CEO / Filippo Berio USA
Olio nuovo, vino vecchio, say the Italians, new oil and old wine to indicate the best of life. And despite the worst olive oil harvest in the past 30 years, the disruption of supply chains by COVID-19 and inflationary pressures, Filippo Berio USA’s freshly minted CEO Dusan Kaljevic is determined to educate the American consumer and make a difficult year sizzle.
Kaljevic is from Italy’s olive oil heartland in Viareggio, Italy, where Filippo Berio’s parent company, Salov, was founded in 1919. Filippo Berio’s growing presence in the US market has been an even longer time coming, being registered as a brand in the United States in 1896. The distinctive gold and green bottle still bears the company founder’s signature going back to 1867. Less than a century earlier, in 1782, the olive branch became a part of the great seal of the United States where a bald eagle clutches one in its talon.
Now Kaljevic is focused on bringing oil from a new harvest to the land of promise, which represents a new market for him.
“First of all, for me it is a personal challenge to move from Europe to the United States – a completely new continent. The move was also a professional challenge, as becoming CEO of a company in the world’s largest consumer market is definitely important,” Kaljevic told CEO NA. “America is the largest import market for olive oil in the world, so obviously, the United States is extremely exciting for us.”
“I think it is very important to make clear to the buyers that this will be the most difficult year for the olive oil category.”
The United States consumes 360,000 to 380,000 metric tons of olive oil, which represents 35% of imports in the world. Meanwhile Salov is the largest Italian olive oil bottler with a presence in more than 75 countries, and a leading position in many markets including the US and UK. The central problem facing Kaljevic is how to make the market grow.
“Then there is the other side of the coin,” said Kaljevic. “The consumption in the United States is a little bit higher than 1 kilo (33 oz) per capita. This is an important number but still very low compared to some. For example, most important European markets, such as Italy and Greece, consume from 10 to 15 kilos per capita.
This is a challenge, and we want to have an active role in educating the consumer, the trade and the buyers on how to increase consumption. Household penetration is about 45%, and our role as category captain is to improve that household penetration.”
There is no recipe for blending extra virgin olive oil. Blending is an art form, as the flavor profile of the available oils changes every year. Filippo Berio samples 6,000 olive oils worldwide and only 6% are considered as the final choice that go into its product. Finally, it mixes these in Italy to achieve its specific blend. Part of the attraction of the United States’ market is precisely the variety of ethnicities and cultures, offering its master blenders the chance to find new flavors adapted to this cosmopolitan palate.
Because there is no standard recipe, the company goes on a quest throughout the world’s great olive oil producing countries each year to find the right olives to bring back to Italy to recreate the spirit of the company’s heritage.
“The entire production of the Filippo Berio brand comes imported from Italy,” says Kaljevic. “Why is that? It is precisely because we want to rely on the local expertise that we have in Italy – the art of blending, the modern facilities, the expertise of the local people. We think that is a strong advantage. We prefer to focus on the importing side and the distribution side here in the United States and leave our parent company in Italy to do the production side.”
The company has been involved in a search for new cultivars of olives, particularly with an eye to finding trees more resistant to climate extremes and pathogens. This is particularly urgent as Europe faces accelerating climate change. As of now, Filippo Berio has found 18 promising cultivars.
Back in the New World, Filippo Berio’s current strategic plan has three strategic pillars.
One is the coast-to-coast strategy. Historically, Filippo Berio is very strong in the Northeast with approximately 30% market share, while the West has just a 2% market share.
“The company will try to expand its market share in the West, which will be kind of a new start-up for us,” adds Kaljevic. “Naturally we will also try to consolidate in the Northeast and the South and accelerate in the Mid-West as we try to develop Filippo Berio on a national scale.”
To make this happen, the company will seek to reinforce its presence in the extra virgin olive oil segment after dominating the pure olive oil segment of the market in the United States.
“The United States is a huge continent with such diversity in terms of ethnicity and culinary tastes, we as a brand are trying to expand beyond the Mediterranean diet and are working on the American diet.”
“Striving for the highest quality is our second pillar. This means offering something unique and different in terms of flavors and recipes and also promoting the right size of the product. With the inflationary pressures and the worst harvest in the last thirty years, we are expanding the distribution of our smaller packages (25.3 oz and 16.9 oz) to attract those users who are new to the category.”
The third pillar is the growth of the market for pesto and balsamic vinegars, which requires strong partnerships with the mass merchandizers.
The company’s strategic plan foresees over $20 million in investment in the next three years, particularly in product introduction, marketing advertising and digital interactions.
But COVID-era supply chain snarls and bad harvests in Europe have been making building out the strategy harder than hoped.
“Overall, our company was impacted by a higher cost of logistics of over $6 million,” notes Kaljevic. “Additionally, the drought and heatwaves in Spain and Italy reduced the harvest and increased costs by another $30 million. We have a reliable network of olive growers across Italy, Spain, Greece, Portugal and Tunisia which means continued access to product that meets our quality standards, despite the crop shortages across Europe.”
But with the harvest in Spain down by 56%, Portugal down by 38% and Italy by 37%, the lack of olives in the world’s most important producing countries is expected to result in a drop of the global harvest by almost 35%, leading the industry to expect a double digit increase in pricing and a drop in demand. Given costs are what they are, optimizing expenses has now become a priority for the Tuscan company.
In order to face this challenge, the company radically altered its logistic footprint in the United States bringing the number of distribution centers down from seven to three in 2022. In that way the company reduced the number of transfers between different distribution centers, lowering the costs.
“Obviously the US, as one of the largest countries in the world, requires a special infrastructure to move goods,” says Kaljevic. “I think, with that optimization, we also realized a significant CO2 reduction.”
“Our supply chain department is under high pressure, but even then we could not compensate for the huge price increases that we have seen in the second half of 2022.”
The company is currently trying to partner with all the transportation companies, third-party logistic partners and retailers to optimize the orders, the minimum quantity of orders and the optimal assortment.
“In the United States you have the largest fragmentation of the transportation business,” observes Kaljevic. “There are over 270,000 small truck driving companies owning from 1 to 5 trucks and they represent 25% of the total network. For the last leg to retailers, Filippo Berio works with hundreds of small trucking companies and with retailers to discover how to optimize logistics as a priority for cutting costs.
Kaljevic made his name in the company conquering new markets in Eastern and Central Europe. Now he needs to take that knack for growth to the United States in troubled times.
New oil for a new market. That would be the best of life for this great Tuscan tradition.