Greece’s olive oil industry offers a lesson on economic hurdles

WSJ — Greek olive oil should be a shining example of the country’s export sector. Instead, it offers a lesson in why Greece remains deeply uncompetitive despite years of pressure to fix its economy.

Greece has what should be significant competitive advantages, including a climate that is favourable for agriculture and a 22% drop in labour costs since 2010, around the start of the Greek debt crisis.

But just 2.5% of Greek enterprises are involved in export activity, according to a recent survey by Ernst & Young.

Greece’s notoriously inefficient bureaucracy makes it time-consuming to secure health and safety approvals and export paperwork, according to Greek exporters.

The failure of Greece’s olive-oil makers to break into the international market for branded oil is especially painful. Greece is the world’s No. 3 producer of olive oil, according to Eurostat, but just 4% of branded olive oil sold world-wide is Greek, according to a 2015 report by the National Bank of Greece .

The reason: Greek olive-oil producers have mostly stuck to making bulk oil, unable or unwilling to invest in making the branded product that can command lofty prices in foreign markets. Only 27% of Greek olive oil is exported as a branded product, compared with 50% from Spain and 80% from Italy.

“Greece hasn’t invested to create a brand name, as have Italy and Spain,” says Christina Sakellaridi, who heads the Greek Exporters Association. “Now it’s difficult to compete with them.”

By sticking with bulk oil rather than branded oil, Greece is forgoing about €250 million in revenue each year, according to the National Bank of Greece report, money the capital-starved country desperately needs.

To produce bottled extra virgin olive oil, local farms would have to pay an agronomist to check their fields at least twice a year to make sure they are disease-free and send soil and olive samples to labs to check the type of fertilizers or herbicides used. The trees would have to be irrigated and pruned according to specific rules.

Olive-oil producers also often need to import products such as glass bottles and plastic caps.