Examining the Determinants of Olive Oil Demand in Nonproducing Countries: Evidence from Germany and the UK

Abstract

Consumption patterns of olive oil have changed over recent years influencing the supply chain. The consumption has increased in countries where olive oil is not part of the traditional diet, as for example Germany and the UK, where the average consumption grew by 11% and 13% respectively during the period 1995–2003. The opening of new nontraditional markets has shifted exports and restructured the supply chain. Mediterranean countries have been the traditional suppliers of olive oil with the EU Mediterranean Member States being the main exporters, while the non-EU Mediterranean countries try to gain market shares in the EU markets in an attempt to benefit from the preferential access due to the Barcelona Agreement. This article tries to identify which factors influenced olive oil demand of nontraditional consumers using evidence from Germany and the with the help of a gravity model. The results of the random effects models corrected for serial correlation and heteroskedasticity indicate that being a Mediterranean Partner Country enhances olive oil exports to Germany and the UK. Moreover olive oil exports are positively related to direct marketing strategies and tourism, implying that these factors have the largest impact on the olive oil exports from producing countries and consequently on the overall supply chain.