Lack of rain in Spain falls mainly on oil

The weather has a lot to answer for. The lack of rainfall last year on the olive groves of Spain, the world’s largest olive producer, decimated the year’s harvest. Yields were reportedly down 80% year on year.

Prices have rocketed as supply has been squeezed in 2013. “The last 12 months have been very difficult as we’ve tried to manage a 40% increase in raw material costs,” says Walter Zanré, MD of Filippo Berio. “Our retail prices in some instances have increased by over 20% this inevitably has impacted sales.”

Berio’s value sales have been flattered by this passing on of cost increases, climbing 4% while volumes were dragged down by 7.2% [Nielsen 52 w/e 12 October]. The brand is still category leader in value terms, with the gap between Berio and second-placed Napolina having widened to £4.2m as a result of Berio’s price hikes.

But in volume terms, Napolina is Britain’s biggest-selling oil, perhaps reflecting the fact that the brand has been selling for an average of 66p a litre less than Berio over the past year at £4.53. This has increased its appeal to shoppers looking to curb their spending. However, it has paid the price in value sales, down 0.1% against 2012’s 31.4% increase. Volumes have also fallen, by 10.4%, as consumers have downtraded from olive oils.

Napolina has invested heavily in marketing over the past year, says the brand’s marketing director Dean Towey, with activity including sponsorship of the ITV show Gino’s Italian Escape. Berio is also forking out more on marketing to convince shoppers to swallow price increases. On Tuesday, it began a £1m campaign that will run on TV until March.

But ads haven’t stoppped the downtrading, says Towey: “The cost of olive oil has increased over the past year, leading to higher selling prices. As a result, some consumers have opted for cheaper alternatives.”

” The 30% fall in the cost of sunflower oil has inevitably had an impact on olive oil”  Walter Zanré, Filippo Berio

These include Crisp ’n Dry, up 6.4% on volumes up nearly triple that, thanks to an 8.6% average price cut. “The price decrease of Crisp ’n Dry product is a direct result of our promotional strategy, which is driving an increase in penetration,” says Neil Brownbill, marketing director at owner Edible Oils.

Another of the company’s brands that has cashed in on the rampant inflation in olive oil is Olivio, a blend of olive and sunflower oil. Sales have surged 17.3% on volumes up 22.9% on the back of a price point down 4.5% to just half that of pure olive oil.

It’s clear how brands such as Olivio have been able to undercut the competition, says Zanré. “The 30% fall in the cost of sunflower oil has inevitably had an impact,” he says.

However, he adds, there is cause for optimism. “The current Spanish harvest is looking very good. As the flow of new season Spanish oil comes on stream, raw material prices will ease.”

Read The Grocer’s full Top Products Survey.