Olive oil

Olive oil looks set to be the next victim of inflation, with suppliers warning poor crops and Brexit will push up supermarket prices after Christmas.

Spot market prices for European olive oil have risen dramatically over the last week as a result of poor crops from Italy and Greece and a delay to harvests in Spain.

Spanish extra virgin olive oil (EVOO) prices have jumped from €3,200/t (£2,751/t) to €3,600/t (£3,095/t), and suppliers fear Italian EVOO prices - currently trading at €6,000/t (£5,158/t) - could return to the peaks seen in 2015.

With olive oil production from Italy and Greece expected to plummet by a third in 2016/17, raw material costs were likely to continue rising, said Lisa Mullins, marketing manager at Filippo Berio. This would pile further pressure on supply chains already hit hard by sterling’s devaluation following June’s Brexit vote.

“England doesn’t produce any olive oil itself so it’s all got to be imported, and it’s going to cost almost 20% more,”added Geoffrey Davies, director of the Italian Olive Oil Company.

With hedging starting to run out, most suppliers would soon be forced to pass extra costs down the supply chain, said Mullins. “The likely outcome is that retailers will have to absorb a little bit, suppliers will absorb a bit and a bit will be passed on to the consumers.”

Average olive oil prices in the mults have already risen 2% year on year [BrandView: 52 w/e 16 November 2016] and Aldi recently increased the price of its extra virgin olive oil by 9%.

But Mullins predicted most retailers would wait until after Christmas to increase prices in store.

“We predict that prices will rise early next year,” she said. “It is certainly not months away. These are very real commercial challenges that we are wrestling with at the moment.”