Oil on troubled waters...
15/11/2004
Olive oil is an ancient staple of the Middle Eastern diet. Today, the edible oils sector is fiercely competitive in the Middle East, with Spanish market entrants seeking regional growth and Saudi giant Savola setting itself ambitious targets.
Source: Middle East Grocer
Olive oil lies at the heart of Mediterranean Arab cuisine. The Holy Land's olive trees, with their abundant fruit and nutritious oils are central images in the Bible. In medieval times, the Islamic Moors of Andalusia introduced olive cultivation and pressing techniques to Western Europe. Classic Arab dishes such as za'atar, hummous and baba ghannoush rely on abundant use of high-grade olive oil. Ironic, then, that today's regional market for edible oils is dominated not by producers from the Mediterranean rim, but by players from as far afield as Spain and Saudi Arabia. Despite its small population, the Middle East and North Africa region is a heavy importer of vegetable oils, accounting for 15% of world vegetable oil imports, according to the US-based Foreign Agriculture Centre. As the region’s population grows and with a global drop in world vegetable oil prices, FAC predicts that regional consumption of vegetable oils will grow.
Jeddah-based food giant Savola is poised for new expansion, setting out ambitious plans for earnings growth and embarking on a new round of acquisitions. With a market capitalisation of SR5 billion, the Savola Group’s '555' goal aims to achieve SR5 billion in sales and profits of SR500 million by 2005.
Savola started as a producer of vegetable oils. Today, it is one of Saudi Arabia’s most prominent trading conglomerates. It produces a range of foodstuffs including dairy products through the Almarai company, which owns the kingdom’s largest dairy herd, and of sugar, through United Sugar Company, which exports more than 890,000 tonnes of sugar to Jordan, Sudan and Yemen every year.
A major player in real estate, glass manufacturing and packaging, Savola owns fast food brand Herfy and the Panda chain of nearly fifty Saudi supermarkets. However, despite diversifying, Savola remains a regional giant in edible oils.
Savola Edible Oils (SEO) holds a 70% market share in Saudi Arabia, a 26% market share in Egypt and a 23% share of the Jordanian edible oils market. In 2003, SEO achieved sales of SR1.2 billion and profits of SR86 million. Now the division is expanding overseas.
This year saw Savola launch operations at its first edible oils factory in Morocco. Next year, it plans to start producing edible oils at a second overseas plant in Sudan. Both ventures aim to realise SEO’s ambitions to dominate regional sales of vegetable oils. And in July this year, Savola finalised its first strategic acquisition in Iran.
Savola has bought a controlling 49% stake in Iranian edible oils giant, Behshahr Industrial Company (BIC), representing an investment of some SR290 million – one of the largest strategic initiatives in the Saudi company’s 25 year history, which aims to double SEO’s production of edible oils.
BIC holds an estimated 37% market share in Iranian sales of edible oils, valued at SR1.1 billion, in this vast and populous market whose annual national consumptioni s estimated to stand at some 1.2 million tonnes. SEO took over managing BIC with immediate effect, and has renamed the company Savola Behshahr.
Meanwhile, Spanish olive oil producers have also targeted the Middle East. Three years ago, backed by the Spanish government and regional trade representatives, a consortium of Spanish producers launched a regional marketing drive.
The Olive Oil Exporters' Association of Spain (Asoliva) aims to increase its sales of olive oil, which currently stand at an estimated 80% of all olive oil sales in the Middle East. In 2002, Asoliva launched a promotion across the GCC, Egypt and Yemen to showcase Spanish virgin olive oil.
Asoliva represents 60 Spanish olive oil producers who produce 90% of bottled olive oil exports and 40% of the country's bulk olive oil exports - representing some 3,000 tonnes a year. The Middle East represents the Spanish producers' fifth largest export market, after Australia, the US, Japan and Brazil.
Despite its high market share, which is concentrated in the GCC and Yemen, a spokesman for Asoliva says that growth has been slow, due to the region's large concentration of low-paid Asian expatriates with no tradition of using olive oil. High-grade olive oil is expensive compared to cheaper alternatives such as corn and sunflower oil.
