Ideas to increase the value of Spanish olive oil in traditional markets

Following a general campaign to promote the olive oils in several European countries where the aim was to increase sales, in this article I once more consider how to increase the value of Spanish olive oils in foreign markets.

When the value of a product is to be increased, the logical general competitive strategy is “distinction”, which in an agricultural food product is generally based on a greater quality or some special feature.

All of the products that wish to increase their competitiveness and value in this way use a brand and all of these brands use some kind of advertising communication to inform consumers of the distinction and value of these products. The more end-users who know a brand and the more they are willing to pay for it, the more the brand will be worth.

A distinction that is not communicated does not exist and can therefore not be assessed. It is not an option to invest more or less in advertising communication when competing for distinction, it is a need. It makes no sense to invest large amounts in machinery, technology, R&D+i, etc. to achieve great quality or singularity, and nothing in communicating it. If the strategy were to compete with low prices and large volumes, the right strategy would not be distinction, but rather costs, and it would be necessary to invest in everything that might reduce them.

So what happens to the Spanish brands that have a distinctive value for their great quality and which, due to a lack of budgetary assignment, have not been able to invest in advertising communication? To start with, the end consumers will not know them. If they appear habitually on the line because their quality, their cost-value, their awards, etc. have meant that importers, distributors and purchases of distribution appreciate the brand, time and purchase repetition will ensure that the end consumers at these points of sale get to know it and appreciate it little by little.

When the consumer in a country is faced by one of these “unknown” products on the line, an image of the oil will be created by other paths which are not the brand. Principally, if they have not tried it before, what conditions its assessment and purchase will be: the price – if it is cheaper than the other brands it will be thought to be of small quality; the design of the container, which will also be compared, and finally; the origin.

With respect to the origin, when an olive oil consumer in North America or Europe sees that the oil is Spanish, they will not react in the same way as a consumer from Brazil, Mexico or China. If they do not know the private brand, the Spain country-brand will be what conditions the sale, along with the price.

Knowing how the Spain origin affects the purchase process in each country and why will be an important factor in decision-taking when exporting. On this point and under the prism of marketing, I divide the foreign market of our olive oils into two large groups: the group with the “Spain” origin is a brake on achieving better prices (as Spanish oil is considered to be of less quality than Italian, something backed up by the lower prices at the point of sale, which creates a vicious circle), and the group where the “Spanish” origin has a positioning to be built, which can be seen as an opportunity.

The first group is mainly represented by European and North American countries, the traditional foreign markets of Spanish olive oils, and the second group is formed by the new markets of China, India, Brazil, etc.

The fact that in the markets where it has traditionally been exported, it is considered a “second-class” oil just because it is Spanish is what is described in many market studies1 and which causes a lot of harm, although it cannot be generalised.

To know why this happens, we have to understand the process of building the positioning of a brand. In this case the “Spain” country brand in the specific environment of the international olive oil market.

Something curious about this process is that people are going to form an image of our olive oils simply because they are Spanish, and when they compare them with oils from other origins they will position them with a certain value in parameters of quality and price, without even trying them.

This happens because the positioning is created in our mind through everything that reaches our senses. Everything communicates: what is seen at the point of sale (designs, offers, brand, etc.) what is heard about Spanish oils, what is said by the advertising of the Interprofesional del Aceite de Oliva Español (IAOE) about the Spain origin, what the private brands say in their advertising, the place where it is sold, the price and finally the quality of the oil itself.

All of this gradually builds a certain positioning of Spanish oil in time with respect to the other origins, which will condition its purchase and value.

From my experience in the agricultural food sector, of all of these “communicational inputs”, the quality and price are what are most determining in building a certain positioning if there has not been advertising communication.

And as the present positioning is always a consequence of the past, it may be deduced that in the past Spain exported olive oil to the traditional markets which did not strictly observe the quality criterion 2 At the same time and alongside this, the Italians worked more on real and perceived quality through advertising presentation and communication 3.

All of this is shown today by a price difference between the Spanish and Italian olive oils which have turned these traditional markets into conditioned markets not very willing to pay more for our oils.

However, in the same way due to the large amount of Spanish extra virgin olive oil of very high quality and presentation that is being exported more and more today to these conditioned markets, I can also conclude that in the future the “second-class” positioning that too many consumers and purchasers in this country still have will disappear. The distance will be eliminated between real, present quality and the perceived quality of the past.

With these reflections, I intend to give some ideas to help to shorten this repositioning time, so that Spanish private brands enjoy the “Spanish” origin as a factor of revaluation and not quite the opposite as soon as possible.

Seeking examples in other sectors, we can see that Zara does not have much interest in proclaiming its Spanish origin, because in the fashion world the “Spain” origin gives no value. However, in the agricultural food sector it cannot be admitted that in such important market as the North American or European, the “Spain” origin gives no value today. I therefore believe that we have to do whatever we can to reposition our “Spain” country brand in these markets.

Therefore, to accelerate the process I suggest that ideas are provided and work is done simultaneously in combination on all levels of the marketing mix: product, price, distribution and communication.

 

Product

The product and its constant quality in time are the basis of everything. This repositioning process could not be started if the product was not at the right level, and our excellent extra virgin olive oils have long been at the right level. Therefore, our problem in these countries is not one of real quality, but rather perceived quality, one of positioning in the mind of end consumers and purchasers.

Therefore the first idea I propose refers to the product and it is to create a new category of super extra virgin olive oil with exclusively Spanish varieties. To internationally present a high-quality oil which can only be produced in Spain with local varieties; this prevents comparison and therefore contributes to destroying the second-class positioning. If I am unique and singular, I cannot be compared. This idea would be like creating “100% Iberian oil” with its regulations and controls and accompanying it with presentations in North America and Europe as “Spanish novelty”.

