Cobram Estate is Australia’s leading extra virgin olive oil producer, taking on the industry’s giants in Spain and Italy and beating them in global tasting competitions.
Last month, Cobram Estate was named the world’s most successful producer at the New York International Olive Oil Competition for a third successive year after taking out an unprecedented 11 awards, including two Best in Class trophies.
Australian oils took out four of the 18 Best in Class trophies, with 630 extra virgin olive oils from around the world entered in the competition.
The Victorian company’s CEO, Rob McGavin, describes himself as “just a farmer”, but his focus on quality and research has helped make Cobram Estate Australia’s top producer in under a decade.
The numbers are impressive: Cobram has one of the world’s biggest single olive estates, with around 1.5 million trees on 3000 hectares at Boundary Bend, a small town near the junction of the Murray and Murrumbidgee rivers. McGavin established the grove with Paul Riordan in 1998, as a nascent Australian olive oil industry was beginning to emerge. The initial planting was just 200 hectares.
The company has another 1 million trees on 2,800 hectares at the Boort estate, 120km northwest of Bendigo. The two groves produce around 13.5 million litres of extra virgin olive oil annually and turnover now tops $100 million.
Cobram Estate now also has groves in California, producing small-batch, single-varietal oils for the US market.
Boundary Bend Limited (BBL) is a public unlisted company with McGavin as its largest shareholder.
“We just set out to be farmers,” he said. “We weren’t marketers, we weren’t even producers of high quality food.”
However, BBL was producing high quality fruit, but was left to take what processors would give for its fruit while others value-added by making oil from it. One of the key drivers in McGavin’s business philosophy is using research to drive costs savings in the business while maintaining quality.
“Because we started from the supply side without a market, we just knew that if we produced as much high quality oil as possible at the lowest price that we should be able to survive,” he said.
The focus on quality came out of necessity, McGavin said: “we’ve been forced into high quality by the cost of labour”.
McGavin helped pioneer mechanical harvesting in Australia and as a result, has made the industry viable.
“We’re picking the olives for 10 cents a kilo, but if we were doing it the traditional way it would be $1 per kilo,” he said
The company produced 15 peer-reviewed research papers focused on the challenges they faced to develop a competitive advantage “not because we’re mad about doing it or like spending money – it’s just purely to solve a problem”.
“The whole thing’s been trial and terror to get there,” McGavin joked.
The surprising aspect is his willingness to share his findings with others in Australia. Some of the research, such as best before dates, has been picked up globally to set food industry benchmarks.
“A lot of people in other industries in leading positions can’t believe how open we are with information, but you can’t be an industry by yourself,” he said.
“We felt that if we can’t share our technology with other people and still be way in front of the game because of the next thing we’re working on, then we should give up. So we haven’t felt pressurised to go ‘let’s be precious’.”
The turning point for McGavin came in 2006, when BBL bought Cobram Estate, already an established brand with a strong supermarket presence, because, as he explained “we saw that we were big enough and it was almost like the tail wagging the dog”.
“We needed to take control of our destiny.”
The past nine years have seen McGavin reshape the local industry with the Cobram and Red Island olive oil brands. As well as being stocked in more than 1,500 supermarkets, the oils are exported to New Zealand, USA, Canada, China, Hong Kong and Singapore.
The company runs two of the world’s top 10 olive oil processing plants, crushing 75,000 tonnes of olives in 2013 to produce around 13.6 million litres of oil.
Then there’s a 9.2 hectare warehouse and bottle factory on Melbourne’s western fringe and a specialist nursery that suppliers other growers – the payoff from the early research into the best varieties to grown locally.
There are 100 permanent employees and 350 full-time equivalents and revenue now tops $100 million annually.
The critical lessons of growth
But uncertainty is one of the few certainties in agriculture and McGavin admits that on three occasions he had to go begging to the bank as the business teetered on the brink.
“We’ve nearly gone broke a few times from just a few key things: the currency going up, a big flood, Europe olive oil price dropping to record lows,” he recounts, recalling the most important piece of business advice his father ever gave him.
“The number one lesson, as my dad always used to say, is there’s only one way to go broke – spend more than you earn.
“Ensuring that your great brilliance and ideas can be funded is essential, because quite often it’s the cash flow crunch that ends that dream.”
His rules for a successful business are simple, but commonsense is often the hardest thing to implement.
