Olivia takes a saucy road abroad
Olivia's executives know that the Israeli market is too small for a company that specializes in quality sauces, condiments and spreads. Thus the company, which invested no small sum in teaching Israeli consumers how to pronounce its name and how a quality sauce can vastly improve the foods that they prepare, is now looking for new growth engines.
Olivia is currently negotiating with a few large overseas supermarket chains, with the objective of selling Olivia products under the supermarkets' in-house labels.
"Sauce and spread sales in Israel are worth about NIS 90 million annually at consumer prices," says Olivia CEO Iris Fine. "As a company, we realized that we had to branch out."
Fine notes that the company considered entering the olive oil market, but decided against this because "most of the players in this field lose money." The same went for the option of entering the mayonnaise market.
Its examination of the mayonnaise market helped Olivia to understand what the company's problem is in Israel: The markets are relatively small and consumers are not necessarily looking for quality. Mayonnaise sales in Israel are estimated at NIS 90 million annually, and the market is controlled by Unilever Israel, via the simple mayonnaise produced by Telma.
"We brought quality mayonnaise from France and did a taste test against Telma's simple product," says Fine. "The consumers chose Telma." It is quite likely, explains Fine, that people are simply looking for the flavor with which they are familiar.
Olivia enjoys strong corporate backing: Tnuva bought 50 percent of the company's shares from the Kardan Group in 2001, and it purchased the remainder of Kardan's holdings in Olivia, 45 percent, in 2002. In July 2001, Olivia invested NIS 8 million in building a new brand. When the brand was launched, the CEO at that time, Rafi Orel, said that the company's sales target for 2004 was NIS 70 million.
The company is indeed growing, particularly after the redesign of its packaging in 2003 and a focus on specific products, but the sales target mentioned in 2001 still seems a long way off. Fine says that sales in 2003 totaled NIS 32 million, and she is anticipating 30 percent growth in sales in 2004, to NIS 54 million, without any new products. This growth forecast is based on the expansion of activities in the local market - both retail and institutional - and on exports.
Fine explains that Olivia underwent repositioning in 2003. "Olivia, which was a gourmet brand," says Fine, "now appeals to the general public." Market surveys conducted for Olivia by Teleseker found that 25 to 30 percent of the population buys Olivia products (including Vicol olive oil spreads), and that the awareness of the brand has jumped from 40 percent to 66 percent.
The relaunching of Vicol demonstrates Olivia's advantages in the market. In 2000, Tnuva began marketing Vicol, with a goal of conquering 30 percent of the margarine market within two years. The product, which was developed in Olivia's laboratories, was marketed under Tnuva's label, as the company felt that the Tnuva brand would promote the product better than the Olivia name would. Despite substantial investment in advertising, however, Vicol did not become a regular product in Israeli refrigerators.
At the end of October 2003, the product was relaunched as Olivia Vicol - and according to data collected by the Store-Next research company in November, sales jumped to 9.9 percent of the margarine market, up from 4.8 percent in October and 3.9 percent in the January-March 2003 period. Fine says that margarine sales in Israel are about NIS 100 million annually.
Fine says that despite the growth of Olivia in Israel, the company has to turn to overseas markets in order to increase sales substantially. She admits, however, that "there is no place for the Olivia brand in the world." That is why the international marketing strategy is based on the development of products for supermarket chains' in-house brands. "From our point of view, two such deals could significantly increase our sales," says Fine. Olivia currently produces products for Supersol's private label.
Over the past year, Olivia has also begun considering cooperation with sister companies in the Tnuva group. Olivia will soon embark on a joint campaign with Sunfrost: Frozen mixed Chinese vegetables will be marketed with Olivia's new soy sauce. Olivia also wants to promote its sales by marketing its sauces along with Tnuva's "Mama Of" (Mother Chicken) poultry products.