Price analysis of extra virgin olive oil

Abstract

Purpose The price of extra virgin olive oil (EVOO) is highly subjected to variability. In this way, the consumer is not able to perceive a price of reference. The purpose of this paper is to investigate this topic, trying to define a range suitable for the selling of EVOO. Design/methodology/approach A mathematical model is applied to the three price levels (i.e. production, intermediate and selling). It studies the relationship among main variables: purchase cost of olives, the production cost of olive oil, the yield of olives obtained by the technological process and the profit margin. To define the input data, 25 producers of olives and 25 owners of olive oil mills are involved. Findings The production of EVOO depends strictly on the production of olives, which typically is subdivided in a year of “high production” and in a year of “low production.” The price of EVOO is subjected to a great variability; however, it is possible to propose a range that varies from €7.0 per liter to €8.7 per liter. Research limitations/implications The level of acidity influences significantly the quality of olive oil, and this model has the limit to not analyze the variation of the price in function of this parameter. Originality/value This study is the first to propose a pricing model to evaluate EVOO. The literature section supports this assumption.