IGNACIO SILVA

Spain 2021 | AGRICULTURE | VIP INTERVIEW

TBY talks to Ignacio Silva, CEO of Deoleo, about a century-and-a-half of company history, a new strategic plan, and goals for 2022.

With over 150 years of experience and a presence in over 70 countries, Deoleo is the largest olive oil bottler in the world. Two years ago, when you assumed your position, financial restructuring was the priority. How has this progressed?

We own some of the world's leading olive oil brands. In fact, if we were to create a ranking of the main oil brands in the world, eight or nine are ours in terms of market share and global presence. And our products can be found in over 70 countries. Two and a half years ago, the company was in a critical financial state and required financial restructuring to secure its future. Therefore, the company's main objective was to create a long-term financial structure, specifically through debt refinancing. This was a major part of the first half of 2020. We reached an agreement with our creditors and shareholders that enabled us to reduce the financial debt by €375 M, registering a net financial debt of €190 M at the end of the first half of 2020, compared to the €557 M recorded at December 31, 2019. If we had not restructured the debt , the company would likely not have been able to meet the senior debt maturities. The closing of this process restored Deoleo's equity balance and provided the group with new resources and greater flexibility to meet the financial commitments, guaranteeing stability in the short and medium term, as well as a more efficient structure for implementing our long-term business plan.

2020 was a good year for Deoleo, with EBITDA growth of 160% to EUR72 million and the creation of the 2019-2023 strategic plan. What are your plans for the next business plan?

We are working on it. In 2019, commercial decisions started to be made in the most relevant countries, and some six months later, we realized that the brands were growing in response to the investment and decisions we were making. This was important because then COVID-19 came along. Therefore, there were two new effects in play for the company: the new strategy, which was already proven to be working, and COVID-19. First, there was an effect from March-May 2020, during which the pandemic and lockdown sparked a stockpiling effect. Whilst it was a difficult period for all to keep up with the increase in consumer demand, our facilities remained open and we continued to produce, bottle and deliver all required quantities. . Secondly, we were not impacted by closures of hotel, restaurants and bars, as we sell branded olive oil to retail stores.. When the foodservice and restaurant industry closed down, and we were in lockdown, there was a positive transfer of consumption from Long Trail to Love Trail. Then, we had a second effect in 2020,, that was an additional sales effect due to the transfer from one channel to another. However, not all of this shift in consumption will return to normal, as people go out less and value home consumption far more now.

Thinking that the biggest challenge in 2021 may be the cost of raw materials, how do you expect to close the year?

We knew this year would be slower than last year because of the pandemic. The raw material effect is important, and we are managing it fairly well, according to market shares. By managing the trade levers of the different countries, we will be able to curb much of the impact, although it will definitely have some effect.

The US has suspended tariffs on EU agri-food products for five years. What opportunities does this bring for Deoleo considering the importance of the US market for the group?

Olive oil production in the world is becoming less reliant on Spanish oil, as more and more new producers are emerging with much higher yields than those of Spain. For example, apart from Portugal, Italy, and Greece, which were already producers, there are countries on the African Mediterranean coast that are entering the sector with super intensive productions. Therefore, Spain's weight in the world production is lower. We buy oil all over the world. In Spain, we buy 60% of our oil. The rest we buy from Portugal, Greece, Italy, a little in Tunisia, and Chile and Argentina. However, when you are able to transport Spanish oil to the US without having to pay tariffs, it forces the price of oil from outside Spain to go down. In our case, it had little impact because the brands we sell in the US are mainly Italian and in small quantities.

For years, the industry focused on a volume-based model, leading to a devaluation of olive oil. What strategy is the industry currently following to achieve a further revaluation of olive oil and educate consumers on the value of the product?

The olive oil category is at risk of losing its global leadership in the sector if we do not get things right quickly. In this category, especially in Spain, where we are leaders in production, it is not understandable if we do not have a clear quality and consumer project. For example, in the press, the consumer is hardly ever taken into account, and everything revolves around the raw material. This is a mistake, since being a product that is widely consumed, the consumer should be at the center of the decisions that are made in the sector and in companies. In Deoleo, we talk about brand, quality, and the consumer. These are the three concepts around which our strategy revolves and around which the sector should revolve. In general, it is the consumer who decides, so we must take them into account. We should teach consumers that there are different oils, that they have different prices, and there are different moments to consume them depending on what each consumer wants.

What are the company's main goals for 2022?

One of the goals would be to reap the fruits of the first strategic plan we created, with an improvement in the evolution of results compared to other years. As leaders in the sector, we have the responsibility to play a leadership role so that the entire category improves with a view to the future.