Meanwhile, reports from Lebanon suggest that the region's home-grown olive oil industry is facing challenging times. Lebanon produces $250 million worth of olive oil a year - barely 0.2% of the global $125 billion olive oil industry. However, anecdotal evidence suggests that cold-pressed Lebanese olive oil is losing market share to cheaper, no-brand imports smuggled across the border from Syria and rebottled as a local product.
In August this year, Beirut-based Executive magazine reported that local production is falling to an onslaught of cheap bulk imports. In addition to fierce local competition, stringent trade regulations protecting indigenous producers in Europe, including Spain, Italy and Greece, effectively bar Lebanese olive oil firms from exporting their goods to the EU market.
According to the report, up to 40% of olive oil sold in Lebanon has entered the country illegally. Once inside the country, these bulk consignments of low-grade olive oil are bottled and labelled as high-grade Lebanese oil. In these recession-hit times in Lebanon, consumers are reluctant to pay premium prices for olive oil, and this has put Lebanese producers under growing pressure to lower prices of up-market extra virgin oil.
Competition from cheaper olive oil and growing output from Syria and Turkey poses a major challenge to international brands too, Asoliva confirms. "Olive oil is three or four times more expensive than other oils such as sunflower oil," says a spokesman. "Now, cheaper brands are coming into the market, as countries like Syria expand their production of olive oil.
"Because of the influx of cheaper product, our members have not increased their Middle East sales as much as we would have liked. There are many suppliers in Tunisia and Morocco too, and the region’s small population is a further challenge."
Many Lebanese olive oil producers have scaled down production of high-grade olive oil as a result of Syrian imports. In some parts of Lebanon, olive oil production has fallen by up to 15% over the last decade. Experts estimate that the proportion of extra virgin oil has fallen to barely 10% of Lebanon’s total olive oil output.
Executive magazine alleged that government failure to regulate quality meant that even major supermarkets in Lebanon were selling imported oils whose labels made false claim to be ‘extra virgin’, locally-produced olive oil brands. This year’s Lebanese olive crop has suffered a further set-back due to infestation by insects said to have destroyed up to 60% of the harvest.
The answer may lie in growing consumer consciousness. Consumers across the world are increasingly asking tougher questions about how food is produced, creating growing interest in fair trade initiatives and in organically produced goods.
In Lebanon, non-governmental organisation the Rene Moawad Foundation has joined forces with USAid to set up a farmers’ co-operative to support small olive oil producers. It hopes to tap into growing Asian consumption of olive oil, and has already inked a deal with French firm Olivier & Co to sell Lebanese olive oil overseas.
And, as Middle East Grocer reported earlier this year, Palestinian olive farmers have joined forces to market oil as a fair trade product, to market the country’s annual 23,284 tonne olive oil surplus.
Launched at the beginning of this year, the Zaytoun scheme is helping Palestinian farmers to overcome restrictions caused by the conflict and to get their produce to market. Zaytoun has secured bulk advance orders from buyers in Europe, Japan and the United States, with the first shipment due as Middle East Grocer went to press.
Another recent trend is the emerging market for specialist oils, driven by growing international interest in alternative medicine. Although very much in its infancy in the Middle East, regional producers are attracting new interest from specialists in the field. One such venture is the Berber Argan Foundation in south-west Morocco.
Widely used in traditional Moroccan medicine, argan oil is credited with easing digestive disorders, arthritis and skin problems. Argan trees are native only to Morocco, but research by alternative health experts suggests that the oil produced from their fruit is rich in amino acids, antioxidants and anti-fungal properties.
London-based Danish biopath Gudrun Jonsson works with Casablanca-based Berber Argan to produce organic, cold-pressed argan oil as a health supplement. She has spent the last six years researching the benefits of argan oil.
