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Gentlemen of the Press

Although South Africans win gold the world over for their extra virgin olive oil, back at the ranch it's a different story. The oil might be extra virgin, but the industrial famrers and artisanal types who chase after it can be in for a rude – and rough – deflowering.

Original publication: Private Edition, 2012.

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It began, in a way, with an inconvenient truth. The year was 1992 and Giulio Bertrand had attained a life-long dream: buying a Cape Dutch farm on which to retire. For a man like him, a textile magnate who owned factories in South Africa, who always dwelt in cities – Milan, New York, you name it – the notion of living in the countryside … why, this, he says with seigneurial élan, was paradise. The sod of it, though, was that paradise had a drawback. Nothing severe, but still irksome and the sort of itch a retired industrialist might get it in mind to scratch.

Bertrand, you see, enjoys salads. He eats them ‘365 days a year’ and, moreover, considers them incomplete without a dressing of olive oil. In those early days he was obliged to import his oil because the local product … well, let’s say he felt it had room for improvement. Acquiring the stuff he liked to have in his pantry was a mission; something had to give.

Then, more resplendently, there was the farm itself: Morgenster, the ‘morning star’ of his sunset years. A beautiful vineyard estate in Somerset West, it reminded him of his native Italy and seemed to call out for a grander, more productive destiny than simply being a garden for his home. ‘I thought that because of Morgenster’s situation – a fantastic setting with a wonderful terroir – it would be nice to produce French wine and Italian olive oil.’

A nice idea, indeed. It spelled the end of his plans to spend two months per year in the Cape and the balance abroad (nowadays it’s vice versa), yet in turn marked an auspicious new beginning: nothing less than the revitalisation of what until then had been a modest, small-scale industry.

At the time South Africa was negotiating peace at home and re-entry into the world, in the process emerging also from a culinary Dark Age in which a dab of Spanish rice alongside the Sunday chops could be regarded as outré and foodstuffs like olive oil as faintly subversive, faintly other. The country was starting to internationalise its tastes, and these developments would work in tandem with Morgenster’s rising star.

Not one for half-arsed measures, Bertrand travelled to France and Italy – to France to recruit its best winemaker, and to Italy to secure leading expertise at the Institute of Olive Oil Research as well scour the homeland for its choicest olive cultivars. In 1994, 3,000 of these imports were planted at Morgenster; today there are 30,000 of them, under harvest for paste and table olives but largely for the product category where the estate, though a relatively small producer, has made its heftiest impact: in the elite, rarefied niche of EVOO – extra virgin olive oil.

In 2006 Morgenster won an award for ‘The best Blended Olive Oil in the world’, and in 2007 it was international ‘Mill of the year’, but these are just samplings from a litany of accolades. The estate has not only put the local industry on the map; it has also helped it spread roots into the soil, literally as well as figuratively. According to the brochures, Morgenster supplies ‘tens of thousands’ of its cultivars to farms across South Africa, and in 2012 Bertrand was honoured once more, this time with an Absa Life Time Achiever trophy acknowledging the contribution he made to the industry.

All perhaps for a zesty salad to make a dream complete. Bertrand proved a fruitful influence on the EVOO world, yet he epitomises a wider success story, too – the city-slicker whose countryside fantasy comes true, the urban businessperson who yearns for a truer lifestyle and finds fulfilment in crafting an elixir ripened from the earth. Add to that the prospect of earning income from honest artisanal work, and the question might be asked: If this chap Giulio could do it – hey, why can’t I?

Because the effect of those historic developments – South Africa’s internationalising tastes, Morgenster’s rise – can be summarised in one word: growth.

‘An amazing number of people have entered the olive oil field,’ says Linda Costa, a blender, consultant and co-director of Olives Go Wild. ‘Whereas for many years the industry association SA Olive had about 100 members, it has grown to over 200, and not all farmers are members, either. If we look at labels on the shelves, they’re also exploding. At a conservative estimate, there are easily 60 different labels out there.’

In particular, market demand is expanding, bringing with it fresh opportunity. While South Africa’s consumption of olive oil is small by world standards, it is nonetheless a doughty 3.5-million litres per annum, and industry folk are optimistic that it will increase. Junior Burger, general manager of the farming company Tokara, echoes Bertrand when he says the future of EVOO, ‘a naturally cholesterol-free product’, lies in heightened consumer awareness of its health benefits.

