From being an integral part of Greek mythology to being included in UNESCO’s list of Intangible Cultural Heritage, from being the secret behind Julia Robert’s soft hands to being Vito Corleone’s front business, olive oil always was, is, and always shall be the choice of the who’s who. And if these reasons are not strong enough to lure one towards it, its health benefits surely are. And as is expected from something of such high profile, importing it is a stunningly profitable business as well

Neha Dewan | September 2014 Issue | @TheDollarBiz  

Question: How do you think India covertly retaliated to the European Union’s ban on Alphonso mango exports?

Answer: By blocking the import of olive oil from Europe! And this is not something from the grapevine of the trading community. It’s something confirmed by Member of European Parliament Maria Bizzotto. Now that we have fully established just how important an item olive oil is, let’s talk a bit about the main reasons behind this importance – health factors – particularly, in the context of India. The WHO, in a recent report, forecasts heart diseases to become the single biggest killer in India by 2015, with almost 10% of the country’s population suffering from some sort of heart ailment. While this presents a rather dismal state-of-affairs, it also reflects the reason for the growing interest in healthy lifestyle choices among Indian families – a primary one being olive oil.

Health is wealth

Pooja Tankha, a 31-year-old Delhi-based homemaker, couldn’t agree more. She took to olive oil for cooking food after health issues started showing up in her family. “It is far more expensive than other edible oils and does strain our monthly grocery budget. But my son’s alarming obesity levels forced us to switch to a healthier alternative, irrespective of the high costs,” she told The Dollar Business. This trend and olive oil’s aspirational values have ensured that India’s olive oil imports have grown at an astounding CAGR of 25.25% over the last 10 years. And those in the business of importing it, expect this trend to get even stronger. Rajneesh Bhasin, Managing Director, Borges India Pvt. Ltd., a 100% subsidiary of the Spanish olive oil major Borges, tells The Dollar Business, “Olive Oil is one of the healthiest cooking mediums available and is a highly aspirational product for the health conscious consumer.” For importers of olive oil, this means a big and profitable opportunity. Speaking to The Dollar Business, Deepak Asrani, MD, Sri Roda Foods said, “We import very high quality olive oil during the harvest season. Margins for importers like us usually range around 12% to 20%.” Some of the more popular imported brands of olive oil in India include names such as Figaro, Borges, Leonardo and Del Monte – these four brands together constitute a bulk of the olive oil offerings in modern retail chains.

Olive oil production and exports is dominated by Mediterranean countries, though there are efforts to grow olive in bulk in California

Dolly Kumar, Director of GAIA, which has several variants of olive oil in its portfolio, says that olive oil is rich in mono saturated fat which helps reduce the level of bad cholesterol and increase the amount of good cholesterol. “Good cholesterol protects the heart and reduces the risk of cardio vascular diseases. Moreover, it is a great option for weight watchers as it offers higher satiety, thus making one feel full for longer periods,” she told The Dollar Business. Olive oil also helps regulate blood pressure, which is a growing concern among Indians, with a WHO report stating that almost 14% of the Indian population affected by high blood pressure related issues.

Almost a duopoly

 Although olive oil is consumed all over the world, Mediterranean countries are, by far, the biggest producers and consumers of it. In fact, despite accounting for over 20% of global olive oil production, which put it in the second place just behind Spain, Italy was the top importer of olive oil in CY2013. Similarly, when it comes to exports, while Spain leads the way, Italy comes in at second place, with Greece being a very distant third. It’s estimated that Spain – the world’s top olive oil producer – has over six million acres under olive cultivation and produces over 1,000 million liters of olive oil every year. Even when it comes to Indian imports, the picture is the same. Ministry of Commerce data reveals that in FY2014, over 62% of Indian olive oil imports were from Spain, with Italy accounting for about 32%. However, rising prices and an extremely weak rupee meant that last year saw the first dip in Indian olive imports (in volume terms) in over a decade. 

Various variants

Olive oil can be classified under various categories such as extra virgin olive oil, which is of higher quality, superior taste, has a bit of fruitiness and contains no more than 0.8% free acidity; virgin olive oil, which is of slightly lower quality and has a free acidity component of 1.5%; refined olive oil, which essentially means that the oil has been chemically treated to neutralise the strong taste and acid content; and olive pomace oil, which is the variety that India largely imports. The reason why this variety has got more acceptance in India is the fact that other than being light on the pocket, it has a more neutral flavour and goes well with Indian taste buds. Interestingly, it is also known to have a high smoke point, thus being a popular choice for restaurants and home cooking.

The home experiment

Almost all the olive oil that is consumed in India, is imported. But with the Rajasthan government encouraging local farmers to take up olive farming and other states like Punjab, Haryana and Odisha also making some noise about producing olive and extracting oil out of them, are Indian importers apprehensive? Asrani of Sri Roda Foods doesn’t think so. “This will not impact our profitability, as it all depends on the volume. Current level of production in Rajasthan is just too small. Moreover, the quality and essence of olive oil products sourced from Spain will always occupy a niche slot in the consumer’s mind,” he said.    And going by the amount of imported olive oil cans/bottles stocked and flying off the shelves of retail stores and departmental chains, one would find it hard to disagree with Asrani. But if you thought importing olive oil is money for old rope, here’s a twist. Lately, what is acting as a serious deterrent for importers of various foreign food items, including olive oil, is the enforcement of stricter labelling rules by the FSSAI, which is starting to keep a very close eye on imports. The norms, which started getting enforced late last year, basically want that manufacturers of pre-packaged food items should specifically and clearly outline the content, mention the ingredients and also the nutritional values. This has led to bulk consignments of various imported products being held up at ports and airports since the older labels do not comply with the new labelling standards. According to an olive oil importer, who did not wish to be named, “The new stringent labelling norms have been tough on the industry and ultimately, this will have to be passed on to the consumer. In fact, many international brands have already started shying away from the Indian market due to the new changes in place. We are hopeful that FSSAI will understand our concerns.”

