Olive oil producers still see 'lots of room for growth'

Issue Date: February 4, 2009

By Ching Lee

Consumers may be tightening their belts as they adjust to the current economic slowdown, but so far they don't seem to be holding back on at least one food item: olive oil.

Even with the state's tree acreage devoted to the production of extra virgin olive oil increasing by as much as 25 percent to 30 percent year after year, California olive oil producers say they are poised to weather the current recession with continued growth and a quality product that keeps loyal customers coming back for more.

"We've done wonderful," said Jon Fadhl, a Solano County olive oil producer who runs Jovia Groves Olive Oil in Dixon with his wife Sylvia. "Our sales are way up. A lot of it is because people are starting to recognize the value of locally grown, fresh, quality products."

With 9,000 trees of the Arbequina variety planted four years ago that are now just beginning to come into full production, Fadhl said the economy has not affected his business and he thinks there's still "huge potential" for California olive oil producers who make a good-quality product.

"Even I, struggling as an artisan grower, am still finding that the market is growing for us," he said.

Fadhl acknowledged that intense media coverage on California olive oil and a recent mention of his Jovia Groves Olive Oil in the food section of the Sacramento Bee newspaper have definitely helped to drive up his sales.

It also helps that his oils are competitively priced, he said. A 500 milliliter bottle of his extra virgin sells for $15, compared to the $20-$25 price range of other artisan oils. While other foreign oils sell for much less, Fadhl said consumers are still willing to buy a reasonably priced product, and he's hoping that once they try his oil, they will be hooked.

"It's really about getting the product into their mouths," he said. "Once they taste what that intense freshness should be, they're going to realize that there is a huge value in the quality and freshness of California olive oil."

California's olive oil business has come a long way in just a few years. Patricia Darragh, executive director of the California Olive Oil Council, which represents about 90 percent of the state's olive oil production, said there has been "tremendous growth" in the sector, and that growth doesn't appear to be slowing down.

Last year, growers produced an estimated 675,000 gallons of olive oil, up from about 383,000 gallons in 2004. The state's current olive acreage for oil stands at about 21,000, compared to about 26,000 acres for table olives. Based on nursery contracts, the council projects an increase of about 10,000 acres going in for oil each year through 2020.

Darragh noted that much of that new production has been in super high-density plantings, which allow growers to mechanically harvest the fruit at a much faster rate while cutting costs on labor.

Albert Katz, a chef and olive oil producer in the Napa Valley, said he once feared that the super high-density plantings would flood the market with less expensive oils, but so far he has not seen much impact on his business. He said he has been able to sell every drop of oil he's made every year.

"Just like there is a place for good bulk production in wine, there's a place for good bulk production in olive oil that doesn't necessarily impact the small producer," he said.

He acknowledged that his boutique oils are considered in the upper end in terms of price, with a typical 375 ml bottle of extra virgin at $22. But even with today's consumers becoming more price-conscious in light of the economy, he said he hasn't noticed a dropoff in his oil sales.

"There is clearly a growing niche of people who are looking for authentic, domestically grown olive oil," said Katz, who farms about 6,000 oil-producing trees. "I don't want to say that high-end olive oil producers are going to be recession-proof, but I think if you have a community or a loyal following to your brand of olive oil, you'll be OK."

Brady Whitlow, president of San Joaquin County's Corto Olive, one of the state's largest olive oil producers using the super high-density method, said the company is doing more plantings and "moving full steam ahead" with its program.

And while the economy is a concern, Whitlow said he remains optimistic about Corto's future in the marketplace.

"Yes, olive oil is a luxury oil," he said. "It's certainly more expensive than other seed oils. So will a long-term recession be a challenge? Yes, probably. But because of the tremendous growth in our category and the tremendous awareness by the consumer about the real, demonstrable health benefits of olive oil vs. less expensive oils, I think we will weather the recession very well."

With regard to the amount of acreage for oil going into the state, Whitlow said California's olive oil sector is still a "long ways off from being in a glut position" and he does not expect the plantings will have an impact on pricing "for a long time."

What's more, he said because companies such as Corto are able to produce a high-quality product that's also competitively priced against all the offshore oils that currently dominate the market, consumers will soon catch on and opt for the California product.

California produces nearly all the olive oil made in the United States but, even with its growth in volume of oil produced, Dan Flynn, executive director of the University of California, Davis, Olive Center, said less than 1 percent of all the olive oil consumed in the United States comes from California.

"The United States is the fourth-largest consumer in the world of olive oil, but per capita, we only consume about the equivalent of a wine bottle per person per year. Whereas in Greece, they consume 32 to 35 wine bottles a year per person," said Flynn. "So there's lots of room for growth."

The trend in U.S. olive oil consumption has also steadily increased, said Gino Favagrossa, orchard manager at California State University, Fresno, and that increase is driven in large part by consumers' awareness of the health benefits of olive oil.

"I don't see our consumption going backwards," he said. "Are people going to cut back on their purchases because of the economy? Probably to some extent. But as some cut back, others are expanding into it because of the health factors, and I think that's going to drive sales more than anything."

Dewey Lucero, an olive oil producer in Tehama County, said the "buy local" movement also helps sales of his product because consumers want to support their local economy and California farmers.

"Plus, they're a little more aware of their carbon footprint and incoming products from outside countries that may not be as good quality," said Lucero, who uses both traditional and high-density methods.

Lucero said his online sales quadrupled last year and he expects "nothing but growth at this point." With this projected growth, his company recently purchased a new mill and has plans to plant 250 more acres.

But not everyone is as optimistic about the future of California's olive oil market. John Tillman, a producer in El Dorado County, said he's had to close his tasting room in Placerville due to lack of traffic and slow sales.

"There are just so many trees going in and so many new producers that it's getting very competitive," said Tillman, who started his Gold Hill Olive Oil Co. in 2002 and farms about 1,600 trees, all traditional plantings that are hand picked. "So it's just a rush of everybody jumping on the California olive oil bandwagon."

He said with so many growers planting olive trees and producing good-quality olive oil, the price is bound to come down, which is good for the consumer but not for small producers like himself.

"I see a Two Buck Chuck coming for olive oil down the road, like with wine," he said.

Despite current market challenges, Tillman said he doesn't plan on giving up on olive oil and will look to other marketing avenues to increase his product's exposure and sales.

"I've got to find my niche," he said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

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