carried out to Codex Standards (which have been adopted by the IOC) at independent laboratories and the data collated and made publicly available. We can then make informed decisions on blending and the marketing of our products.

By establishing a Code of Practice and/or a trade standard that does not require full testing to IOC Standard, the Australian Olive Association may be favouring the larger producers who have substantial quantities of varieties that may produce non-compliant oil. At the same time, having a standard to accommodate local interests which is less rigorous than international standard risks the entire industry being discredited by international buyers.

By establishing a Code of Practice and/or a trade standard that does not require full testing to IOC Standard, the Australian Olive Association may be favouring the larger producers who have substantial quantities of varieties that may produce non-compliant oil.

The ‘Australian Standards’ may also disadvantage those that ‘have done the right thing’ by planting varieties that produce oil to international standard. And who should be getting a premium for their bulk oil if it is in high demand for blending.

The ‘Extra Virgin Olive Oil’ classification is an international brand mark with standards set by the International Olive Council. It is not logical to state that Australia produces almost entirely extra virgin olive oil, and then argues in international forums that trade standards should be eased to allow ‘a significant proportion’ of currently non-complying olive oils to comply with extra virgin classification.

It is not logical to state that Australia produces almost entirely extra virgin olive oil, and then argues in international forums that trade standards should be eased to allow ‘a significant proportion’ of currently non-complying olive oils to comply with extra virgin classification.

Survey short on options

The Survey on Compliance is a useful scientific analysis. However, it is surprisingly political coming from an independent government research laboratory. The only solution it seems to recommend is the changing of international standards, an unlikely political achievement given Australia’s insignificance by volume in the world market. It offers little to help producers in overcoming the problem while this attempt to change world standards takes its inevitable slow course.

The process of changing world standards will be a protracted one. It will involve:
1. Australia developing a new standard through Standards Australia with a lengthy consultation process.
2. Adoption of the Australian standard by Food Standard Australia and New Zealand (FSANZ).
3. Garnering support from other producing countries.
4. Persuading Codex Alimentarius to change the international trade standard.
5. Persuading the International Olive Council to replace the existing International Trade Standard with the new standard.
6. Allowing a moratorium period for producers to comply with the new trade standard.

In the meantime how does Australia dispose of potentially increasing volumes of non-complaint oils as groves planted with offending varieties reach maturity?

There are no suggestions of rooting out the offending trees that produce non-compliant oil – as was suggested with the large plantations of Manzanilla. There are no suggestions on ways horticultural practice could mitigate the problem. There are no estimates of the requirements for blending, or suggestions that more widespread testing of oils should take place.

The Survey does not canvass the impact of opening up the standard to the substantial amounts of non-complying oil produced overseas, thereby increasing then worldwide volume of extra virgin olive oil and lowering prices. The implication of softening the standards in the detection of adulteration with vegetable oils is not discussed.

The Survey does not canvass the impact of opening up the standard to the substantial amounts of non-complying oil produced overseas thereby increasing then worldwide volume of extra virgin olive oil and lowering prices

If Australia is to act unilaterally and develop its own standard, it runs the risk of discrediting its olive oil product in the eyes of major importers, and at the same time opens Australia up to the importation of products that comply with local standards but are outside international standards.

The singular approach of The Survey’s recommendations appears to be doing the AOA’s bidding and potentially legitimising the sale of substantial quantities of non-compliant Australian olive oil.

This singularity is reinforced by the statement ‘it may cost exporters large amounts of money to send oil outside the country, only to have it rejected as adulterated’. It could also say – ‘to avoid incurring large costs from having oil rejected as adulterated, we recommend that all oils for export are tested to international standard prior to despatch’.

‘to avoid incurring large costs from having oil rejected as adulterated, we recommend that all oils for export are tested to international standard prior to despatch’.

And –‘Oil with exceptional characteristics such as organoleptic quality and oxidative capacity is being blended with inferior oil to achieve compliance with inappropriate trade standards’. Which could also have said – ‘blending is common practice to improve the quality and shelf-life of olive oil and to ensure compliance’.

blending is common practice to improve the quality and shelf-life of olive oil and to ensure compliance.

There are many legal and economic implications of the use of the descriptor ‘extra virgin olive oil’ when an olive oil does not comply with standards. It is not good enough to say that there is no Australian Standard, and little better to introduce a standard that ignores key chemical specifications established to detect adulteration.

Australia should simply adopt the International Trade Standard promulgated by the IOC and then get on with solving the problem of non-compliant oils. Money being spent on delegations to Codex in the arguably futile and certainly protracted attempt to substantially change standards would be better spent in making it possible for producers to fully test their oils.

The Government should be establishing an independent monitoring and compliance programme not influenced by those that may be affected by planting the wrong varieties.

The alternative is to allow the sale of olive oils that are not extra virgin, thereby undermining all the rhetoric from the AOA claiming Australia produces almost entirely ‘extra virgin olive oil’.

Australia's Largest Olive Oil Producer Troubled

Timbercorp Limited has announced on its website that 'unless the company is able to reach agreement with its financiers to restructure existing debt facilities, or an alternative funding or restructure plan is implemented before 1 May 2009, there is significant uncertainty regarding the ability of the Company to continue as a going concern'.

Timbercorp owns the largest olive groves in Australia and claims to produce around 40% of Australian production of olive oil. Boundary Bend Ltd, owner of the Cobram Estate brand of olive oil, is Timbercorp's 'strategic alliance partner' for its olive projects.

In its 2008 annual report Timbercorp recorded 6,530 hectares of olives under management which produced almost 4.6 million litres of extra virgin olive oil. An oil yield of 15.41%. Oil prices achieved were between $4.53 and $4.71 per litre ($4.92-$5.12/kg). With the 2009 harvest under way, the predicted harvest is 5.5 million litres, almost 20% up on 2008.

The statement cites the cause of the credit squeeze as the unsatisfactory offers for its timber plantations which it is attempting to sell to retire debt. As far as its horticultural assets are concerned, it states that expressions of interest have been received but no formal offer has been made to date. It does not state whether the olive assets are the subject of an expression of interest.

Edible Oil Prices on The Rise

The world financial situation is affecting the supply of edible oils, such as soya bean oil and palm oil, as producers apply less fertiliser and development stalls.

Analysts predict the increased consumption of fried foods in Asian countries and continuing demand for palm oil for electricity generation will mean a supply shortage in the coming year. This may increase the demand and price for other vegetable oils such as canola and sunflower oil.

This could be good news for olive oil producers which produce around 4% of the world's edible oils. Olive oil is usually around double the price of oils such as canola and sales should benefit if the price differential is reduced.

Seen as a healthier vegetable oil than competing oils, consumers may respond to the closing of prices by electing to buy the healthier product for slightly more.