Monday, September 18, 2006

The River Of Adulterated Olive Oil Flows Unabated

This column is scheduled to run in the Capital Press in the Fall of 2006.

A Capital Press reader recently contacted me, requesting that I discuss the profusion of adulterated olive oil that has found its way into the US ingredient and food service markets. Here follows a brief account of the adulteration problem.

In the US, it is illegal to mislabel olive oil or to sell another oil like soybean oil as olive oil. However, it is legal to blend olive oil with other seed oils provided that the resultant olive oil blend is clearly labeled as a blend and both the name of the component oils and the percentage used of those oils is clearly listed on the label. However, the enforcement of the laws regarding olive oil blending is spotty at best.

Relative to most other seed oils, like soybean oil, olive oil is very expensive. While soybean oil is generally traded around $2 per gallon, olive oil fluctuates in price between $9 and $18 per gallon depending on supply and demand. Since soybean oil is virtually odorless and tasteless it is easy to blend small amounts of it into olive oil without noticeably diminishing the flavor of the olive oil. Thus, when the price of olive oil is high so is the economic incentive to adulterate olive oil.

I was hired by a client in the fall of 2005 to investigate the sale of adulterated olive oil in certain markets in the US. As the price of genuine extra virgin olive oil on the global market rose, my client’s sales in certain markets fell. A few phone calls later, I determined that there were several brands of “extra virgin olive oil” that were being sold well below the market price and significantly below the replacement price for genuine extra virgin oil.

Laboratory tests provided us with clear and conclusive proof that the oil that was being sold as “extra virgin olive oil” was actually 90% soybean oil. Several distributors were informed that they were selling fraudulent oil and their reaction was a flippant “so what.” One of the distributors went so far as to explain that the product really was “imported from Italy,” as the label stated, because the cans actually came from Italy. When I explained to this distributor, that he was getting ripped off because he was paying $10 for $2 oil, he explained, “everybody’s doing it and I can’t keep the stuff in stock; we’re selling the hell out of it.”

The bottom line on the adulteration issue is that nobody will care about it until somebody dies from ingesting one of these fraudulent oils. The FDA criminal investigators told me this after we presented them with our evidence. Although there have been a few well-publicized busts recently, the river of adulterated oil still flows, especially through the food service channel and the ingredient market, at an alarming rate. In short, I would advise domestic producers not to hold their breath while waiting for the government to stop this widespread and very lucrative fraud from eroding the market for genuine extra virgin olive oil.

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posted by Brian J. Kenny @ 11:24 PM   0 comments

Tuesday, September 05, 2006

California Olive Oil Versus The World

This column is scheduled to run in the Capital Press in Summer 2006.

My column on September 1, 2006, focused on some of the less-publicized realities of both the California olive oil market and super high-density plantings of olives for oil production. Some readers have taken issue with a few of my assertions.

One reader felt that my equating the price of commodity olive oil on the global market with that of California olive oil is misleading. Although California oil can enjoy a premium for being fresher and more local, this premium is only enjoyed in the niche market. There is a niche for California oil in the ingredient and food service markets, however, this niche is relatively narrow and is by definition price sensitive.

In terms of freshness, olive oil is made once a year. Since it often takes a few months for oil to make its way to the US from Europe, domestic producers do enjoy some logistical advantages in terms of shipping fresh oil to their customers. In the Northern Hemisphere, the oil production season is generally over by March, while the season in the Southern Hemisphere begins around May. Thus, as producers form Australia and South America further develop their reach into the US market, domestic producers will only be able leverage their freshness advantage until June or July.

The San Francisco Chronicle article, on which my original column was based, featured a heading stating, “Mechanization is the future.” This is a very salient point and it introduces a number of additional potential pitfalls for olive growers. At a very basic level, the oil yield for olives is dependent upon the degree of ripeness of that fruit. Thus, if you harvest the olives too early, you will see a noticeable decrease in the oil yield.

The olive varieties used in the super-high density system tend to reach peak ripeness in November. However, sometimes, as was the case in the fall and winter of 2004, the season slows down and the olives don’t reach peak ripeness until after the first few cold days. When your entire economic model is dependent upon mechanization, inopportune rains can present major problems. Since most harvest equipment will sink in a wet field, growers will invariably face years in which they will have to harvest their olives before they reach peak ripeness. When the economic model is based upon the oil yield per ton and all of the cost studies set the average yield at 40 gallons per ton, a yield of 28 gallons per ton, which is a realistic estimate for unripe fruit, can be financially catastrophic.

My point regarding super-high density olives remains the same; proceed with caution. All of the acres planted to super-high density olives in the state are planting the same basic varieties; Arbequina, Arbosana, and Koroneiki. Thus, if the fortunes of these varieties plummet, if they are painted as inferior varieties or bulk varieties, there may be very little room for differentiation for producers who decide to attempt to market their oil themselves. Markets are fickle and consumer perception ultimately becomes the producer’s reality.

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posted by Brian J. Kenny @ 1:52 AM   0 comments