By most accounts, the Food Network has done a masterful job of changing the palates of American consumers and expanding their world of flavors. Within the supermarket, no category’s success better reflects that than olive oil.
Industry insiders estimate that olive oil dollar sales have nearly doubled since 2004, while olive oil household penetration has climbed to around 42%, up from 35%. Comparatively, other popular oils such as vegetable, canola, corn and sunflower have either declined or remained stagnant over the same time period.
“In addition to expanding the flavor profile, all of these cooking shows are also opening up people’s eyes on how to cook like a professional,” says David Neuman, president of Miami-based Lucini Italia, Co. “You need professional cookware, the right utensils, fresh ingredients and of course a good cooking oil. These consumers are cooking gourmet meals at home and want performance; olive oil provides them with that performance.”
Adding to the allure of olive oil, for the past few years a multitude of media outlets, including television, print and Internet, have extolled the health benefits of a Mediterranean diet, of which olive oil is a vital cog. As olive oil continues to gain favor with consumers the amount of product on retailer shelves also expands. According to the April 2009 Olive Oil in the U.S. 3rd Edition report from Rockville, Md.-based Packaged Facts, 60 new olive oil products accounting for 144 SKUs were launched in 2008.
Among the newer entrants to the category are two brands better known for vegetable oil—Crisco, which is owned by Orrville, Ohio-based J.M. Smucker, and Memphis, Tenn.-based ACH Foods’ Mazola. Insiders say that the presence of these well-known brands adds to the notion that olive oil has gone from niche product to mainstream item, or as Lewis Brosowsky, market research director for Secaucus, N.J.-based Goya Foods, says, “They have taken olive oil out of Yuppieville and placed it into the everyday household.”
Most olive oil purveyors believe the presence of Crisco and Mazola can only help perpetuate category growth. In fact, several have lauded Crisco’s marketing campaign, saying that it has gone a long way toward educating consumers on how to use olive oil in different ways. Many believe it is these different ways that present an opportunity for even greater growth in the category.
“A lot of people still think extra light olive oil means extra light in calories,” says Patti Andrade, senior vice president of marketing for Fresno, Calif.-based Borges USA-Star Fine foods. “It actually means extra light in flavor, so it really has no olive flavor at all and can be substituted for other oils when baking.” Andrade adds that pure olive oil is not as heavy as extra virgin and works well for grilling, sautéing and in marinades, while extra virgin has the strong flavor desired for dipping and salad dressings.
There is an obvious need to continually educate consumers on the different uses of olive oil and retailers can help, particularly when it comes to cross-promotion. For example, Andrade has a retail customer that includes light olive oil in its brownie mix displays. “That’s where the retailer can really help educate the consumer and also make olive oil easy to pick up,” says Andrade.
As olive oil has become more mainstream, it has also become a highly promoted category, with grocers putting at least one brand on sale nearly every week, and usually two or three. “The variable being grocers will have one brand promote extra virgin, another light and still another pure,” says Brosowsky. “Based on the latest figures I saw, 40% to 45% of the product is sold on deal.”
Most insiders believe the sheer number of brands available to consumers—estimated at 250—and the category’s heavy promotional activity make it a bit difficult for consumers to develop brand loyalty. Instead, Brosowsky believes consumers have lists of “brands I like” and “brands I don’t” and then make purchases based on what is on sale.
While it may be tough to develop a significant amount of brand loyalty in the category, private label sales have skyrocketed. According to Chicago-based Information Resources Inc., for the 52 weeks ending July 12, 2009, private label products account for about 22% of dollar sales, up more than 11% over last year. Since 2001, private label volume has increased from around 8.5% to more than 23%.
“Because of the economy, there is a sudden shift toward private label,” says Lisa Kartzman, director of marketing for the New York-based American Roland Food Corp. “Private label has captured some of the market but there are certain categories and subcategories where branding is still very important to the consumer, whether their parents used a certain product or their grandparents, that brand has become familiar to them.”