Tokara’s olive shed was a sideline to its vineyards until 2008, when a decision was made to ‘sweat the assets’, build the brand-synergies between their wine and olive oil, and offer the market ‘a more complete basket of products’. Burger describes Tokara as a ‘young, up-and-coming brand’, but Andries Rabie, MD of Willow Creek Olive Estate, is bolder in his self-description.

‘We’re the biggest local brand on the shelves,’ he says, and while he believes competitors often make the mistake of working only a single market segment, Willow Creek does them all: the retired Good Lifers, the Daily Providers (mums in supermarket aisles) and the Kitchen Artists, ‘guys who love to entertain, who like an oil with a story to it’.

Undergirding the brand is a network of agents selling to delis and restaurants, along with a company that handles sales, distribution and merchandising to smaller retailers; major retailers are serviced directly from the estate, where 175,000 trees stretch across 280 hectares of land overseen by Worcester’s Langeberg mountain range – territory Rabie’s ancestors have farmed in since 1691.

Set against this history, Rabie’s ten-year-old EVOO op is a mere pup, but there is matter-of-fact determination in his voice and, speaking as the chair of SA Olive, his assessment of the industry is as robust as that of his own venture.

‘Local production is about 30% of the consumption. We still import 70% of oil, but [local market-share] is growing fast. Five years ago it was 80% imports to 20% local, and before that, 90-10, so we’re steadily eating at the imported figure. We can grow the industry, we can create massive numbers of jobs.’

Growth attracts investment; investment drives growth. Though this virtuous circle has been spinning like a bugger, Rabie says it wound down in 2011 as an after-effect of the recessionary slump in world olive oil prices. The terrific news is that Spain’s recent crop was ‘a total disaster’, and with prices ‘rocketing’ against imminent shortages, he predicts investment will soon normalise.

But let no-one accuse Rabie of leading the unwary into perdition. The EVOO world remains a niche sector with only ‘five to seven big players’; most newcomers are boutique operations, and he is wryly sceptical of their chances. Some are one-hit wonders never heard from again, others stay the course or even rise to success. For many more, as Costa says, it’s ‘hand-to-mouth’, and lifestyle satisfactions are the chief reward. Or as Rabie puts it, the only investment return is ‘return on ego’.

Olives, it should be stressed, don’t grow on seafood pizzas. They come from what are known as ‘trees’; that is, the realm of farming. And farming, apparently, is not all about wearing dungarees and zoning out on brandy and Coke.

On the production-side, it’s an expensive, risky undertaking; on the market-side, recovering costs, let alone earning a decent profit, is a battle, because the challenge is to command a price high enough to make matters worthwhile and low enough for products to solicit buyers. The EVOO game is both smaller yet fuller than it might seem – if not entirely saturated, as it were, then crowded. It’s a competitive space, sometimes ruthlessly so.

Allowing for a myriad of situation-specific variables, Rabie outlines the ball-park outlay and yields. An economical unit is 25 hectares; less than that is boutique territory. Break-even is at about year eight on capital investment of R75k/ha, a sum excluding infrastructure costs – tractors, dams, all that – as well as property costs: let’s call the total R250-300k. A normal harvest is 2,000 litres/ha, selling price is roughly R50/litre, so that’s R100k turnover; deduct farming costs of R30k plus factory costs of R15k and you clear R50k/ha. ‘You’re looking at net ROI of 10-15% … if everything goes well.’

A fine caveat. Acquiring and establishing a farm requires forethought to factors ranging from climate and soil to cultivars, irrigation and planting density. According to Perry Chaloner of Falcon’s Nest Farm, one of the reasons South African oils win so many awards is because, ‘if you’re small, you can often do things a lot better than the big producers.’ The terroir, he says, ‘is also key’.

‘A lot of the premium European producers source part of their blends from North Africa, which has a similar latitude to the Cape. One of the advantages we have is that we’re able to pick and choose the best cultivars. If you travel around parts of the Mediteranean, for example, you see thousands of beautiful Olive trees but because they’re ancient cultivars, the quality of oil is mediocre at best.’

Running the farm demands adroit organisation, especially in harvest season. ‘As the olive ripens,’ Costa says, ‘its oil content increases all the time, but the flavourful components decrease.’ There’s a limited window for striking the desired balance between quality and quantity, so timing is critical; and once the oil is extracted, it must be guarded from air and light or else it goes rancid.

