Australian Olive Industry Mission - Case Study Example

Student’s Name Professor’s Name Subject Date Marketing Business Plan Introduction The past two decades have been characterized by a significant growth of the Australian Olive Industry. According to a publication by Sheppard (2008), Australia has acquired a significant share in the global market with an estimated 0.3% of the olives market. This has seen the industry produce high quality and affordable olive products for local and international consumers. To garner both economic and environmental gains, the industry has made its products accessible therefore expanding into international markets.Many Olive oil companies have stressed on the need for more quality branding and production that is needed for the industry to meet consumer preferences and favorably compete with industries in Europe. Extra virgin Olive Oil as one of Australia best products in the industry. Unlike other types of olive oils, extra virgin olive oil is manufactured by mechanical extraction rather than chemically (RIRDC, 2010). It constitutes 95% of total Australian production. Contrary to this, a larger percentage of the European production comprises of the chemically refined oils. The demand for Australian Olive oil especially the extra virgin oil continues to grow with more consumers from Europe warming up to the product and switching from the European’s. This has been attributed to its perceived health benefit of being the healthiest edible fat. The European Producers who are the strongest and biggest competitors for the Australian Olive Oil Industry dominate the market. According to the European Commission (2000), the European Union is deemed as the major producers of olive oil. The EU is responsible for 80% of the olive oil produced there and consumes 70% of it. However new competitors are emerging with Argentina and countries along the Mediterranean Basin acting as new entrants into the market. Regardless of the growth and the success experienced by Australia and the new entrants, there is still strong competition brewing up in this industry. The Australian Industry needs to stimulate generic promotion of their products and market developments in order to compete favorably and acquire a big portion of the market share. A consumer survey done by Sheppard (2008) indicated that Australian consumers who were using imported Olive Oils were more loyal to the product. This will have an implication that much needs to be done in terms of promotion of the product as well as education of the consumers on the health benefits of extra virgin olive oils. The global consumption rates of olive oils has substantially grown in past few years. Between 2000 and 2010, the global consumption of olive oil has grown from 2.59 million tonnes to 2.84 million tonnes (RIRDC, 2010). Despite this increase in global consumption rates, per capita consumption rates in olive oil producing nations such as Greece have decreased substantially. This decrease has since been unclear. Increase in olive oil consumption globally has been attributed to increase in consumption in olive oil importing nations such as the United Kingdom and France among others. Morocco, Turkey, France and Portugal are among the countries which have seen an exceptional increase in consumption with a total per capita increase of 22% in consumption (RIRDC, 2010). Sheppard (2008) ascribes this increase consumption to increased awareness and information access. Australian Olive oil is gaining popularity for its quality and the industry is optimistic of its success in the near future compared to the domestic market. The fact that locally processed olive oils controls only a quarter of the local market share calls for the need to focus on external markets. This report seeks to find facts about the existing market and the strategies that can help in the success in new markets. The data collected and evaluated in this report constitutes of the size and growth of the markets in this industry, consumer preferences and purchasing trends and power. Further the report can be used as a research tool that will assist the industry in coming up with processing and production strategies which will assist the Australian Olive Industry to sustain production. This plan also uses findings from the Research Development Extension to provide communication, coordination and training tools that can be used in improving competency in the industry. Objectives Australian Olive Industry's objectives are to increase the market of olive products by diversifying to new markets and boost the popularity of its quality oils in the global market.These objectives can be attained by researching on the existing and emerging trends of olive oil products in the global markets Mission Statement The Australian Olive Association in its strategic plan outlined its vision as: “By 2010 Australia ought to be acknowledged globally as the main producer of high quality and price competitive olive products.” Their mission seeks to use the required tools in making Australia “a sustainable and unified Australian Olive Industry that produces high quality products for domestic and export markets.”(Australian Olive Association, 2015) Environmental and Internal Analysis The External Environment The capability of any industry to thrive and be successful in the market is normally evaluated based on relevant external factors affecting its performance (Porter, 1990). These factors are categorized as the external environments of an industry. They include the; political and legal system, geographical setting, technology advancements, economic, social and cultural environments and the trading infrastructure. Basic changes in these areas are unavoidable and normally pose specific challenges to an organization. The Australian Olive Industry has undergone rapid changes as a result of unstable environmental changes. Political factors The power of agricultural lobby around Europe continues to grow tremendously. The established regulations by the European Commission 2003 regulates the distribution of olive oil in the EU greatly influenced the performance of Australia