Chad Barnett did not bury the lede in his recent presentation on the state of the retail grocery business. In speaking at the North American Olive Oil Association’s (NAOOA’s) virtual annual meeting last week, Barnett, Sr. VP of Acosta’s Business Intelligence division, opened with that quote from boxing champ Mike Tyson. Barnett was referring, of course, to the one-two punch from this past winter: the government’s announcement on February 25th that Americans should prepare for the COVID-19 outbreak, and its announcement on March 16th of a fifteen-day lockdown to slow the spread.
Months after the ensuing panic-buying subsided, Barnett reported that his company surveyed its 30,000-strong panel of shoppers to explore how the pandemic may have changed consumer shopping habits, and the extent to which those changes may be long-lasting. His conclusions, when considered in the context of NAOOA members’ own retail market data, point to an encouraging future for the olive oil industry.
Anecdotally, we all know that consumers are cooking more at home. The industry has been holding its collective breath hoping that this trend will continue post-pandemic. According to Acosta’s data, Barnett believes it will, albeit to a somewhat lesser extent: Millennials report being pleased with their newly discovered culinary skills, but Gen Xers with children are wearied by the inconvenience of having to cook so much.
We also know that many quarantined shoppers were forced to turn to online grocery delivery. NAOOA members who do business with online retailers like Amazon have seen their sales soar. According to Acosta’s data, Barnett believes this too will have a lasting impact. Consumers now report a willingness to shift to eCommerce grocery shopping at levels experts did not anticipate seeing for another 3-5 years.
We also know from long lines and empty shelves that supermarket sales have thrived. Barnett confirmed that this is especially true for the “center-of-the-store” products, which as a group are continuing to outpace the growth of the entire store. And among supermarket center-of-the-store products, olive oil is a leader of the pack.
One reason olive oil is doing so well may be Acosta’s finding that consumers’ buying habits during the pandemic are being driven more than ever by health and wellness concerns, which we know has always been the primary driver of olive oil sales. Indeed, Mr. Barnett reported he anticipates olive oil sales for 2020 will end the year up 20% to 25% over 2019.
When combined with the retail market data from NAOOA members that was also shared at the annual meeting, Acosta’s findings portend strong future growth for the olive oil industry. Data compiled by the Association of Food Industries (of which NAOOA is a section) show that olive oil imports for the last twelve months reached a record 410,000 metric tons – an increase of 16% over the prior year. And NAOOA members’ retail data show olive oil category sales are up 23.5% in volume over last year.
But in a departure from recent sales trends, retail data show the strongest growth in the category is coming not from extra virgin, as we would have expected, but from light tasting olive oil, sales of which are up 29.9%. Given the industry’s commitment to increasing quality and promoting the extra virgin segment, this sudden growth in light tasting olive oil after years of slow decline would be very concerning if cost-conscious consumers are trading down to a less expensive option.
However, that does not seem to be the case. Our members’ data show that the increase in olive oil volume has come largely at the expense of canola and soybean oils for which growth has lagged behind olive oil during the pandemic. So, if the growth in light tasting olive oil is not coming from cannibalizing extra virgin, where is it coming from? Other data, combined with Acosta’s findings on the increase in health and wellness awareness, lead us to believe the growth in light tasting olive oil sales is coming from new users who have finally been motivated to enter the olive oil category.
Light tasting olive oil plays two important roles in the olive oil category. First, it offers consumers a healthy option for recipes calling for a neutral tasting cooking oil. But second, light tasting olive oil helps build our consumer base from the ground up. The U.S. cooking oil market continues to be dominated by tasteless, solvent-extracted and highly refined seed oils; sales of vegetable, canola and corn oil account for 75% of the pourable oil category by volume. For consumers accustomed to buying these neutral flavored oils, but who are looking for a healthier option, light tasting olive oil can be the “gateway drug” into the category. For them, that costly green bottle of flavorful extra virgin on their supermarket shelf may simply be a bridge too far.
In fact, retail data from NAOOA members presented at the annual meeting confirm that there has been a large increase in new olive oil users. The percentage of American households stocking olive oil in their pantries has increased 9.2% during the pandemic. That number is staggering, given that olive oil household penetration had been stagnant for roughly a decade. If that data is accurate, it could mean there are now as many as 4 million new households buying olive oil, with significant implications for future sales growth.
In the shadow of uncertainty and fear cast by the pandemic, the data presented by Acosta and NAOOA’s members at the annual meeting provide reason to believe that the olive oil industry’s outlook is bright. Indeed, Barnett concluded his presentation saying he believes that the unprecedented level of olive oil sales we’re seeing in 2020 will not retreat, but instead will become the new baseline against which future growth will be measured.
Particularly encouraging is the increase in olive oil household penetration being driven by health-conscious, home-cooking consumers. Even though many of these new users may have entered the category buying light tasting olive oil, this is good news for the extra virgin category as well. We know that a great many of these new consumers will at some point graduate to more flavorful and healthier extra virgin olive oil.
And once an extra virgineer, always an extra virgineer.
About the North American Olive Oil Association
Established in 1989, the North American Olive Oil Association is a trade association of marketers, packagers and importers of olive oil in the United States, Canada and their respective suppliers abroad. The association strives to foster a better understanding of olive oil and its taste, versatility and health benefits.
For more information about the North American Olive Oil Association and membership, please visit our website and follow our page on LinkedIn.
Photo Credit: Lidl Supermarkets