The real devils are the unplannables. ‘The biggest challenge in this industry,’ Burger says, ‘is the inconsistency in the year-to-year annual harvest.’ In one typical case, a farm dipped and rose on a five-year rollercoaster from 14 tons to 38, 66 and 14 before tripping the light-fantastic at 122 tons. ‘The farm manager did exactly the same thing each year that he did the one before. There were no hurricanes, no major spells of heat or cold, no environmental impacts …’ Farming costs, however, remain constant, making every year a boom-or-bust gamble.

Marketing the oil presents further issues. It needs to be packaged, warehoused, distributed – all of which potentially adds to the asking price. ‘By the time the oil gets to the shelf,’ Costa says, ‘it could cost three times as much; at the same time, you want to keep it at a price consumers can afford. The producer gets squeezed at every turn.’

She believes cooperatives and amalgamated brands might remedy matters; the downside for some producers is that it would entail relinquishing the overarching objective: return on ego. For consumers, the profusion of labels is not an unmixed blessing. Although prices are competitive, the variety of choice can be almost as ‘confusing’ as it is tantalising. For producers, it’s just plain tough. ‘Putting out a new label doesn’t mean it will start selling immediately.’

If at all. The major impediment to local olive oil is one which casts a continent-sized shadow over it: Europe, the largest importer into South Africa. According to Perry Chaloner, ‘We struggle to compete in price with the Europeans due to the subsidies they receive under the EEC’s Common Agricultural Policy. Under their Single Farm Payment system the farmers are paid a subsidy per hectare of land owned whether they grow anything or not. Hence they can sell their olives into the market at less than true cost and still make a living.’

Although ‘most of our oil is in the higher end of the market’, from ‘a volume perspective the majority of consumers are price-driven in their selection, and in this category it’s hard to compete with cheaper, inferior oil from abroad’.

Putting it differently, given the choice between a classy yet pricier local oil and a European product, the average South African will grab the latter and not think twice about it.

The problem doesn’t end there. In the long-run it teaches consumers habits of bad taste in that they’re desensitised to the discriminations on which a growth in consumption of quality olive oil depends. The fixed idea in consumers’ mind is that ‘olive oil is olive oil’, which is as disconcerting for the EVOO crew as it would be for winemakers if everyone believed, ‘Plonk is plonk, old pal.’

Imports have a distinct price advantage, then, but according to Rabie there’s more to it than subsidies: he contends that ‘fraudulent marketing’ is rife.

‘What happens in the European Union is that they take old oil and put it through a charcoal filter that removes all the flavours and blend that oil back into some extra virgin oil. They then sell it as extra virgin olive oil when it is not so anymore. That creates a lower price-point which is brought into South Africa, with the result that retail buyers want to compare our prices to those of imported oil – and you can’t compare them.’

Rabie supports his allegations with tests SA Olive conducted in 2010 of products marketed as EVOO. Whereas 90% of local oils passed it, only 23% of imports were up to spec.

Evidently some oils are not so much extra virgin as extra harlot, and perhaps many entrants to the industry, lured by the opportunities but beset by the challenges, will say they know just how that feels. For prospective newcomers, especially those owning a smallholding with an olive orchard, Burger offers this advice: be realistic; start with small-quantity pressings; outsource oil-processing; and see if the market’s interested before scaling-up the capital outlays. Do things progressively, and position yourself in the seed-to-shelf value-chain rather than trying to do it all yourself at the outset.

In other words, you can skin an olive in more than one way – a point Rabie takes up. ‘There are three steps to investing in the industry. If you want to go into production, the first is acquiring a farm and selling the fruit to a processor. The second is to set up your own factory and sell in bulk to another entity that markets the product [under its brand]. The third is to create your brand and take it forward. Here you don’t really need a farm or factory. You can buy oil in bulk and create a blend.’

Investing in the EVOO countryside fantasy: good deal, bad deal? Costa speaks a great truth in half-apology. ‘It’s trite to say this, but it won’t work if you come in just to make money. You need passion.’ She laughs. ‘Lots of money, lots of passion.’ And Rabie observes: In life many things catch the eye, but few the heart. Return on investment, return on ego. Sometimes you can’t have both; indeed, sometimes you can’t have either. It’s then that you’re acting from soulful desire: a morning star calls, and you follow.

 

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