California's Extra Virgin Olive Oil Engine - Part 2
My last post briefly described SHD production and alluded to the competitive difficulties this method of production creates for both traditional and small SHD growers. In order for SHD production to work, it needs to be done on a relatively large scale: the cost of bringing in or owning the equipment is sufficiently high that if you are not farming sizable acreage, there is no cost effectiveness to the mechanization. This means that the typical SHD operation is better capitalized and more efficient than the typical small producer. That makes for a pretty tough competitor.
I was recently asked to speak to a group of small producers about marketing strategies and gave a presentation I have now given repeatedly. The main point I try to make is that you have to distinguish your product in some way from the oceans of California SHD oil being produced now. That distinction can take many forms like being a single varietal oil that isn’t Arbequina, Arbosano, or Koroneiki, being organic production, hand harvested fruit, a local product and the list goes on. The small producers who really have a problem, however, are the small SHD operations. They don’t have any way to distinguish themselves and they don't get the cost savings of mechanization that the larger operations do.
After my presentation, one small SHD producer said to me, "I don't need to distinguish our production because our oil tastes different from the large producers' oil. I can tell the difference". While I don't doubt for a minute that that producer can tell the difference, it doesn't really matter. The only thing that matters is: can the customer tell the difference and is it different enough to cause them to prefer it and to pay more for it? In my experience, they can't and they don't.
It is an unfortunate situation for a lot of small SHD growers. We are frequently approached by growers with anywhere from 1 to 20 or so acres wanting to sell us their excess oil at astronomical prices: 20% - 80% more than what we can purchase it for from the larger operations. Frequently it is hard for the producer to understand how it can be that their carefully made oil is not worth any premium but unless they can somehow successfully make a distinction pitch to a potential customer, it just isn't.