About Risks and Side Effects

Although olive oil producers, as food producers, are also essential providers of basic supplies and therefore remain open and allowed to operate, particularly in Spain and Italy, many of them are facing an uncertain future. Before COVID-19, at least, it was clear to most producers that they will have to put up with constantly falling olive oil prices at production costs that remain at least constant. Today, however, especially those producers who were able to successfully escape the pull of the mercilessly downwards turning price spiral, are facing a never anticipated horror scenario. Their crops have been brought in, production paid for, the tanks full. The only thing is that nobody wants to buy the oil now. In times of the Corona crisis, the demand for good olive oil has collapsed. But paradoxically, this crisis also offers producers good reason for hope.



High quality olive oil is less in demand in Corona times (Source: evoo ag)


«There are people who buy 12 liters of olive oil.»

- Felix Meyer, Managing Director of Migros Lucerne in an interview with the Luzerner Zeitung



Hand disinfectants are a rare commodity in these times. Just like high-quality olive oil. But the main difference is that the demand for ethanol-based hand cleansers is currently very high, whereas hardly anyone wants to buy good olive oil these days. A look at the shelves of supermarkets confirms that during the Corona crisis consumers are now primarily turning to 1-litre olive oil bottles of well-known brands (such as Monini and Filippo Berio) and are also making use of low-priced private labels (such as Coop Naturplan Bio). On 17.03.2020, the managing director of Migros Lucerne, Felix Meyer, told the Luzerner Zeitung: «[...] There are people who buy twelve litres of olive oil. I can only repeat it with insistence: We're ensuring supplies and we're replenishing the shelves as quickly as possible. There is enough food for everyone and it is unnecessary to stock up on emergency supplies.»


This absurd buying behaviour was caused by the fact that people believed themselves to be in a survival struggle as a result of the headline communication in the media about the corona virus and accordingly prepared themselves for the worst - even before the first corona infection became publicly known in Switzerland. They bought low-cost durable foods in the form of dry pasta, flour, starch- and fat-containing ready meals, canned tomatoes, as well as oil, salt, sugar and yeast, and likewise covered themselves with hygiene products such as toilet paper, household paper and cleaning materials. In the Swiss retail trade, sales of flour in calendar weeks 6 to 9 rose by 37 percent compared with the prior-year period. Sales of dry pasta were up 32 percent, rice and mashed potatoes by 31 percent and canned food by 30 percent. Sales of oil also showed an increase and rose by a fourth (see graph by Nielsen). One has what one has, many thought. Only when retailers aggressively communicated that the Swiss population's food supply was guaranteed, hamster purchases fell again. And yet, Migros boss Fabrice Zumbrunnen told the Luzerner Zeitung on 30.03.2020: «Our own pasta production, for example, operates non-stop and produces over 100 tonnes of pasta every day.»





Migros, Manor, Coop - olive oils at low prices are in season

Well, twelve liters of olive oil will last the average Swiss household of 2.23 people two and a half to three years. And even if people in Switzerland in this apocalyptic-looking era were able to spend much more of their time cooking on their own stoves - which is very likely to be questioned, given the current mass sales of canned ravioli - the large-scale Migros olive oil stock would probably last for more than a whole year. Twelve litres of olive oil cost between 49.20 and 379.20 Swiss francs at Migros, with M-Budget Virgin Olive Oil in a 1 litre PET bottle for 4.10 Swiss francs being the cheapest product and the very good Monini Monocultivar organic olive oils - if they are not already rancid because nobody has bought them - and the Monini IGP Toscano olive oil for 15.80 Swiss francs per half-litre bottle each being the most expensive offers. A glance at the olive oil shelves at Migros reveals that the more expensive and usually much better olive oils are now, however, hardly in demand. Some bottles of lamp oil in the time of need, who knows when they turn us off the electricity. At least candles are not among the articles of the basic supply, otherwise IKEA might also have open. A similar situation applies to Manor Food, which in the Corona crisis launched a home delivery service for around 500 everyday consumer goods. In its "Home Delivery Product Catalogue", the basel-based retailer offers five different olive oils at prices per litre between CHF 13.60 and 23.80, with Monini Classico marking the entry point. Two of the products in the range are private labels, two others belong to the Il Viaggator Goloso brand. Quality products, on the other hand, are completely absent in the catalogue. Coop - also from Basel - currently has a price offensive on olive oil as part of its "Wochenend Knaller Aktion". The retailer is offering one litre of extra virgin olive oil of the Castello Don Felipe private label for 5 instead of 9.95 francs. A massive 49 percent cheaper! According to the Duden dictionary, the word "Knaller" means something that is very much in fashion, very popular and in great demand. To put it simply, "Knaller" are hit sellers.





