CEO of Largest Olive Oil Company Calls the Sector’s Business Model ‘Broken’

Pierluigi Tosato spoke today to a room representing major importers and said the industry was going about it all wrong.

The executive chairman of the world’s largest olive oil company said today that the business model for the olive oil industry was “broken,” and the next few years will be critical as consumption slumps in traditional markets and a scenario of overproduction with dwindling demand looms.

Pierluigi Tosato was addressing the 50 or so attendees of a conference near Chicago organized by the North American Olive Oil Association, most of whom had been in the olive oil business far longer than Tosato.

He joined Deoleo as its chief executive just two years ago, bringing a beverage industry background to lead the company that produces the Bertolli, Carapelli and Carbonell brands.

“Consumers are moving away from olive oil,” Tosato declared in his opening remarks. “We will have an excess in production in the next years. The demand is not going the way it should go.”

Dressed in jeans and sneakers, the CEO of the Spanish multinational denounced what he said were the protectionist practices that have damaged the industry and caused consumer mistrust.

“Consumption is falling because consumers have a lack of confidence and they don’t trust anything,” Tosato said, using his native country, Italy, as an example. “There is not enough olive oil (made in Italy) no matter what they say. They try to stop imports but by doing that they have harmed the category.”

Aside from the producing countries badmouthing imports, Tosato sees private brands and retailers using olive oil as a loss leader as major factors driving the sector downward.

“In Spain, internal demand dropped, the market is dominated by private label. Olive oil is perceived as a traffic builder by the retailers and of course, volume is more important than value. And the retailers are asking only for a promo price because they see the category as a traffic builder — nothing more than that.”

Tosato presented some slides of what appeared to be typical olive oil sections in grocery stores. “I’m coming from other categories. This is really bad,” he said to the group representing companies who filled those shelves.

“There’s something we have been doing wrong in this category for many, many years, sorry to say,” said Tosato, who ran a bottled water business, Acqua Minerale San Benedetto, and was presumably used to better-looking displays. More