Pierluigi Tosato: We want to change the olive Industry


L>R: Ilias Kantaros, Pierluigi Tosato, Vassilis Zampounis

The CEO of DEOLEO, Pierluigi Tosato, gives a comprehensive exclusive interview to olivenews.gr and Olive and Olive Oil magazine: "We want to change the olive oil Industry".

We met with Mr Pierluigi Tosato, Executive Chairman of DEOLEO, at one of the most chic boutique hotels in Athens during his recent business trip to our country. Also present were Mr Ilias Kantaros, Director of the magazine Olive and Olive Oil, as well as Mr George Afentoulis and Heracles Kounadis from the company Feronia, which represents the interests of DEOLEO in Greece.

In the relatively short space of the two years that he has been involved in olive oil – he comes from the bottled water sector – Mr Tosato has already left his mark with his ground-breaking views, especially considering these come from a manager responsible for the trading of thousands of tonnes of olive oil in the world market. This is why at Olive and Olive Oil, we were prepared for an extremely interesting interview from which neither the beautiful view of Athens at sunset, nor the trade details of his trip to Peloponnese would distract. We noted straight away that for the Greek representatives of DEOLEO, the next day’s trip and upcoming agreement with the Cooperative of Gargaliani was barely newsworthy. Consequently, we turned our attention to what is happening in the world olive oil market and to the proposals of DEOLEO, a Spanish multinational company that holds some of the most well-known emblematic brands, such as Bertolli and Carapelli, for example.

Many Rules Without Results
In response to the first question we put to Mr Tosato, his position is clear: The world olive oil market is regulated by too many rules which at the same time are ineffective. He focused on the USA, which in his opinion is not interested in oil quality. On the contrary, there is a vacuum because the US Department of Agriculture has adopted a voluntary model, which is ineffective as it allows olive oil to be called extra virgin even when it is organoleptically deficient. The USA does not comply with the International Olive Council (IOC) standards. This opens the door to poor quality olive oil. Characteristically, he notes that today 85% of the olive oil that is sold as extra virgin is in fact not. This allows some to profit because they flood the market with poor quality oil thereby misleading consumers. On the other hand, the European Union has realised that we do not have the coordination, legislation and regulation required to prevent this.

New Rules and Panel Testing
In this same vein, we ask him if he is in favour of new rules and interventions. Pierluigi Tosato clarifies that he is in favour of better rules so that the parameters that guarantee extra virgin quality are more strictly defined. One such measure is more reliable organoleptic evaluation (panel test) supported by analytical methods. We must, he says, define exactly what extra virgin is and how it differs from ordinary virgin olive oil. Consumers do not understand the difference between virgin and extra virgin, and because of this confusion they are not willing to pay the difference in price.

The Cost of Quality and the Role of the Olive Producer
For Pierluigi Tosato, quality has economic value and therefore has an additional cost. It begins with the olive producer and depends on three parameters. Firstly, on rapid harvesting, in November and not January as in Spain. Secondly it depends on the entire processing at the olive mill, which needs to be as soon after harvest as possible in order to prevent oxidation, which can occur at the largest mills with high-volume inputs. Thirdly, the olive cultivar plays a role: the cultivars in Italy, where he is from, and those in Greece are better than the Spanish cultivars Picual and Arbequina.

Sustainable Development
We asked how the prevailing market model can be changed to achieve sustainability which will combine protection of production with that of consumption and of the climate.

Tosato categorically states that “For us, sustainability is the future. It is the company’s strategy. We are focusing on sustainability”. He refers to super high-density planting which requires more water, more plant protection products, with quality parameters lasting only six months, pointing out this does not translate into sustainability. “I’m talking about sustainable agriculture that does not include chemicals” he stresses characteristically. These processes follow a protocol with conditions set down in a contract between DEOLEO and local producer groups (cooperatives), as Deoleo has in Spain with VinOliva and aims to expand in Italy and Greece. “We do not want simply to sell a commodity, that’s not what DEOLEO is about, we want to be distinct. I need to meet farmers and see what they need, this is what vertical integration is all about. We will invest in relationships, in alliances with the best producers”, confirming the interest of Deoleo in the Messinian cooperative.