Insiders say several factors have led to the rise in private label sales, including the mainstreaming of the category, the economy and retailers ongoing dedication to marketing their own products. However, even with the current popularity of private label it is still important retailers offer consumers a wide array of branded product and manufacturers are continually expanding their offerings.
Kartzman says over the course of the next several months Roland will add a Sicilian olive oil to its roster of olive oils from specific regions such as Umbria and Tuscany. “We do line extensions very well,” she adds. “We like to do that and we think the consumers who look for our brand enjoy the fact that we are adding another flavor profile to that line.”
For a category such olive oil, insiders stress the importance of not only providing information to consumers and retailers, but also receiving feedback and meeting industry demand. Lucini did that when they introduced its EcoValue Box. “People asked us for three things—they want Lucini at a better price, they want it to be as fresh as possible and they want Lucini to be environmentally supportive,” says Neuman.
The EcoValue Box, which offers the equivalent of six 500-ml. bottles of Lucini’s premium select extra virgin olive oil at a retail price of $49.99, a 55% savings compared to the bottled product, and comes in a recyclable cardboard box that contains a bladder to keep the oil fresh, answers all of those needs, says Neuman. While the bladders themselves aren’t recyclable, Lucini plans to collect the bladders, shred them up and convert it into the rubber flooring found in many playgrounds.
Perhaps most interesting however, is the in-store selling strategy behind the EcoValue Box. Lucini is only offering the EcoValue Box in a ready-to-merchandise display case on a store-by-store basis. The display holds four boxes to the master and has a popup front window, which can be accompanied by a side stack or wing display.
“We are a taking quite a risk by not distributing this product,” says Neuman. “What we are doing is saying we are all going to contribute in the process and I’m asking the retailers to work off a reasonable margin—a good margin, but reasonable—30 or 40 is the max I want to see. If a retailer is at 30, they have got a hot price. If a retailer wants to do specific promotions, we are open to anything they want to do.” Neuman adds that as of September H-E-B is carrying the EcoValue Box in 116 of its stores.
With the intent of lowering its carbon footprint along with capturing greater market share, Baltimore-based Pompeian recently repackaged its line of Extra Virgin, Classic Mediterranean, Extra Light Tasting, OlivExtra and OlivExtra Plus olive oils into lightweight, environmentally friendly plastic bottles.
The new bottle is square-shaped with a top that is shaped like a multifaceted diamond. The bottle is also embossed with the words “Since 1906” a reference to Pompeian’s long heritage. According to Pompeian CEO Bill Monroe, the redesign comes on the heels of months of research.
“Pompeian’s research shows that consumers want an olive oil from the Mediterranean,” says Monroe. “Our new look evokes the essence of the healthy Mediterranean lifestyle. Each label clearly identifies the product, the flavor, the taste profile and the health benefits to expedite consumer purchases.”
In addition to the new bottle, new labels were designed featuring a deep-red logo with lemon colored lettering which Monroe says provides dynamic branding for Pompeian while creating a facing that stands out on the shelf. Beneath the Pompeian logo each product is clearly identified, along with a Mediterranean landscape framed by olives or other fruits.
Pompeian’s new packaging also carries the North American Olive Oil Association (NAOOA) Seal of Quality. According to Bob Bauer, president of the Neptune, N.J.-based NAOOA, the Seal of Quality, which was created about a year ago, is only available to members of the NAOOA.
In order for a brand to use the seal, product must undergo testing and adhere to International Olive Oil Council standards. While 50% to 60% of the U.S. olive oil market belongs to the NAOOA, Bauer says only about four or five brands currently use the seal.
“Pompeian was the first to use the seal and they have been doing a nice job of putting it put there for both consumers and retailers to understand,” says Bauer. “There is a big hope that in the near future we will see the seal become more commonplace. Some companies took a wait and see approach but are now coming aboard, so I think pretty soon the majority of product on shelf is going to have our seal on it.”