China Fuels Australian Olive-Oil Rush; Wealthy Chinese Looking Safe, Prestigious, Healthy Products

China Fuels Australian Olive-Oil Rush

Wealthy Chinese Looking Safe, Prestigious, Healthy Products

SIMON HALL And ROBB M. STEWART

Feb. 18, 2014 10:11 p.m. ET

Wealthy Chinese consumers are switching to olive oil for cooking, fueling a surge in spending on imported bottles and spurring companies to snap up olive groves in Australia to secure supplies.

The buying has been driven by shoppers looking for prestigious and healthy products that aren’t tainted by domestic food safety scandals at home. A raft of advertising campaigns showcasing the benefits of the oil not traditionally used in Chinese cuisine is also boosting demand at the expense of other cooking oils.

China spent $184 million on imported olive oil last year, 9.3% more than in 2012 and up from just $1 million a decade earlier. Meanwhile, a number of deals in Australia means Chinese and Asian investors now own nearly 10% of Australian olive oil output, says Tim Smith, sales and marketing director at Boundary Bend Ltd., Australia’s largest producer of extra-virgin oil.

Investing in farms and food processors overseas is nothing new for Chinese companies, although the deals so far in olive oil are tiny compared with multibillion-dollar acquisitions in the energy and commodity sectors. So far the activity has focused mostly on bulk buying from big European producers and bottling in China, and edging into Australia’s relatively small-scale olive groves.

The latest development came in late January with Chinese-owned Australian Organic Olive Oil Co. starting to package oil for the home market from 1,500 hectares of olive groves it bought 15 months ago when Kailis Organic Olive Groves Ltd in western Australia went into receivership.

Most deals by the Chinese in Australia are small and private and aimed at bringing the oil back home, said Lisa Rowntree, chief executive of the Australian Olive Association, an organization representing growers.

“There are a lot of wealthy Chinese willing to pay for high-quality olive oil to ensure they have the ‘real thing,'” Ms. Rowntree said.

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Australia is a minnow though, compared with Mediterranean producers. Spain makes between 45% and 50% of the world’s output, with the southern province of Andalusia producing the majority, and it has a 60% share of the Chinese market, trailed by Italy, Greece and North African growers.

“There is enormous potential for continuous growth in Chinese olive oil use over the next two decades, although perhaps not at the explosive rate of 30% or 40% annual growth seen in past five years,” said Manuel Leon, the Shanghai representative of Andalusia’s export promotion agency Extenda. “Each month Extenda has several queries from Chinese companies wanting to buy oil or do licensing agreements.”

State-owned Chinese food giant Cofco Corp. and the smaller Kingoliva are among companies that have been buying the right to use Spanish brand names when bottling bulk imports. Both declined to comment on their strategy and the market outlook.

Extensive television advertising by Chinese importers and foreign trade-promotion bodies on its uses—extra-virgin for drizzling or lower-temperature cooking, regular olive oil for higher-heat frying–and the opening of hypermarkets in second- and third-tier cities across the country stocking overseas foods has helped drive sales. For now though, olive oil imports volumes are less than 1% of those of palm oil.

“I used to use peanut oil, now I only use olive oil and sunflower seed oil which I think are more healthy,” said Ms. Su, 51, Beijing native who declined to give her first name.

Importers are quick to reject arguments too that olive oil isn’t suitable for very-high-temperature cooking in woks favored in China, particularly if regular oil is used, although they concede that top quality extra-virgin oil which contains a high concentrations of organic particulates does smoke at temperatures above 190 degrees Celsius.

China imports around 99% of the olive oil it uses as there are few areas outside its provinces of Gansu, Yunnan and Sichuan with the right conditions to grow olives—hot, dry summers and mild, wet winters. Another disincentive is the five-year wait before young trees bear fruit, said Beatriz Feichtenberger of Seville, Spain-based Extenda, who sees a promising future for import growth.

China’s commercial olive cultivation dates back to the 1960s when 1,500 saplings from Albania were delivered to Yunnan, but by 2011 the country had only 33,000 hectares of olive trees versus Spain’s 2.4 million hectares.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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