Navigating Growth and Challenges of the Olive Oil Industry and its Oil Alternatives

Industry Growth

The olive oil industry has emerged as a significant player in both global culinary and agricultural realms. Recent years have witnessed notable growth in the olive oil sector, driven by evolving consumer preferences. The global market for olive oil achieved a valuation of USD 12 billion in 2023. Projections indicate sustained expansion, with an anticipated compound annual growth rate (CAGR) of 5.2% through 2033, elevating the market valuation to USD 19.92 billion.

Figure 1. Global Olive Oil Industry Valuation from 2023 to 2033

The olive oil industry is experiencing rapid growth due to increased demand across culinary, pharmaceutical, and personal care sectors. The global trend towards healthier dietary choices is prompting consumers to seek out natural ingredients with proven health benefits. Known for its high levels of monounsaturated fats, antioxidants, and other beneficial compounds, olive oil has become a preferred option for health-conscious individuals looking to improve their well-being through dietary choices.

Beyond cooking, olive oil is also widely used in skincare, haircare, and cosmetic products. Its hydrating properties and antioxidant-rich composition make it a sought-after ingredient in personal care formulations, appealing to consumers looking to nourish and rejuvenate their skin and hair. This expansion into non-culinary applications has significantly widened the market for olive oil, attracting a diverse consumer base and driving industry growth.

Increasing Olive Oil Pricing

In Jan-24, the global olive oil market witnessed a sharp price surge, reaching an all-time high not seen since the turn of the millennium. Over the past five years, the market has been characterized by significant volatility, with prices plummeting to a low of USD 1,313.41 per metric ton (mt) in Dec-20. After which prices increased slightly until Sep-22, when an exponential and continued price surge emerged. Prices skyrocketed from USD 4,316.42/mt in Sep-22 to a staggering USD 10,281.37/mt in Jan-24.

Figure 2. Global Olive Oil Prices From Jan-19 to Jan-24

The surge in olive oil prices from 2022 onward can be attributed to a combination of factors affecting production and supply chains. Firstly, extreme weather conditions, including a two-year drought in Spain, the largest olive oil producer, severely impacted olive tree growth and fruit production. These adverse weather events also affected other major producing countries like Italy, Greece, and Portugal. Particularly, Spain experienced a staggering 56% decrease in olive oil production in 2023, contributing significantly to the scarcity in the market.

Moreover, the inability to irrigate effectively compounded the production challenges, further exacerbating the situation. This combination led to a substantial decrease in overall olive oil output, creating a supply-demand imbalance and driving prices to unprecedented levels. Additionally, production costs soared as a result of the adverse weather conditions, causing financial strain on olive oil producers. Rising interest rates on loans and inflation in fertilizer prices further added to the financial burden within the industry.

The limited availability of olive oil, coupled with heightened global demand, contributed to the surge in prices. As consumers worldwide sought out olive oil for its perceived health benefits, the market faced increased pressure to meet the rising demand amidst dwindling supplies.

In 2024, despite expectations of a 15% year-over-year (YoY) increase in Spanish olive oil production compared to 2023, prices are anticipated to remain high and continue rising until May-24, according to the Olive Oil Times. Despite the expected increased yield in 2024, global olive oil production is still projected to remain 34% below the average of the previous four years. The seven largest olive oil-producing countries, including Spain, Italy, Tunisia, Greece, Turkey, Morocco, and Portugal, are expected to see a 7% YoY decrease in crop yields in 2024. This shortfall poses significant challenges to the sustainability and resilience of the olive oil industry, with elevated prices likely to persist in the foreseeable future.

Oil Alternatives

As olive oil prices soar to unprecedented levels, consumers are exploring alternative options to fulfill their culinary needs while keeping costs in check. With the escalating prices, individuals are turning towards substitutes that offer similar flavor profiles and health benefits. Some of the alternative oils include:

Avocado Oil: Avocado oil is gaining popularity as a versatile and healthy alternative to olive oil. Known for its rich flavor and ability to withstand high heat, it's perfect for frying, grilling, and roasting. Packed with beneficial nutrients like monounsaturated fats, vitamin E, and antioxidants, it's not just tasty but also good for heart health and reducing inflammation. The global avocado oil market hit USD 584.8 million in 2023, and experts predict it will grow at a CAGR of 4.4% to USD 861.61 million by 2032, driven by increasing demand for healthy cooking oils and dietary supplements.

Figure 3: Global Avocado Oil Market Value from 2023 to 2032

Coconut Oil: Derived from mature coconut kernels, coconut oil has extensive use in culinary applications and beauty and skincare regimens. Its distinct tropical flavor enhances the taste of various dishes, particularly in baking and sautéing. Despite its high saturated fat content, some proponents suggest potential health advantages, including the ability to elevate good cholesterol levels and support brain function. Additionally, its inherent antimicrobial properties have led to its popularity in oil-pulling and skincare routines. The global market for extra virgin coconut oil was valued at USD 2.52 billion in 2022 and is anticipated to reach USD 5.73 billion by 2032, with a CAGR of 8.6%.

Figure 4: Global Virgin Coconut Oil Market Value from 2022 to 2032

Sunflower Oil: Made from sunflower seeds, sunflower oil is a popular choice in many kitchens for its affordability and versatility. It has a light taste and works well for frying, baking, and making salad dressings because of its high smoke point. With plenty of vitamin E and low saturated fats, it's good for your heart and stays fresh for a long time. The global sunflower oil market was valued at USD 21.4 billion in 2023 and is expected to grow to USD 38.32 billion by 2033, at a CAGR of 6%.

Figure 5: Global Sunflower Oil Market Value from 2023 to 2033

Canola Oil: Made from canola plant seeds, canola oil is light, versatile, and heart-healthy. Ideal for frying, baking, and sautéing, its neutral taste blends well in dressings and marinades. With low saturated fats and high monounsaturated fats, it's good for the heart. Plus, it contains omega-3 fatty acids, which may reduce inflammation and chronic disease risk. There is an increased demand for canola oil fueled by dietary preferences, environmental concerns, and the oil's diverse culinary applications. The global canola oil market is expected to reach USD 47.14 million by 2032, at a CAGR of 3.89% from USD 36.09 million in 2023.

Figure 6: Canola Oil Market Volume 2023 to 2032

In conclusion, the olive oil industry has seen significant growth driven by consumer demand for healthier options, expanding its applications beyond culinary use. However, unprecedented price surges due to production constraints and supply chain disruptions pose challenges. Despite partial production recoveries expected in 2024, global supply remains insufficient, sustaining high prices. Consumers are turning to alternative oils like avocado, coconut, sunflower, and canola for cost-effective and nutritious options. Adaptation and innovation are crucial for the industry's sustainability amidst evolving market dynamics, urging stakeholders to diversify offerings and invest in sustainable practices to thrive in a competitive landscape.