"To me, a healthy person is like a child; bright-eyed, busy and looking forward to what each day may bring," she says. "The seeds of illness are sown in faulty digestion, which is why I strive to find new tools to help people to regain a happy digestion. Berber Argan is one such precious tool in this process."
Olive oil lies at the heart of Mediterranean Arab cuisine. The Holy Land's olive trees, with their abundant fruit and nutritious oils are central images in the Bible. In medieval times, the Islamic Moors of Andalusia introduced olive cultivation and pressing techniques to Western Europe. Classic Arab dishes such as za'atar, hummous and baba ghannoush rely on abundant use of high-grade olive oil. Ironic, then, that today's regional market for edible oils is dominated not by producers from the Mediterranean rim, but by players from as far afield as Spain and Saudi Arabia. Despite its small population, the Middle East and North Africa region is a heavy importer of vegetable oils, accounting for 15% of world vegetable oil imports, according to the US-based Foreign Agriculture Centre. As the region’s population grows and with a global drop in world vegetable oil prices, FAC predicts that regional consumption of vegetable oils will grow.
Jeddah-based food giant Savola is poised for new expansion, setting out ambitious plans for earnings growth and embarking on a new round of acquisitions. With a market capitalisation of SR5 billion, the Savola Group’s '555' goal aims to achieve SR5 billion in sales and profits of SR500 million by 2005.
Savola started as a producer of vegetable oils. Today, it is one of Saudi Arabia’s most prominent trading conglomerates. It produces a range of foodstuffs including dairy products through the Almarai company, which owns the kingdom’s largest dairy herd, and of sugar, through United Sugar Company, which exports more than 890,000 tonnes of sugar to Jordan, Sudan and Yemen every year.
A major player in real estate, glass manufacturing and packaging, Savola owns fast food brand Herfy and the Panda chain of nearly fifty Saudi supermarkets. However, despite diversifying, Savola remains a regional giant in edible oils.
Savola Edible Oils (SEO) holds a 70% market share in Saudi Arabia, a 26% market share in Egypt and a 23% share of the Jordanian edible oils market. In 2003, SEO achieved sales of SR1.2 billion and profits of SR86 million. Now the division is expanding overseas.
This year saw Savola launch operations at its first edible oils factory in Morocco. Next year, it plans to start producing edible oils at a second overseas plant in Sudan. Both ventures aim to realise SEO’s ambitions to dominate regional sales of vegetable oils. And in July this year, Savola finalised its first strategic acquisition in Iran.
Savola has bought a controlling 49% stake in Iranian edible oils giant, Behshahr Industrial Company (BIC), representing an investment of some SR290 million – one of the largest strategic initiatives in the Saudi company’s 25 year history, which aims to double SEO’s production of edible oils.
BIC holds an estimated 37% market share in Iranian sales of edible oils, valued at SR1.1 billion, in this vast and populous market whose annual national consumptioni s estimated to stand at some 1.2 million tonnes. SEO took over managing BIC with immediate effect, and has renamed the company Savola Behshahr.
Meanwhile, Spanish olive oil producers have also targeted the Middle East. Three years ago, backed by the Spanish government and regional trade representatives, a consortium of Spanish producers launched a regional marketing drive.
The Olive Oil Exporters' Association of Spain (Asoliva) aims to increase its sales of olive oil, which currently stand at an estimated 80% of all olive oil sales in the Middle East. In 2002, Asoliva launched a promotion across the GCC, Egypt and Yemen to showcase Spanish virgin olive oil.
Asoliva represents 60 Spanish olive oil producers who produce 90% of bottled olive oil exports and 40% of the country's bulk olive oil exports - representing some 3,000 tonnes a year. The Middle East represents the Spanish producers' fifth largest export market, after Australia, the US, Japan and Brazil.
Despite its high market share, which is concentrated in the GCC and Yemen, a spokesman for Asoliva says that growth has been slow, due to the region's large concentration of low-paid Asian expatriates with no tradition of using olive oil. High-grade olive oil is expensive compared to cheaper alternatives such as corn and sunflower oil.
