Master Olive Oil Consultant: the olive oil sector from production to selling

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The olive oil sector is a sector of extraordinary relevance in countries of the Mediterranean basin, since they are producing countries. However, this relevance is increasing in non-producing or low-production countries. This importance of the olive oil sector is not only from an economic point of view, but also from an environmental, cultural and health point of view, since it is one of the healthiest fats in the world.

However, it is one of the least consumed fats in the world, since of the total of fats used, only approximately 2% is olive oil. This means that it is a product with a wide margin of growth and with great attractiveness for the global consumer.

Value chain

Every sector has its value chain, which allows knowing the companies that are part of it, their position in the market and their strategic positions.

The olive oil sector is a cross-sectional and linked set of activities that create value and that range from obtaining the necessary raw material, in our case the olive, that is, the source and creation of olive oil to the finished product that is delivered to the final consumer, that is, until the final use of this olive oil,

Knowledge of the value chain of the olive sector will help us to develop strategies aimed at achieving competitive advantages for some olive companies over others.

We are going to take a tour of the entire olive oil sector, from production to sale, collecting the study carried out by the Ministry of Agriculture of Spain in 2021. In this way we come closer to recognizing the importance of knowledge of the figure of the olive consultant, and seeing the relevance of each of the stages that are part of the entire value chain of the olive oil industry. 

First phase

OLIVE PRODUCTION: OLIVE GROVE.

The activities carried out by the olive growers are: cultivation, collection and transport of the olive to the oil mill.

The following costs appear in the value chain scheme of the study:

• Soil management
• Irrigation
• Pruning
• Fertilization / fertigation
• Phytosanitary treatments
• Olive harvest
• Olive transport to the mill

The costs that are considered in this first stage are:

• Agrochemicals. Includes the cost of fertilizers and phytosanitary treatments.
• Irrigation. Cost of water consumption for irrigation, irrigation fees, electricity and maintenance of the facilities.  
• Workforce. It includes all the workforce employed on the farm and social security, both direct and structural, including that of the farmer himself in charge of running the farm.
• Machinery. Repair, maintenance and fuel costs.
• It does not include work contracted to other companies or rentals.
• General expenses. Maintenance costs of the operation (repairs of roads, buildings, etc.), Consumption of gas and electricity and fuels other than irrigation and machinery. Insurance, taxes, advice and management, communications, amortizations (installations and irrigation equipment and machinery), and long-term financial expenses. Opportunity cost. Includes family labor, land rent, and interest on other capital. 20% of total gross income when the farm's yield is less than 2,000 kg / ha and 25% when the yield is greater than 2,000 kg / ha. For these concepts, the work incorporates a cost range that, in many cases, is very wide. Later, it incorporates: Transportation of the olive to the mill. This transport is carried out by the farmer with his own tractors and equipment. The labor used in this activity is included in the "labor" section and the cost of tractors and equipment in the "machinery" section.

Second stage

TRANSFORMATION OF THE OLIVE INTO EXTRA VIRGIN OLIVE OIL (EVOO)

The activities carried out by the oil mills are:

• Reception of the olive
• Cleaning
• Grinding
• Oil extraction
• Storage

The costs considered by the work in this phase are:

• Courtyard. Reception, classification, cleaning and / or olive washing
• Oil extraction process: grinding, blending and extraction
  • horizontal centrifugation
  • vertical centrifugation
  • decantation
• Filtered out
• Classification
• Quality Control
• Oil storage and preservation
• Environmental quality management
• Traceability

Later, when calculating the cost range for this phase, consider the following:  

• Reception and manufacturing: transport of olives to the factory (in some cases) and the pomace and residues to the extractors.
• Consumption of water, electricity, fuel and other excipients.
• Repairs and maintenance of machinery and facilities.
• Laboratory analysis.
• Storage costs (occasional).
• Factory labor.
• Marketing expenses: includes broker commissions expenses and, in the case of cooperatives associated with 2nd grade cooperatives, the latter's maintenance expenses.
• General expenses: cost of administration personnel.
• General industry insurance.
• Advice and management.
• Communications.
• Vigilance and security.
• Computer maintenance.
• Other costs (R&D, traceability, critical points, etc.).

