The price of olive oil purchased by shoppers in supermarkets in the UK increased by an average of 1.6% in 2015, according to the latest analysis of consumer goods sales by retail analysts IRI. This has had an impact on volume sales, with UK shoppers buying -4.7% less olive oil than they did in 2014. A decrease in volume sales of other oils of -2.2% indicates that shoppers are not switching to other oil products, despite prices falling by -2.4%.
The cause of the price hike is a bacterial disease in Italy that is still affecting more than one million olive trees at the same time as a poor harvest in Spain, Europe’s biggest olive producing country, that started in 2014 and continues to impact production. Manufacturers, as well as retailers with their own label products, are pushing up the price of olive oil to cover their increased costs.
The impact of olive oil price rises in the UK has been less marked than in other European countries. Retailer price wars actually drove prices down in the first half of 2015, along with most other FMCG products. Product shortage began to force up prices in the middle of the year – on average by over 10% between August and November. Price increases were much higher in southern Europe, and had a greater effect on volume – perhaps because of the importance of the category in the region, where olive oil accounts for between 2-3% of packaged grocery expenditure, compared with 0.2% in the UK.
Across Western Europe as a whole, shoppers spent an additional €231m on olive oil in 2015, which drove sales value for the whole oil category by +9.5% to €2.7bn. The price increases were most severe in Spain (rising +27.2% in 2015 compared to the previous year), Italy (+21.0%) and Greece (+17.2%), where promotions on olive oil products virtually stopped.
As prices continued to rise, accelerating during the final months of the year, shoppers started to buy less olive oil. IRI reported a year-on-year decline in sales volumes in every country except Italy, where they remained relatively flat (increasing just 1.0%). The decline was most evident in Greece (-18.0%) and Spain (-16.2%).
Olive oil sales in Western Europe for 2015:
UK private label market share rises
In terms of volume market share, UK retailers’ own label olive oil increased +5.3 points versus last year – the highest among the seven countries monitored. This was due to the strong price increase of national brands (+6.1%) while private label’s price decreased by 1.8%.
In the rest of Western Europe the price increases for own label olive oil were higher than or equal to the total increase in price for the oil category as a whole, which is often the case when raw material costs rise.
In Spain, where there is already a strong private label culture, the price increase is as high for private label as it is for national brands (28.6% and 26.6% respectively) yet private labels grew in terms of volume market share (+3.1 points compared to the previous year) as well as showing an increase in total sales value of 13.3% to €529 million. In France the opposite occurred. With the price war impacting mainly national brands, the price increase for olive oil impacted just private label which had a direct impact on volume market share – down -7.2 points versus the previous year.
Private label olive oil sales in Western Europe for 2015:
“Olive oil has always been very dependent on weather conditions, but the bacteria attack in Italy might change the game for a while, particularly for those countries where olives are a staple purchase. There have been reports of thefts from some olive groves in Spain as producers in Italy look to import olives from Spain and Greece,” commented Tim Eales, IRI’s Director of Strategic Insight. “Olive oil, which is a staple product in Southern European countries seems to have become a good deal more premium – at least for the countries where consumption is high.
“Price rises are costing shoppers who are still trying to balance budgets. In those countries where olive oil is one of the main shopping essentials, price increases can have a major impact on the shopper’s basket which can affect sales of other categories and distort the price of total FMCG sales for some countries like Spain. Retailers and manufacturers need to review their price, promotion and assortment strategy so that they are clear on what impact price rises will have on total category and basket sales.”