The Broken Business Model
Our discussion returns to the world market and what he calls the ‘broken business model’, a position which he himself has stated several times. According to this, olive producers do not have the motivation to produce quality olive oil due to the lack of price differentiation between high and low quality oil at the consumer level. The retail sector is not interested in good quality because it routinely promotes offers to attract consumers. Consumers are confused because on the supermarket shelves they see olive oil at 10€ and 2€ but do not understand why they are priced differently and pay attention to price alone, seeking the most economical. The Chairman continues to describe what he calls the broken business model, saying that it leads to a poor industry as it does not give consumers what they should buy. Consumers do not understand the difference between extra virgin and ordinary virgin olive oil. For example, they do not know that only extra virgin oil contains polyphenols. This is another issue, we cannot indicate on the labels that these are beneficial. It is forbidden by law and is considered false advertising. So this is why we want to change the entire olive oil industry he stresses.

The Position of DEOLEO in the World Market
We ask what the position of DEOLEO and its products are in the world market, and if, in hindsight, whether he as a manager would still have made that initial investment (of the Salazar brothers with Sos Cuetara)
Pierluigi Tosato: “That’s a difficult question. CVC Capital Partners (the fund which controls the company) has realised that in order for an initial agreement to be profitable, time is needed to change the olive oil industry, it’s not a short-term game. CVC is the main shareholder, and isn’t focused on the short-term results but on the long-term ones. The fundamental elements are good. The increase in consumption is a healthy result. The shareholders place importance on basic principles. The problem is the industry itself, which is dying, therefore our aim is to change the industry to benefit consumers and producers. This is why we are concentrating on sustainability’’.

How Can Greece Improve Its Role?
For the Chairman of DEOLEO, Greece has a high quality of production, especially in the Peloponnese. However, his opinion is that because of the economic conditions, production is decreasing. The capacity of Greece is important for its quality and organoleptic profile. Southern Italy has the Coratina cultivar, which Tosato himself, originally from North Italy, does not prefer. This is why he would mix it. Moreover, in Germany, in order to have an acceptable quality with organoleptic harmony, you cannot have too much Spanish olive oil (from Picual) and you have to blend with Greek or Italian oils. Concluding, he states: “I’m in favour of Greek cultivars and their oil”.
If you look at the map, you will see the bulk of production lies in Spain, which does not concentrate on quality, that is why it has to change as it only focuses on quantity. Tunisia is making progress in organic cultivation because they have olive groves in the desert. In Italy, we have cultivars with high quality but production is falling every year.

Estimates for the 2018/19 Harvest (Supply, Demand and Prices)
The conclusion form our discussion is in line with our estimates in our previous edition, Vol. 85 of Olive and Olive Oil. Pierluigi Tosato predicts that if the production in Spain exceeds 1.6 million tonnes, then there will be good production and prices will have some variability. Production in Italy will be very low, production in Sicily and Puglia is catastrophic, while that in Tunisia will be maintained. Greece will have less production than last year. Spain will have the greatest force, hoping that quality will be better. Tosato does not believe that prices will fall very much, remaining about where they are.

Mid- and Long-term Prospects for Balancing Supply and Demand
We asked if there is a danger of supply outstripping demand as olive oil consumption in Mediterranean countries is falling, while there are difficulties to be faced, for example, in the US market.

Pierluigi Tosato expresses the same concerns. He says if anyone in Spain believes that by reducing prices consumption in the USA will increase, they are mistaken. Consumption there is steady, while that in Italy is in decline, as in Spain. Consumers have lost their trust in olive oil because there have been so many scandals, and we do not supply them with products of proper quality. Many Italians buy their oil directly from mills. We need to clarify the market because otherwise consumption will not recover.

We now point out to Mr Tosato that DEOLEO represents large companies. Therefore, if the consumer does not trust large companies, how can DEOLEO change its behaviour?

Pierluigi Tosato has the view that they can achieve that as a company, and that others will then follow. On the contrary, if they do nothing, the market will collapse. “It is our obligation to change, and when you are the largest company, you are obliged to change the market.”

Our fascinating discussion ended at this point, leaving us with much food for thought and grounds to return to this issue on two aspects:
How realistic is this sustainable model for the economic recovery of DEOLEO?
How realistic is the agreement between the cooperative of the Peloponnese and DEOLEO?