THE OIL CRISIS

There's a war being waged over oil. The oil in question is olive oil, and the fighting is among major branders, who are wielding price cuts and heavy dealing in a struggle for market share.The wrangling has shaken up the category, boosting unit sales nationally but depressing dollar sales, according to scanner data."Now there is more competition between the brands out there. More companies are trying

There's a war being waged over oil. The oil in question is olive oil, and the fighting is among major branders, who are wielding price cuts and heavy dealing in a struggle for market share.

The wrangling has shaken up the category, boosting unit sales nationally but depressing dollar sales, according to scanner data.

"Now there is more competition between the brands out there. More companies are trying to promote their brands to keep their customers, or increase their business," said one category manager, reflecting the state of the business from where the retailers sit.

These oil wars have been prompting supermarkets to rethink their sections. Some operators are

offering more varieties than before and allotting more space to the active category. Retailers told SN they've noted overall sales increases, and in some cases the price drops apparently are encouraging consumers to trade up to higher quality grades of oil.

The retailers said the growth of the category is also a direct result of more consumers using olive oil in their everyday food preparation because of its health benefits.

Scanning data compiled by Nielsen North America, Northbrook, Ill., show a 3.6% rise nationally in unit sales to 55 million for the year ended March 12, 1994. However, dollar sales, perhaps reflecting the trend of lower retails, slipped 2.1% to $208 million during the same period.

A number of retailers reported that most recently they've been seeing both positive sales and profits, and credited the aggressive dealing by manufacturers and their representatives.

One of them was Big Bear Stores, Columbus, Ohio. "Brokers are dealing heavily," said Alan Asbury, grocery buyer for the chain. "The cost to consumers has been lowered by heavy deals, as we have been given better price points for customers to trade over.

"We expect this promotional activity by the brands is having a positive impact on our sales and profits," said Asbury.

Other retailers reported similar conditions. At Big Y Foods, Springfield, Mass., for example, olive oil sales and profits are inching upward, said John Corcoran, category manager.

"We have experienced price declines, and most manufacturers continue with temporary price reductions on a regular basis. We have had a slight increase in sales because of that," he said.

Bel Air Markets, Sacramento, Calif., also reported positive olive oil performance, with movement increasing for the category as prices have come down, said Winston Wong, grocery buyer.

"We are seeing deeper deals," he said. "There are more manufacturers, and the manufacturers are giving deeper deals. Price has gone down significantly in the last two years."

The buzz of activity on the supply side is adding to an already rising clamor from the demand side for olive oil, said industry sources.

"Ten years ago, few people used olive oil except for the real ethnic groups. Today, more people who are not in those particular ethnic groups are using it than ever before," said Ross Nixon, vice president of merchandising at Dahl's Food Markets, Des Moines, Iowa. "This might be due more to a learning process than a price issue," Nixon said.

"Price is what sells in olive oil, but only to the person who is not a real connoisseur. The real good cook knows the extra extra virgin has a lot more taste, quality and flavor for the money spent," he said.

Dahl's carries a relatively small section, with typically less than 10 stockkeeping units, Nixon added. "Des Moines is not a huge metropolitan area and we do not have a large Italian population. We don't sell gallon cans of olive oil," he explained. "We have maybe two or three varieties in 7- to 16-ounce jars in a 2-foot section. We have increased the number of brands carried and the space. The new brands and line extensions have led to increased facings."

Treasure Island Foods, Chicago, is at the other end of the spectrum, with 40 brands and more than 100 SKUs of olive oil.

Like Nixon and some other retailers, however, Treasure Island's Lee Zarras, deli, bakery and fancy food buyer, linked recent category expansion to increased demand. In his stores, extra virgin olive oils are attracting the largest sales increases, he added.

Consumers, he said, are reacting to "the benefits of extra virgin over regular olive oil, or even butter or margarine. It is naturally cholesterol-free and contains so much less saturated fat. It's healthier. More people are learning this and switching to a higher quality olive oil."

Treasure Island capitalizes on the trend with constant sampling of olive oil and signs to remind consumers that extra virgin olive oil is lower in acidity and cholesterol-free.

"We offer one of the largest varieties in our market," Zarras said. "We aim for variety. In our typical store we allocate maybe 60 feet to olive oil, not counting floor displays. We have increased our variety by maybe 10% to 15% in the past year because of demand. We know our customers like to see new things on the shelf, so we are constantly trying to find new items and new brands, or higher quality items with better flavor."

Wong of Bel Air Markets said his customers also seem to be gravitating toward higher quality oils.

"Right now the most movement is in the extra virgin olive oil. Looking at movement, it may be trending toward the customer stepping up, but it is hard to say. A lot of companies have been promoting olive oil in general. Extra virgin has definitely picked up, and regular may have dropped off a little within the last couple of years," Wong said.

"We carry about 30 SKUs. We added maybe another five stockkeeping units in the past year, usually different sizes of a particular brand," he added.

Michael Schultz, senior vice president at Hughes Family Markets, Irwindale, Calif., also has seen a shift toward more expensive olive oils. "Our best seller is Bertolli brand extra light and extra virgin in the 34-ounce sizes. We have seen some trading up to extra virgin from regular."

Hughes carries 35 stockkeeping units in about 16 linear feet, an increase of three or four SKUs and about 2 feet from last year.

"We have seen some shifting of consumer preferences toward extra light/extra virgin olive oil," said Teresa Reifsteck, grocery merchandiser at J.M. Jones Co., a Supervalu division based in Champaign, Ill. "We see increased movement in extra light or anything light."

Big Bear, on the other hand, hasn't seen a move toward extra virgin oils, according to Asbury.

"Sales are pretty even between virgin and extra virgin. Regular olive oil is still the leader. The mild and light forms account for about 75% of regular olive oil sales. We move from 8-ounce to 17-ounce olive oils, but the 17-ounce is the big item," Asbury said.

Big Bear designates 4 feet of shelf space for oils, offering only one major national brand and its private label. "In the past year, we dropped another brand because of lack of movement. The [surviving brand] and our private label have been very aggressive. The other brand was not so aggressive in our part of the country."

Big Y's Corcoran, like Asbury, said customers are still going for the conventional olive oils, which are now even cheaper due to price cuts. "Our best seller continues to be 100% olive oil," he said. "Very small numbers of customers are trading up to higher quality extra virgin."

He said Big Y carries 22 stockkeeping units on about 12 linear of shelving. "The space allocated remains about the same as last year. We have introduced some new items but discontinued some slower movers."

Joe Crimaldi, director of procurement at Riser Foods, Bedford Heights, Ohio, has seen an upward trend across the category. "Our best-selling item is a gallon of olive oil at $9.99," he said, adding that sales of virgin oils were increasing. His stores carry about 30 SKUs in about 6 feet of space, he said.

Jim Dodge, grocery buyer at Copps Corp., Stevens Point, Wis., said olive oil sales were up 4%, but profits remained flat. "We typically carry 11 stockkeeping units of olive oil in the stores and three are direct store delivered. There has been no change in the past year."

Nixon of Dahl's said the pricing and promotion dynamics of the olive oil category can be seen as a microcosm of what's happening to the entire grocery department in his stores.