Olive Industry in the market. The regulations also applied to France as part of the European Union. The European Commission strictly forbade the distribution and sale of olive oil packs that are more than 5l, without brand names, addresses of manufacturers and producer. Such high standards meant that the Australian Industry had to immensely improve on; technological methods of production, use standardized equipment and ensure employees work under secure conditions for quality productions (Mili, 1999: 14). The EU offer lucrative markets for the Australian Industry. However the European Nations may also use sanctions as a way to get rid of unwanted competition in the agricultural sector. The government and food safety regulations globally will also affect the industry by demanding for an additional increase in investments and management systems (Mili, 1999: 8). Economic Factors The current economic situations in most parts of the world pose a threat to the industry and can easily influence the sales of standardized olive oil to consumers there. The consumption by consumers is determined by economic trends ranging from; disposable income, interests and inflation rates. With recent terror attacks on several countries, the economic state is at a stake thus influencing the interests and disposable incomes of consumers. However for the past few years the Australian economy has opened enabling the industry compete favorably in the global market with other key players (International Olive Oil Council, 2001).Current low inflation environments experienced from time to time in Australia is likely to mark a milestone for the industry. This is because, the export of olive oils and its products from Australia, tend to be rather sensitive to certain exchange rate fluctuations. The growth in France economies also gives Australia to some extent a competitive advantage. This is due to its capability to produce and supply reliable and cost competitive quality olive products. However it is important for the Australian Olive Industry to take into account the competitive characteristics of major European producers to fluctuating economic environments (International Olive Oil Council, 2004). Social-Cultural environments The European continent as Australia’s sale market allows an in-depth analysis of the market segment in order to understand how its population affects the Australian Olive Industry. The market segment has an aging population that has shown signs of living longer than anticipated. Most individuals in this age group aspire to lead a good, healthy and quality lifestyle for the remainder of their lives. This has contributed to the shift in priorities, whereby citizens are focused on watching what they eat placing more emphasis of health and vitality. With such beliefs among consumers, the olive industry in Australia is pressured in producing high quality and less fatty products (Hofstede, 1991). According to Hofstede (1991), Europe registers at least 12% disposable income among its citizens thus ensuring that consumers are less threatened by their spending power and pay more attention to the impact of food products on their health. Thus Australian Olive Industry is influenced by such social and cultural forces that drive it in spending more on production and manufacturing. The industry is required to evade and take precautions when it comes to issues concerning how chemical and microbiological contamination of their olive plants may yield poor quality productions. The industry is forced to evaluate the impacts of Environmental Management system to the supply chain and finally consumer concerns related to their product. Technology factors The food industry is not adversely affected by turbulent changes of technology in the current world. Nonetheless it is important to note that technology advancements are global and therefore the performance of local industries in the international markets can easily be affected by other foreign competitor’s products. This is because competitors may opt to use new technologies which boosts their production and improves the quality of their products. Thus if the Australian Olive Industry fails to adopt new technologies that will contribute to the growth of the industry, it is likely to lose in both the domestic and export markets in the European Union (Hassan, Craft & Kortam, 2003: 446). The use of current technologies in production in the industry will be a determining factor for its administration, decision support system, operation and research and development. By adopting the use of recent telecommunication devices, the Industry is in a better position to market their products and address consumer concerns more effectively (Hassan, Craft & Kortam, 2003: 462). Several technology introductions in an industry tend to impact it, for instance the introduction of chemical extraction technology may essentially influence the Australian Olive Industry. Geographical settings The climate conditions in Australia are favorable and allow Olive plants to thrive in the regions they are grown. Adequate water resources and reservoirs also facilitate the successful irrigation and cultivation of Olive plants in the country. Consequently, the types of landform give rise to a health soil structure that enables the plants to develop into healthy Olives ready for processing and human consumption. The Mediterranean weather experienced in the north and west of Australia, contributes to high production levels annually making the industry a steady Olive product supplier (Harding, 2008: 4). Competition The main players and suppliers of olive products around Europe include Spain, Italy and France. However Spain poses a great threat in the industry as it is almost taking over the entire market share. In order to compete favorable with its competitors the industry has employed marketing strategies in terms of the 4Ps. These include; 1. The product strategy As discussed in the mission statement, the Australian Olive Industry is committed to producing and supplying high quality brands to its consumers. The products include high quality; Extra Virgin Olive Oil, Organic Olive Oil and Extra Light Olive Oil. The industry has invested heavily in ensuring that these products are unique and meet the demands of consumers (Engel, Blackwell & Miniard 1990). The distinctive factors of these products, apart from being unique and of high quality, includes there natural, versatile and healthy nature in meeting consumers needs. With these factors the industry is likely to acquire a high competitive edge over its rivals. As an emerging producer in France, the industry offers products that are appealing to consumer preferences in the market segment. 