“Life’s not just about money, although that has to happen in order to be sustainable, but more than anything it has to be fun. You’ve got to enjoy going to work,” he said.
To that end, who you employ is critical.
“Businesses don’t deal with businesses, people deal with people. It’s the team and the people.
“Don’t employ the smartest guy in the room, employ the guy who culturally fits the best and has the best work ethic,” is McGavin’s advice.
“Great people and passionate people drive our business, so it’s important to keep the rewards within the business.
“I say anyone who we employ won’t be passionate about our product on day one, but if they’re not passionate about it after 12 months they must be dead.
“We’re really lucky. We sell a very healthy product.”
His other tips for success are that “over-delivering on quality versus price is hugely important if you can” and investing in research.
“It’s so important because that keeps you at the cutting edge which will give you new systems that will give you better quality at a lower price and also opportunities to value add or give new innovations to customers,” he said.
The outcomes of that research have produced remarkable results.
Pollinating olive blossoms normally takes two days. McGavin found a way to get that down to between 12-24 hours, improving the fruit strike rates.
And Cobram Estate produces 10% more oil from its fruit than the next best processor in the world.
“That oil is not only 10% more, which means you’re 10% more cost effective, but it’s higher quality too,” McGavin said, adding that “it’s not just one thing, it’s 100 things” which led to that moment.
Cobram Estate’s place in the local market tells the story in stark terms. In 2004, it produced 25% of Australia’s olive oil from 2.5% of the nation’s trees, now it’s 65% of the oil from 18% of the trees.
“That just means our cost of production is way lower,” McGavin said. “Someone else has 80% of the trees producing 40% of the oil.”
Small things also add to the success. Putting autosteer on all the harvesters saved $500,000 a year in labour, while using the olive pits to fire the boilers saved another $500,000.
The other lesson is turning issues into opportunities.
“Every time we’ve had a problem, we’ve resolved it and made a business out of it. We try and leverage what we do and work with the industry,” McGavin said.
“We don’t see the Australian industry as competition, we see them as allies.
“We’re 1% of world production. They’re not our competition. We’re all together in this industry.”
How to market without a budget
Making Cobram Estate number one has been done with a minimal marketing budget.
“We grew from number 10 to the number 1 brand by both revenue and units sold, but it hasn’t been without fierce competition,” McGavin said.
“In the early days, getting people to try it is the huge thing – it’s absolutely critical. We offered the oil at half price so people would say ‘This is too cheap not to take home’. And once they tried it they came back.
“We spent all our limited marketing budget on getting influencers to come and see harvest so they see, taste, smell and understand a family-run business.”
He set out to create an army of ambassadors for his product, and more recently, sponsored tennis star Sam Stosur.
The other side of the equation has been attacking European producers in what McGavin called a “reasonably aggressive” strategy, pointing out inferior, deceptive and over-priced oils from the places people traditionally associate with olive oil.
“We’ve thrown a lot of mud at the competition, but we had to because consumers were just getting rorted,” he said.
While the Australian oils are all “basically good because we have to be”, Europe he says, sends us their rubbish and overcharges for it, using rotten fruit and refining it to hide the problems.
“Europe’s its own worst enemy because it just trades on tradition and growers make more money selling rotten,” he said. “50% of global olive oil production is refined and refined doesn’t mean better. They send us anything and treat us like fools.”
The Europeans also prevent companies such as Cobram from entering their markets with import tariffs of close to 100% on Australian oils.
“There’s no doubt Australian consumers have the best value olive oil in the world. Nowhere else in the world comes close and we feel so proud of doing that for consumers,” he said.
So McGavin has turned to the US as the next step.
“We’re going to the States because we think we can really add some value to the growers and get more oil at a higher quality, and introduce our way of growing and our way of harvesting, which is not anywhere else in the world,” he said.
Cobram already produces more oil than the entire US production, but the markets speak for themselves: Australia consumes around 45 million litres of olive oil annually; the USA is 350 million litres.
An increasing focus on health is also a key part of the company’s strategy, with McGavin emphasising that his oils have 3-5 times more antioxidants than competitors’.
“Health will get bigger and we know how much more healthy our oils are,” he said.
“Value is about quality and price, not just price. But value is a perception thing so we need to keep the education process going so people know what they’re getting and what they’re paying for.”
McGavin relishes the fight to take his extra virgin olive oils to the world.
“It’s been a battle, but it wouldn’t have been fun if it hadn’t.”
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