Reductio ad absurdum - the orange giants communicate terribly

Twelve litres of olive oil. Felix Meyer from Migros Lucerne should actually be happy about this hoard purchase. The Monini olive oil advertisement, which has been running for days on the television screens of the entire nation, orchestrated by the marketing managers of MGB and paid for by Monini S.p.A., has achieved its intended purpose. Public contradictory communication in times of crisis? Migros knows no mercy. «Buy please, buy», shouts one commercial that, at the most inappropriate of all possible moments, in times of "social distancing", fools us into believing an Italian tavolata with cheerful company. «Hold back, don't make hoarding purchases», warns the other advertisement, which was organised by IG Detailhandel, where two of the three members belong to the Migros Cooperative. And a third campaign, another joint project between MGB and Coop, advises the "esteemed clientele" to keep a distance of two metres from other people both in front of the store and inside the store. Tavolata is out. No more barbecue party. Нет (nʲet).


Difficult prospects for quality producers

While Coop & Co. is bringing poor quality olive oils to consumers, pressure on producers of high quality olive oil is intensifying. They can barely sell their olive oil anymore. Demand has collapsed. In Italy as well as in Germany or in Switzerland. At least, some of them who serve the Asian market are fortunate, as Asian importers have been stocking up in the last few weeks, fearing that they will no longer be able to obtain olive oil due to Spain and Italy's drastic virus containment measures. One has what one has. In many places, however, a drama seems to be looming for the producers. Their harvests, brought in and paid for last autumn, are now lying in their tanks. Thus, these producers lack the urgently needed revenues to keep their operations running. Olive oil production is not only concentrated in the last quarter of the year, when the olives are usually harvested and processed into oil, but stretches more or less over the whole year. Field work such as fertilisation and pruning is now the order of the day, which is very labour intensive.




«We would be forced to sell the oil to bottlers or intermediaries at 50 percent below production costs.»

- Italian top olive oil producer



These days I have often talked to olive oil producers on the phone in order to find out how they are doing. Especially the independent producers, who are not employed, do not work for cooperatives and who do not sell their oil in bulk, are hit hard. While some top estates are held by investors with long-term visions and usually have no risk of bankruptcy due to the Corona crisis, it is the traditional farms and small producers which have to compensate for the loss of turnover out of their own pockets. Although loans are a short-term option, they merely shift the liquidity shortage into the medium-term future when the loans become due for repayment. Because, the olive oil that is not sold today, won't be sold in double quantities tomorrow. An equally discouraging option would be to sell the olive oil in the tanks in bulk to traders in order to get at least some cash. But even that is only a shift of the liquidity problem. The revenue collected in this case could very probably not cover the costs. Without question, the olive oil producers are now in need of orders; they must be able to sell their oil at reasonable prices, at least halfway cost-covering, otherwise they could face economic ruin.



Olive Harvest in Sardinia (Source: Shutterstock)


A few days ago, a top producer from central Italy answered me when I asked him what the worst-case scenario would be in the face of the increasingly spreading Corona pandemic: "Very simple. If we would not be able to sell the oil by the summer, we would be forced to sell everything in bulk 50 percent below our production costs to bottlers or intermediaries". But the producer can't afford that, he would get into an uncomfortable dependency on banks or other external financiers. What could be possible ways out for him and hundreds of other olive oil producers? I simply do not know.


The journey is the objective, we will have to understand that

The only likely thing, and this is where producers draw hope when I talk to them, is that in future people will again put more value on product and food quality. Little things that were very commonplace in life before the crisis will be given more attention. The wonderful border flower, the majestic red kite gliding over the farmland, the neighbour's friendly hello, the face-to-face contact with the parcel carrier or the visit to the reopened garden centre. All of these many individual impressions will have a strong impact on us and will lead us to make our lives more thoughtful. Everything will be given a new, unprecedented value. It will no longer be about getting from A to B quickly and avoiding the journey in between as much as possible, but instead we will understand that the journey is the objective. Or as Alan Watts would have said "the fun of the journey is to travel". It will no longer be trendy to have dinner in a chic restaurant that serves the most extravagant dishes - made from raw produce carted in from all over the world - in four courses at 50 francs each, simply to be seen. It will no longer be the accomplishment of something that is desirable, but rather the doing. Consequently, we will again begin to appreciate products and food that have idealistic values, stories and souls. And, high-quality olive oils are definitely amongst them. They are masterpieces of handcraft, produced by exceptional artists who care for a centuries-old cultivated plant and thereby benefit both nature and us. So, what if, in the worst case, sell the oil depots to bottlers, secure liquidity with a bank loan and hope for a debt cut in the near future? Despite all adversities COVID-19 has many positive side effects, no question about it. Flora and fauna feel them almost immediately, while we humans are slowly but surely beginning to feel the dawn.



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