2. The Place Strategy According to a publication by EUROMED, industry analysis and evaluation followed by the increased trends in the France oil industry makes this country an ideal location for the Australian Olive Industry to market its products. As previously discussed, the high numbers of olive oil consumption in France will facilitate the growth and expansion of this industry. Products produced by the Australian Olive Industry, seek to generate an adequate amount of profits by marketing and distributing them in France. Additionally, the SWOT analysis of the industry has identified strengths and opportunities that the Australian Olive Industry must take advantage of. 3. The Promotion Strategy The Australian Olive Industry seeks to distribute and market its products through several medium of distribution. Its promotional strategy, aims at tapping into new and potential market base. This strategy will employ a number of mediums for distribution which include; Australian Olive Industry online stores, retail distributors, specialty stores, direct sales and also health clubs. In advertising and communication, the industry will make use of the internet by using the industry’s website to address consumer concerns and publicize offers and introduce new products through social media as they interact with consumers. Consequently, Australian Olive Industry will make use of print media, radios and TV commercials as a way to get their products out there for consumers to see (Kotler & Keller, 2009). 4. Pricing Strategy Price tags place on each product produced by the industry will revolve around specific factors. These factors include the quality of the product, quantity, and the current prevailing market prices. Moreover, the industry will be careful not out do itself when pricing so as to avoid giving its competitors an added advantage by scaring off potential customers (McEvoy & Gomez 1999). Organizational and Marketing Factors All members’ part of the human resource team are tasked with specific roles and each one of them is required towards implementing the organizational strategies as outlined. However head of marketing will solely be responsible of monitoring and evaluating sales made. There will be annual sales target set aside and equated appropriately depending on the industry’s operational regions. Additionally a well calculated marketing program will be put in place to monitor the efficiency of each of the concepts discussed in the marketing mix. Through the organization’s management, it is believed that the Australian Olive Industry will achieve its set goals and objectives while satisfying consumer needs. Penetrating into the France market provides the Australian Olive Industry with an opportunity to invest globally (Sweeney, 2002: 26). Target market As discussed in the mission statement, the Australian Olive Industry is committed to producing and supplying high quality brands to its consumers. The company’s target market include; distributors, retailers, supermarkets and restaurants in France and around Europe at large The products include high quality; Extra Virgin Olive Oil, Organic Olive Oil and Extra Light Olive Oil. The industry has invested heavily in ensuring that these products are unique and meet the demands of consumers (Engel, Blackwell & Miniard, 1990). The distinctive factors of these products, apart from being unique and of high quality, includes there natural, versatile and healthy nature in meeting consumers’ needs. With these factors the industry is likely to acquire a high competitive edge over its rivals. As an emerging producer in France, the industry offers products that are appealing to consumer preferences in the market segment. In analyzing the industry it is quite evident that competition is rather strong and is likely to reduce over time. Competition from the European producers seems to be affecting the industry’s performance and profitability. The Australian Olive Industry if well-equipped and structured has the potential of overtaking and dominating the market immensely. Thus it is important for the industry to curb any internal challenges and issues in order for it to maintain a sustainable competitive advantage. Competition has been identified as the key factor driving the industry’s prices down while reducing consumer preferences. Nonetheless, competition from major and minor stakeholders will stimulate the high demand chains, production efficiencies, product and market development. Such motivations tend to increase the level of innovation and differentiation in the industry (Kotler & Keller, 2009). Statement of Problems and Opportunities Critics argue that the Australian Olive Industry is faced with several uncertainties that tend to interfere with its development. In the past decade the industry has encountered financial setbacks due to large Managed Investment Schemes in the country. Additionally financial constraints also rose as a result of the increased value of the Australian currency as opposed to the major overseas currencies. There have been several concerns regarding small scale farmers and the capability to raise enough money in order to purchase quality resources for their farms. Small scale farmers fail in making enough revenue returns which will facilitate the growth of their production. This is due to the high costs associated with labor, chemicals, fertilizers and fuel. The nature of imported oils raises more concerns as they offer low pricing to consumers, these concerns are followed up by the lack of any government interference in addressing the matter.Small