Too small to derail

The minor hiccup regarding labelling norms notwithstanding, there’s no reason to not believe that last year’s minor drop in imports was just an aberration. As is the case with most aspirational products – from luxury cars to platinum jewellery – as India grows and integrates more with the rest of the world, consumption of olive oil is bound to keep rising. And negligible domestic production, at least over the foreseeable future, means this demand can only be met by imports. Importing it won’t make you a Vito Corleone, would it?

“There is no chance of olive oil imports falling or new sources emerging”- V.N. Dalmia, President, Indian Olive Association

V.N. Dalmia, President, Indian Olive Association, is the man to go to if one wants to understand the olive oil market. In an exclusive interaction with The Dollar Business, Dalmia talks about India’s olive oil imports, domestic production efforts and more importantly, why importing olive oil is not a get-rich-quick business

V. N. Dalmia, President, Indian Olive Association

TDB: Olive oil is still considered a rich man’s oil in India. Do you think it will manage to enter the kitchens of India’s middle class in the near future?

V.N. Dalmia (VND): Growth of olive oil consumption in India is being driven by health factors. India ranks as World No.1 in cardiac patients, with almost 10% of our population affected by heart diseases. The US and Europe rank second with about 7% of their population affected by heart ailments. The WHO expects heart diseases to be the single greatest killer in India by 2015. The highest prevalence of heart diseases in India is among young corporate executives. Additionally, 31% of urban Indians are either overweight or obese. 140 million people in India have high blood pressure. Over 40% of urban Indians have high lipid levels. India is the No.2 diabetic capital of the world, with an estimated 61 million people affected by it. The situation is already a national emergency. We need a healthy oil. Olive oil is becoming popular because, with rising purchasing power, education and world travel, Indians are becoming increasingly exposed to new concepts in health and cooking. The West switched to olive oil in the 90s. So, it was just a matter of time before we became aware of its benefits.

TDB: In volume terms, olive oil imports declined by close to 12% last year. Was it just a function of a weak rupee or there was something more systemic?

VND: Growth of olive oil imports to India slowed down last year as compared to the blistering rate of FY2013, primarily because of a rise in international olive oil prices by up to 40%. The price increases were a function of a severe crop shortfall in Spain in 2012-13, coupled with the steep depreciation of the rupee. An economic slowdown in India completed the trio of factors that saw a decrease in the rate at which consumers were switching to olive oil from other seed oils. This year’s crop is normal and producer prices in Spain and Italy have shown a downward trend. This has translated to declining retail prices in India.

TDB: Besides being used as a cooking oil and for baby products, what are the other unconventional uses of olive oil?

VND: Olive oil has plenty of uses in our homes too. But there’s no need to waste your expensive Extra Virgin for these tasks. Just grab a bottle of inexpensive Olive Pomace Oil for around-the-house uses. Olive oil is a safe and natural lubricant for a close shave; it can be used for a good wooden furniture polish; for a good manicure; as a good lip moisturiser; for lubricating the throat and muscles to avoid snoring; as a skin softener; as a hair tonic and of course as a makeup remover.

TDB: Spain continues to be the major supplier of olive oil to India, followed by Italy. Going forward, are there chances of other sources coming up?

VND: No, because India consumes mainly Olive Pomace Oil. And the only other country that produces it in any significant quantity is Turkey. But Turkish prices are higher than those in Spain and Italy. All other countries produce mainly Extra Virgin Olive Oil. So, there is no chance of any other sources emerging, not at least in the near future.

TDB: How profitable is the business of olive oil imports in a market which is still evolving? What kind of pricing power do the major brands have over the unbranded varieties?

VND: Currently, there is a proliferation of products in the market, which is confusing the customer. Today, every retail shelf has a number of brands, some known and many unknown. This is because traders and importers are being misled by the high growth rate of the Indian market. Most new importers in India are under the wrong impression that they can make quick bucks by importing some olive oil.  I will say that as a business, olive oil is as profitable as any other FMCG business. Even though it is an edible oil, it is not a commodity business. The problem is that modern day traders are greedy. So, their expectation of profit margin increases every year. They don’t realise that they are killing the golden goose.

TDB: There have been reports of farmers in Rajasthan switching to olive cultivation. Is there a realistic chance of India’s dependence on imports reducing in the years to come?

VND: The Rajasthan government offers a subsidy of 75% towards the cost of each sapling of olive. The subsidised cost works out to Rs.28.75 against an actual cost of Rs.115. Besides, farmers are offered free consultancy services and 90% subsidy on the required drip irrigation equipment. According to Rajasthan Olive Cultivation Limited (ROCL), farmers cultivating olive can expect an income of Rs.3-3.5 lakh per hectare. But there is no chance of dependence on imports reducing because the production is just too small. Although it’s difficult to forecast Indian olive oil production, even in a best case scenario, it might be about 2,000-3,000 tonne, and in a worst case scenario just a few hundred tonnes.