The United States olive oil market – the worlds third-largest for consumption – is poised to become a battleground between historic European producers and new challengers from California, Chile and Australia, according to a new study from Rabobank Food & Agribusiness Research and Advisory. US producers are expected to capture 5% of the overall US olive oil market over the next five years. They also look set to take around 10% of the premium extra virgin segment provided they can tighten US olive oil quality labelling standards and educate the consumer on the merits of high quality olive oil. Large Spanish and Italian companies which currently dominate global production and the US market, will need to focus on quality in order to counter the challenge by New World producers of premium oils. “US olive oil producers have a good opportunity to build a premium US market niche by promoting their efficient, high quality production and California’s strong local label appeal,” said the report’s author, Karen Halliburton Barber, assistant vice president and senior agricultural analyst with the Food & Agribusiness Research and Advisory group in California. “Spain will continue to be the price setter in the global olive oil industry. Responding effectively to the challenge from New World olive oil producers will require much focus on quality and production efficiency by European olive oil players,” added the report’s co-author, analyst Vito Martielli, Senior Associate Grains and Oilseeds Food & Agribusiness Research and Advisory in Europe. Market growth is attracting new entrants. The US retail olive oil market has grown to sales of $1.11bn in 2010, helped by labelling that high lights health benefits of consuming monounsaturated fats. US retail olive oil sales are forecast to rise 13% between 2010 and 2015, growing at 2.5% a year. Imports currently account for more than 99% of the market. Italy has a 51% share; Spain, the world’s largest olive oil producing nation, has 23%, Morocco 9% and Tunisia 8%. European brands dominate. Three European nations, Spain, Italy and Greece, account for 70% of global olive oil production. As in the global olive oil trade, most US imports are provided by Spain-based Deoleo (Bertolli and Carapelli brands); Italy’s SALOV (Filippo Berio); US-based Pompeian; Spain’s BORGES Group (Star); Sovena Group of Portugal and Spanish-US joint venture Hojiblanca-Cargill. Some of these players also pack private labels meaning they can claim almost a quarter of the market. High-end, niche Italian producers dominate in the top market segments of extra virgin olive oil. Californian, Australian and Chilean producers are now challenging. Producers in California, Australia and Chile use modern, high-density, mechanised production techniques to produce top-quality extra virgin oils. Selling premium oils differentiates their products and covers higher production costs. Already California has 12,146 hectares of intensive olive trees, and planting is expected to add 2,024 hectares a year through 2020. Premium olive oil production is well established in Australia, where producers have captured market share from imports. A model for the US industry, it now exports to the US. Chile too has established a high-tech premium oil industry, with growing production and exports. High quality extra virgin oils are seen as having greater health benefits. Though a global standard for olive oil exists, overseen by the International Olive Oil Council, Australia has developed a national standard and the US may follow suit, adding to the attractive image of Californian production. Chile too is working on a law to regulate olive oil grades, labelling and origin. A focus on quality enables New World producers to target the premium segment in the US, where more than half of bottles of oil sold in US supermarkets are labelled extra virgin. Overall, European exports look vulnerable. Though much Italian oil is perceived of high quality, oil from Spain typically commands lower prices and is seen as of lower quality. European producers must respond strategically. New World countries and growing Middle East and North African (MENA) countries are now challenging the traditional dominance of European producers in olive oil. Success in the US market will accrue to those who can demonstrate the quality of their products and persuade consumers to pay top prices for them. Niche players can build on their brands by producing top-quality extra virgin oil that can command premium prices. Big producers must also focus on quality, but should target large retailers and private label vendors.