Third phase

PACKAGING PROCESS

The activities and associated costs considered by the work in this phase are:

• Raw material collection logistics.
• Packaging process.
• Manufacture or purchase of the container.
• Fill.
• Sealed.
• Labelled.
• Packaging.
• Palletized
• Quality, environmental and traceability management.
• Transport to the distribution platform or to the store.
• Quality, environmental and traceability management.
  
  

Later, when you quantify costs, consider the following:

• Raw material collection logistics: it is the cost of transporting virgin olive oils from the mill to the bottling plant.
• Manufacturing: cost of the oil packaging activity. Includes labor and management costs.
• Supplies and services.
• Maintenance and repairs.
• Cleaning.
• Security and vigilance.
• Leases and royalties.
• Quality, environmental and traceability management.
• Losses, amortizations and provisions.
• Other manufacturing costs.
• Containers and packaging. cost of the materials used in the packaging of the finished products and their subsequent palletizing.
  
  It includes: 

• • Primary packaging (PET, glass) and its labeling (brand label, customer's own label, etc.).
  • Secondary packaging (cardboard box, plastic box, etc.).
    Palletizing (pallet, strap, corner pieces, shrink wrap).
  • Commercial and financial costs: includes cost chapters (commercialization - includes commercial management and sales, marketing and promotions).
  • R + D + i and other marketing expenses.
  • Administration, financial and others: includes financial expenses, insurance, taxes and fees and other administrative and financial expenses.
  • Distribution logistics: it is the cost of shipping the product from the packaging machine to the distribution platform or directly to the store (in some cases).

Fourth phase

COMMERCIAL DISTRIBUTION

The activities and associated costs in this phase contemplated in the study are:

• Distribution platform: Reception and storage in distribution platform. Warehouse location.
• Order management for points of sale.
• Order preparation, storage and dispatch.
• Transportation to store.

A: Logistics to warehouse

In some cases, the cost of transportation from the packaging machine to the distribution platform is assumed by the platform. It is basically made up of three main chapters:

1.- Labor - is the cost of the operating personnel dedicated to the logistics activities of the distribution platform:

• • receipt of merchandise tickets from suppliers
  • warehouse location
  • picking
  • preparation of store orders

2.- General expenses

• • includes the rest of the fixed expenses of the platform
  • infrastructure (rental / depreciation of facilities, machinery)
  • supplies (electricity, telephone, water, etc.)
  • sure
  • external services
  • structure (managerial and office staff), etc.

3.- Losses

It is the cost of the damaged product and that it is necessary to dispose of.

B: Logistics to store

It is the cost of capillary transport of orders from the distribution platform to the different points of sale. It is normally organized by delivery routes, and the reference unit is no longer the pallet, as in long distances, but in boxes, since the orders are smaller.

The transport can be own or outsourced.

Store cost (free service): it is basically made up of the following main cost chapters:

1.- Labor

It is the cost of the store personnel dedicated to assisted sales and to the product replacement activity of the oils section.

2.- General expenses of the store

• • supplies
  • tributes
  • rentals, etc.

3.- Store losses

It is the cost of the product that is spoiled / not sold (expiration, visual appearance, etc.) in the store.

These costs in a high percentage are usually passed on to the supplier.

4.- Central services

It is the cost of the distributor's central services that is charged (passed on) to the points of sale.

Looking at each and every one of the points that are part of the olive oil sector from production to sale, we become aware that the olive oil industry and business is a complex and transversal system. All the different links that compose it are important. It is necessary to intervene if we want to improve, develop and make each of them profitable.

Having training on each of these phases will allow you to ensure more rigorously your daily work within the olive oil sector, regardless of whether you are a private individual, producer, marketer, cooperative or adviser in olive oil matters.