scale producers in the industry are not only threatened by the high purchasing power of large supply chains such as supermarkets but also large olive oil tycoons who have the technical ability of determining the price market. This is because these large producers have the capability of producing very high quality olive products which small scale producers fail to compete with. The industry is also faced with challenges arising from consumer’s lack of knowledge based on new and upcoming olive products. This has made it quite difficult for producers to introduce new and beneficial products and successful penetrate the market place. In evaluating the statement problem, a SWOT analysis on the Australian Olive Industry seeks to generate some insight on the industry’s performance. Strengths A well established and innovative agricultural model.This has opened up new opportunities for the industry in both domestic and international markets. The Australian Olive Industry is well equipped giving it the ability to produce fresh and consistent quality products. Australia has succeeded in maintaining a well-established and growing domestic market for Extra Virgin Oil and olives. The country has gained international prestige by having a good reputation. Australia maintains high international regards for being a reliable, innovative and resourceful producer of agricultural products. Australia has continued to focus its efforts on best practices that seek to improve its industries. The country has spearheaded the Olive industry by supporting groves planted with mechanical harvesting techniques. Ability to produce high quality products due to the olive plants that are grown in a clean and green environment with few or zero traditional olive pests and diseases. A diverse human resource, which is equipped with a wide range of skills who are motivated and very passionate about their products. There is quality assurance throughout the industry. This is attributed to the involvement of the Australian Olive Association in the training, communication and cooperation within the industry. Weaknesses Failure to establish an effective and efficient regional data that is needed in evaluating the varietal performance required to pursue standardized production and processing targets. Lack of a consistent and comprehensive statistics report which is essential in learning about the size of the market, competitors and the numbers posted from production and sales. European subsidies threaten the existence of this industry due to their low cost imported oils as opposed to high costs products processed locally. Impacts of global warming which influences the climate change in the country causing weather extremes and inadequate water. Increased level of consumer ignorance, this has contributed to confusion in the market place whereby consumers are unable to differentiate between different products and brands of olive oils. Small scale producers are disadvantaged since they are forced to compete unfavorably with large scale production companies. The industry has failed to come up with a solid training scheme to educate the human resource in the field of horticultural in the industry. This has led to low productivity levels thus degrading the quality of products in the market. The industry is faced by a poor communication system at the Research and Development level. This has led to poor understanding by producers about the oil quality their olives may yield. Opportunities The Australian Olive Industry should avoid dwelling on the European market a lot and exploit the growing Asian markets. These markets provide a promising future for the growth of this industry due to their proximity and large populations. The industry is presented with favorable foreign exchange rates which seek to support the exports of their products. Exploit the domestic and international markets on the basis of reliable image and high quality products that have enabled the industry build a name for it. Adopt the use of new technologies to improve production and assist the industry in expanding into a modern industry. Focus in producing health conscious products that tap into consumer desires and meet their needs. Use alternative production plants that are less costly in order to increase yields. Expand into the production of other products such as cosmetics, value added by products and good tasting margarine. Increase the industry’s market share by coming up with high quality standards and sanctions that will reduce the competition emerging from imported products. Market trends indicate a substantial growth in the local markets if producers are able to receive political support. Threats Environmental threats arising from climate change. The industry has failed in managing and dealing with biodiversity issues. Increased competition from international companies such as Unilever that threaten the existence of the industry which relies mostly on local producers. Monopolization of the market by European producers who have grown and are dominating the market place. Lack of adequate and sustainable financial aid for small scale and medium producers in the market place. No developments are put in place for efficient mechanical harvesters that can be used in small groves. Failure to come up with a consensus agreement on common international standards for olive oil in the industry. Risk of possible entry of plant disease and entry into Australia in the near future such as the olive knot which is accredited to the abandonment of groves over a long period of time. There is an increased over production in both the international and local markets which will subsequently lead to price decline in the top markets such as France. Lack of confidence in the industry making it hard for it to acquire support from the government and secure financial aid. High labor and production costs. Market choice This market plan focuses on France as the prime target market for the olive oil products. Retailers, olive oil products are making huge investment returns by enabling retailers and producers to increase their interest rates from the sales. Figures posted