Kenya and Kerikeri don’t necessarily strike you as natural business bedfellows, but when it comes to producing avocado oil, they’re a perfect combination.
Olivado came about back in 2000, when one of its founders saw that the oil content of avocado was very high and had great health benefits, so came up with a way of cold pressing it in commercial quantities. This original avocado oil produced in Kerikeri got a reasonable start in life, but costs were quite high and volumes weren’t high enough. There were also problems with the crop in New Zealand as it was quite small and irregular. By 2010, the business model wasn’t working commercially. Olivado needed to find a bigger crop, refine their processes and lower their production costs. The highlands of Kenya turned out to be the source for this second crop and all of a sudden, they had a regular supply of oil that they could distribute. To this day, around 60% of the crop is produced from Kerikeri, with the remaining 40% coming from Kenya.
So how did Olivado go from its humble artisanal beginnings, to offering a range of 23 products sold in 33 countries?
According to Jason Vokes of Olivado, the lightbulb moment was working out Olivado’s distribution model.
“Our distribution model is very rare. Olivado’s owner Gary realised that by cutting out the cost of distribution, he could reduce the overall cost of the product over its lifetime. We make a heavy investment in sales and marketing, but don’t rely on distributors in the countries we export to. This means that you are taking out that big distribution margin so we can compete on the shelf with the local product.”
Olivado is a very simple business but a very complex one at the same time. A move to the Xero platform with BDO’s assistance has been a real help for a business that has stakeholders based in Europe, enabling them to see everything in real time.
With 23 products and counting, Olivado’s new product development philosophy is also very simple: Identify the need, talk to the buyer, and find out from them if they think there is an opportunity.
“We like to go to our buyers and confirm that as the experts in culinary oils, we will go and source the best oils for the right price point and put it on their shelves, so a lot of it comes from conversations with those buyers.”
So are there any challenges to being based in New Zealand’s winterless North? Jason thinks that Kerikeri has “really come right” in the last few years.
“Our biggest industry is growth, so when you’re building houses, when your school rolls are going up and the doctors’ rolls are going up, that’s when Kerikeri grows. And that’s what’s happened for the last four years, especially in the last 18 months. Four years ago we had empty shops, now there’s not one empty shop in town.
The avocado industry has seen the opportunity to plant in Northland, so there are established orchards, they are less biannual than the Bay of Plenty where there is much more crop but we have more regular supply, there are huge plantings going on in Dargaville and further north so the future of avocado production in the north is big.
Shipping from here to our market, which is Auckland and beyond is a challenge. We can backload things that are being exported, but when the bridges at Kawakawa flood it’s a real pain. We’d like to see the North Port go ahead and see a rail link.”
The future looks bright for Olivado. They have just signed a distribution agreement with Korea, which has the capacity to become one of their biggest export markets. They are also pretty confident that they will be in the Australian market this year as well.
Olivado’s advice for taking your artisanal product to the global market.
- Make sure you can fund your growth. If you’re a foody-type business and buying a lot of raw materials, a lot of cost can be involved in production and storage.
- Understand your margins on a day to day basis, know what your production and raw material costs are and monitor them closely.
- Make sure you get payment terms that you are favourable to you, in other words, payment on placement of order, rather than a letter of credit, which is 90 days after delivery into the territory if you’re exporting.
- Use the resources that are there to help you. Go to NZTE, find out who is looking after your category, and/or the market you’re looking at. They have a wealth of knowledge and contacts in the market
- Spend some time in the market you’re looking to export to. Make sure you understand what the competitive environment is there. Make sure you understand how the distribution model works in those markets and don’t do anything until you know what your pricing structure and margin expectations are, at all levels of the supply chain, to the final retail price.