Meanwhile, reports from Lebanon suggest that the region's home-grown olive oil industry is facing challenging times. Lebanon produces $250 million worth of olive oil a year - barely 0.2% of the global $125 billion olive oil industry. However, anecdotal evidence suggests that cold-pressed Lebanese olive oil is losing market share to cheaper, no-brand imports smuggled across the border from Syria and rebottled as a local product.
In August this year, Beirut-based Executive magazine reported that local production is falling to an onslaught of cheap bulk imports. In addition to fierce local competition, stringent trade regulations protecting indigenous producers in Europe, including Spain, Italy and Greece, effectively bar Lebanese olive oil firms from exporting their goods to the EU market.
According to the report, up to 40% of olive oil sold in Lebanon has entered the country illegally. Once inside the country, these bulk consignments of low-grade olive oil are bottled and labelled as high-grade Lebanese oil. In these recession-hit times in Lebanon, consumers are reluctant to pay premium prices for olive oil, and this has put Lebanese producers under growing pressure to lower prices of up-market extra virgin oil.
Competition from cheaper olive oil and growing output from Syria and Turkey poses a major challenge to international brands too, Asoliva confirms. "Olive oil is three or four times more expensive than other oils such as sunflower oil," says a spokesman. "Now, cheaper brands are coming into the market, as countries like Syria expand their production of olive oil.
"Because of the influx of cheaper product, our members have not increased their Middle East sales as much as we would have liked. There are many suppliers in Tunisia and Morocco too, and the region’s small population is a further challenge."
Many Lebanese olive oil producers have scaled down production of high-grade olive oil as a result of Syrian imports. In some parts of Lebanon, olive oil production has fallen by up to 15% over the last decade. Experts estimate that the proportion of extra virgin oil has fallen to barely 10% of Lebanon’s total olive oil output.
Executive magazine alleged that government failure to regulate quality meant that even major supermarkets in Lebanon were selling imported oils whose labels made false claim to be ‘extra virgin’, locally-produced olive oil brands. This year’s Lebanese olive crop has suffered a further set-back due to infestation by insects said to have destroyed up to 60% of the harvest.
The answer may lie in growing consumer consciousness. Consumers across the world are increasingly asking tougher questions about how food is produced, creating growing interest in fair trade initiatives and in organically produced goods.
In Lebanon, non-governmental organisation the Rene Moawad Foundation has joined forces with USAid to set up a farmers’ co-operative to support small olive oil producers. It hopes to tap into growing Asian consumption of olive oil, and has already inked a deal with French firm Olivier & Co to sell Lebanese olive oil overseas.
And, as Middle East Grocer reported earlier this year, Palestinian olive farmers have joined forces to market oil as a fair trade product, to market the country’s annual 23,284 tonne olive oil surplus.
Launched at the beginning of this year, the Zaytoun scheme is helping Palestinian farmers to overcome restrictions caused by the conflict and to get their produce to market. Zaytoun has secured bulk advance orders from buyers in Europe, Japan and the United States, with the first shipment due as Middle East Grocer went to press.
Another recent trend is the emerging market for specialist oils, driven by growing international interest in alternative medicine. Although very much in its infancy in the Middle East, regional producers are attracting new interest from specialists in the field. One such venture is the Berber Argan Foundation in south-west Morocco.
Widely used in traditional Moroccan medicine, argan oil is credited with easing digestive disorders, arthritis and skin problems. Argan trees are native only to Morocco, but research by alternative health experts suggests that the oil produced from their fruit is rich in amino acids, antioxidants and anti-fungal properties.
London-based Danish biopath Gudrun Jonsson works with Casablanca-based Berber Argan to produce organic, cold-pressed argan oil as a health supplement. She has spent the last six years researching the benefits of argan oil.
"To me, a healthy person is like a child; bright-eyed, busy and looking forward to what each day may bring," she says. "The seeds of illness are sown in faulty digestion, which is why I strive to find new tools to help people to regain a happy digestion. Berber Argan is one such precious tool in this process."