by the government organization FranceAgriMer, confirm that olive oil comes second after sunflower oil as the most consumed oil by consumers. According to the European Commission (2000: 23) statistics show that currently olive oil holds 21% of the volume sales and is valued at 43%. By 2009, 105 000 tones of olive oil was consumed by France population whereas the country imported approximately 106 000 tones in that year alone. With 68% of all olive oil products being purchased at supermarkets and discount chains, retailers are assumed to have a high purchasing power. Summary In order for the Australian Olive Industry to succeed in the olive oil markets abroad it is vital for it to meet the impending power imbalance currently experienced. As part of the export business, the industry needs to recognize the flexible and efficient nature associated with this industry (McEvoy & Gomez 1998). The industry can encourage participants in the industry to take part in forming mergers with both small scale and large scale producers in the country. A publication by Anon explains that this will allow the Australian Olive Industry to compete favorable and be strategically placed at an advantage when it comes to the economies of scale. The industry will in other words avoid being dominated by countries such as Spain which has concentrated the market with is numerous Spanish Olive Oil companies. The industry is required to call upon all key players that take part in the production activities of olive oil. Such a move allows distributors and independent exporters to closely work together and come up with and effective and efficient supply chain system that seeks to generate more revenue by maximizing consumer purchasing powers (Ravetti & McClelland, 2008). This can be done successfully when and if business entities in this industry encourage the use of new information technologies. Adopting the use of new forms of technology will ensure that the value and supply chain implements all strategies at different levels. The industry should also focus on increasing its sales through branding. By carefully packaging their products in an attractive manner, will capture the attention of most consumers in the market and draws them closer towards these brands. A report by Senauer (2001) affirms that consumers are intrigued the dynamic packaging of a brand and this captures their attention. Moreover research has revealed that oils that are produced and marketed by small scale and middle sized entities have secured higher sales in the segment. These business entities enjoy profits garnered from the domestic and international markets. The industry should therefore abolish the use of middlemen as a source of marketing and employ their own product distribution channels overseas (Steenkamp, 2001: 147). References Anon. 2010. Oli Extravirgini di Oliva di Firenze Selezione. Australian Olive Association. 2015. About us. [Online]. Available at Accessed [24th January 2015] Engel, J. F., Blackwell, R. D. & Miniard, P.W. 1990. Consumer behavior. Hinsdale: Dryden Press. EUROMED. 2015. Sustainable Connections: 2.1 EU Agricultural Policy Analysis.. [Online]. Available from Accessed [24th January 2015] European Commission. 2000. The quality strategies for olive oil, Communication from the Commission to the Council and the European Parliament, COM (2000) 855 final. Brussels: European Commission. European Commission. 2003. Accomplishing a sustainable agricultural model for Europe through the reformed CAP - the tobacco, olive oil, cotton and sugar sectors, Communication from the Commission to the Council and the European Parliament, COM (2003) 554 final. Brussels: European Commission. Harding, M. 2008. Value for Money – Returns from Rural R&D into Olives, Oaten Hayand Rice. Rural Industry Research and Development Corporation Publication No 08/198.Canberra, Australia. Hassan, S., Craft, S. & Kortam, W. 2003. Understanding the new bases for global market segmentation, Journal of Consumer Marketing, 20: 446-462. Hofstede, G. 1991. Cultures and Organizations: Software of the Mind. London: McGraw-Hill. International Olive Oil Council. 2001. Projected olive oil production and consumption by 2008. Madrid. International Olive Oil Council. 2004. World olive oil figures. [Online]. Available on Madrid> Accessed on [23rd January 2015] Kotler, P,. & Keller, K. 2009. Marketing Management. New York: Pearson Press. McEvoy, D. G. & Gomez, E. 1999. The Olive Industry: A Marketing Study, RIRDC Publication No. 99/86. Rural Industries Research and Development Corporation. Mili S. 1999. The olive oil sector: International challenges and future scenarios, Olivae. 75: 8-16. Porter, M. 1990. The Competitive Advantage of Nations, New York: Free Press. Ravetti, L. & McClelland, B. Improving the Efficiency of Mechanical Olive Harvesting. Rural Industry Research and Development Corporation Publication No 08/052. Canberra, Australia. 2008. Rural Industries Research and Development Corporation (RIRDC) & Australian Olive Association. 2002. Research &Development Plan for the Australian Olive Industry 2003-2008, Canberra: Rural Industries R&D Corporation and Australian Olive Association Ltd. Rural Industries Research and Development Corporation (RIRDC). 2010. Australian Olive Industry Research, Development and Extension plan 2010-2015. Kingston: RIRDC. Senauer, B. 2001. The food consumer in the 21st century: New research perspectives, Paper at the 71th Seminar of the European Association of Agricultural Economics, The food consumer in the 21st century. Zaragoza. Sheppard, S. 2008. Consumer attitudes to Australian extra virgin olive oil. Rural Industry Research and Development Corporation Publication No 08/166. Canberra, Australia.. Steenkamp, J. B. 1997. Dynamics in consumer behavior with respect to agricultural and food products, Agricultural marketing and consumer behavior in a changing world. London: Academic Publishers. Sweeney, S. 2002. Olive Tree Numbers 2002. The Olive Press. Wright, L. T., Nancarrow, C., & Kwok, P. 2001. Case study: Food taste preferences and cultural influences on consumption. British Food Journal. 103:348-357. Read More