Another idea to erase the second-class positioning would be to ensure that a Spanish brand, and not an Italian one, is top of consumers’ minds in terms of quality and notoriety and therefore top in sales within a time of three or four years.

To achieve this requires great economic resources during the launch and construction of the brand and therefore a project of this size requires the union of companies and cooperatives with vision that have already invested in facilities and technology and now with quality and quantity want to come together to create a single, powerful and top brand. It is ambitious but I think it is worth trying, for the whole sector would benefit.

If this were achieved, the present union of the selector on extra virgin olive oil would mean that in the “conditioned” countries, the general olive oil campaigns and the campaigns of the “Spain” brand would coexist and help this hypothetical brand resulting from the union.

I also suggest that all kinds and categories of olive oil products should be presented on these markets with some innovation, provided they give value to consumers and purchasers.

In these “conditioned” countries which have an old image of the quality of our oils, “the new” would help a great deal in the repositioning. Therefore I think it is important to invest in R&D+i now. Everything we do to be the first or the only ones in any important aspect will help the repositioning if it is well communicated.

As the product also includes the container, the extra virgin olive oil might call an annual competition of ideas and designs for the containers used in hostelry, and here a lot of work has to be done. The briefing should suggest that these containers transmit the “Spain origin” in some way.

Finally, in addition to communicating the values of health, work should be done in the area of flavour within the product policy. I would create a work group to study the forms of cooking, tastes, beliefs in each country to create new oils and presentations that adapt to the different tastes and requirements, for what we like in Spain might be a brake in other countries.

Price

We have a large problem with prices in these countries as a vicious circle has been created that we must break. Our positioning behind Italian oils means that people do not want to pay the same for Spanish oils, and as they are sold cheaper this induces people to think that they are worse. To demonstrate to purchasers in the commercial distribution and HORECA channel that Spanish olive oils are as good or better there are prizes and tastings, but as this information sometimes fails to reach the wider public, people remain unwilling to buy oils at prices already held by the Italians.

As the important thing is to begin to appear more and more with the same or higher prices than the Italians to leave behind the second-class positioning, I suggest that in their range of olive oils and prices exporting companies should squeeze the Italian prices by commercialising on at least two price and quality levels, one boldly higher than Italian prices to create image, and another below to generate volume.

The worst thing that can be done if we are to increase the value of the Spain origin is to nurture price competition between the Spanish extra virgin olive oil brands, for this denotes little vision and the whole sector ends up losing out.

Distribution

People travel and see how Spanish brands appear in the best supermarkets and points of sale. Our volume and variety of olive oils is so large that we can allow ourselves to be present in all market segments, but for the goal of repositioning in the “conditioned” countries it is important to be present in the best gourmet shops, hotels and restaurants, and with large presentations. Extra virgin olive oil could report where our oils can be found in each country, and the Spanish hotel chains could offer Spanish extra virgin olive oils in their restaurants in all of the countries where they are established.

Commercial communication.

As I said in a previous article, I believe that one of the main communication objectives of extra virgin olive oil must now be to eliminate their second-class positioning in quality-price in the “conditioned” countries in order to help to increase the value of our oils through their campaigns.

In the tenders, the agencies must propose how and on the basis of what the old positioning will be eliminated, and what the new and unique positioning of Spanish oils must be. Once this has been approved, I believe that it should be applied and adapted in each country by local agencies (whether or not they be multinationals).

Another high potential communicational factor is the innumerable number of prizes our oils are receiving. The companies receiving these prizes lose nothing if they include in their press flyers that they are “Spanish oils”. The repositioning of the “Spain” brand benefits everyone and can only be achieved between us all.

Finally, in the communication policy I once more recommend that all extra virgin olive oil campaigns should add up and create synergies on the level of communication; this is something that would be achieved with a strategic communication plan. Campaigns which as far as possible must be at the service of the interest of Spanish private brands, which in the end are those that sell. They must analyse the time and money that have to be invested in each country for the advertising campaigns to be effective from the start. They must intelligently change the positioning of Italian olive oils (which have just been reported for selling Spanish oil as Italian). They must use internationally prestigious Spanish prescribers in each country, choosing them depending on whether the objective is repositioning or notoriety and finally, my recommendation is that they should intensify the internal communication in the sector and enable ideas and proposals to be gathered.

As for the new unconditioned markets, here there must be a double marketing objective: firstly to increase the consumption of olive oil and secondly to ensure that Spanish oil is preferred with the positioning considered most adequate.

It would be a shame and an error to enter these countries competing in terms of price, for this would create a positioning for us that is far removed from quality. In my opinion, it is necessary to enter with great quality, presentation and medium-high prices in the first stage to create image; later the whole of the market will be gained and segmented without needing to drop prices, as we will have gained a reputation. Otherwise in time we would find that we had the same problem as we want to solve now in markets conditioned by quality, prices and presentations of the past.

I will comment on my ideas for the Spanish market later.

Footer page 1 The proof of this is the result of a study in the United Kingdom and France carried out by FDS in 2010 regarding consumption habits in these countries in which less than two thirds of those interviewed knew that Spain produced olive oil; Italy appeared as the main producer of olive oil in the world and only one out of every six consumers preferred Spanish oil for its higher quality.

Footer page 2 In fact before 2002 the majority of Spanish exports outside the community were olive oil and not extra virgin olive oil, but today exports of extra virgin olive oil now double those of refined oil.

Footer page 3 According to data from Kantar Media, in 2011, Italian private brands invested more than 4.2 million dollars in conventional advertising, whereas in the same period Spanish brands invested 169,000 dollars.

 

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