Oil Consumption in Greece. Literature Review part II

Καλησπέρα!

Σήμερα συνεχίζουμε με το δεύτερο κομμάτι από την επισκόπηση βιβλιογραφίας του Βασίλη Κακοσαίου. Το πρώτο θα το βρείτε εδώ. Καλή ανάγνωση και όπως πάντα στο τέλος έχει τραγουδάκι.

2.4          Greece and olive oil

Olive cultivation comprises one of the oldest agricultural activities in Greece (Panagiotakos and Matalas 2009). The history of olive oil and its contribution to the Greek diet goes back centuries and even today the production of olive oil plays a substantial role in the sustainability of the Greek population. Thousands of tonnes are produced every year setting Greece as one of the biggest producers and dominant exporters, while the per capita consumption is almost 18 kg, which is the highest worldwide (Siskos, Matsatsinis et al. 2001; Lazaridis 2004; Karipidis P 2005; Scheidel and Krausmann 2011). Characteristic is the figure below (Figure 2), which implies the dominant position of Greece in the global olive oil market, being the third producer of olives and olive oil worldwide. Moreover, olive oil signifies 80 per cent of the fat and oil intake, being almost the exclusive fat source of the Greek diet (Tzouvelekas, Loizou et al. 2001).

Source: FAOSTAT, 2009

Until the early 1990s the demand for olive oil remained constant. Per capita consumption, income, prices of olive oil and prices of seed oil lied in harmony, either in short or long-term periods of time (Tzouvelekas, Loizou et al. 2001). Amongst the various variables of the significance of olive oil, price was estimated that is more important than the prices of substitutes and disposable income, whereas the strong linkage of olive oil with the Greek diet was approved by the inelastic demand of olive oil (income elasticity was lower than unity) (Tzouvelekas, Loizou et al. 2001). However, Siskos and Matsatsinis (2001) found that price is more important for the distributors than for the final consumers, despite the high levels of consumption. This can be easily explained as quality is considered by both customers as the most important attribute (Siskos, Matsatsinis et al. 2001). Olive oil is sold either in bulk (domestic trade and exports) or branded, reflecting the unique distribution and trade system, where tradition and up-to-date methods co-exist (Siskos, Matsatsinis et al. 2001).

Nevertheless, during the 1990s, olive oil consumption was unsettled by a variety of reasons. Tzouvelekas (2001) suggested that the entire olive oil supply chain system will be triggered in compliance with the change of the existed lifestyle and the low prices of seed oils. Moreover, price fluctuation due to the two-year cycle that olive oil production follows, affected the purchase of Greek consumers (Tzouvelekas, Loizou et al. 2001). What is more, pressure on the disposable income influenced the consumption, which have been decreased in the first half of the 90’s (Lazaridis 2004). In addition to this, market share was reduced by the entrance of multiple substitutes in the market, such as sunflower oil and palm oil (Siskos, Matsatsinis et al. 2001).

Worldwide, consumers have lived through a transition from a traditional old-fashioned lifestyle to a modern urban way of thinking. Prosperity and the continuous development of the marketplace led to the entrance of edible oil into the households and to the increase of the per capita consumption (Scheidel and Krausmann 2011). For instance, from 1972/73 to 2002/03, total edible oil consumption in the European Union has increased by 60% and per capita consumption by 45% to 19 kg per year. However, olive oil consumption in non-producing areas remains at a low level, as food industries prefer cheaper edible oils. Traders and retailers reacted inefficiently and as a result the consumption of olive oil received a sudden shock. To be more specific, as it is illustrated at Table 1 in the non-producing EU countries per capita consumption reaches 1 litre per year, whereas consumption in Greece is nearly 17 litre per year (Scheidel and Krausmann 2011).

Table 1. Per capita consumption (food) of olive oil (liter/capita/year) in selected EU15 countries, 1972–2003.

Region Country 1972/73 1982/83 1992/93 2002/03
Producing countries   (EU15) Spain 9.8 10.4 12.7 12.9
Italy 13.4 11.5 12.6 14.4
Greece 23.3 22.4 20.0 16.7
Portugal 7.6 5.0 4.3 5.5
France 0.4 0.4 0.7 1.8
Non-producing countries   (EU15) UK 0.06 0.05 0.2 0.7
Germany 0.06 0.09 0.2 0.5
Austria 0.05 0.07 0.2 0.6
NPC average 0.05 0.07 0.2 0.6

Note: Data on consumption are averaged over the indicated years; NPC, nonproducing countries.

Source: Based on FAO (2005, 2008b)

Greek-style diets have changed, as modern lifestyle requires less time for food preparation and at the same time high cost to purchase healthy products (Contaldo, Pasanisi et al. 2003). For that reason Greek consumers turned to alternative food choices, either away from home (Mihalopoulos and Demoussis 2001) or to other fats and products less expensive (Siskos, Matsatsinis et al. 2001). According to Siskos and Matsatsinis (2001), price differences between olive oil and vegetable oils, resulted to the rise in the consumption of the latter (Siskos, Matsatsinis et al. 2001). As it is illustrated in the following table, the cost of olive oil is almost twice the cost of vegetable oils. On the other hand, Lazaridis (2004) found that the demand of olive oil is depended on its price and little on the prices of the substitutes (Lazaridis 2004).

Table 2. Prices of olive and vegetable oil brands per litre (€)

Type of Oil

Acidity

Brand Name

Price

Olive oil

Extra Virgin

Altis

5.24

Extra Virgin

Galaxias (own brand)

3.67

Refined

Galaxias (own brand)

3.37

Extra Virgin

Minerva

5.15

Virgin

Ermis

4.15

Organic

Minerva

6.92

Pomace olive oil

Minerva

2.96

Galaxias (own brand)

2.14

Corn oil

Galaxias (own brand)

1.98

Flora

2.87

Sesame oil

N/A

6.98

Sunflower oil

Galaxias (own brand)

1.92

Sol

2.59

Soya bean oil

Galaxias (own brand)

1.81

Soyola

2.15

Prices derived by Galaxias S.A (August 2011)

2.5          Greek consumers

Demand variations can be explained by the fundamental law of demand. However, quantity demanded changes not only by fluctuations in prices, but also in response to variances to total expenditure and to tastes and preferences (Karagiannis and Velentzas 1997; Karagiannis and Velentzas 2004; Mantzouneas, Mergos et al. 2004). Meaning that, demand of a particular good reacts to three different effects overtime, the total substitution effect, the income effect and the habit effect. In a similar way, expenditure shares response simultaneously to the aforementioned effects (Karagiannis and Velentzas 1997; Karagiannis and Velentzas 2004). A previous survey, which examined food consumption patterns in Greece, predicted that the food share will be decreased by 2010 (no evidence of the financial crisis in the year of publication) (Karagiannis and Velentzas 2004). Also, the Greek population will consume less cereal products and the budget share for meat, vegetables and oils will be greater (Karagiannis and Velentzas 1997). The present study focuses on the income effect on the Greek households adding the important value of the financial crisis. In particular, the research examines all the changes in the quantity demanded of olive oil and the aberration of the food expenditure share that caused by the income fall due to the recent debt crisis.

Karagiannis and Velentzas (2004) attempted to analyse the demand changes in Greece explaining general post-war consumption figures and in particular food patterns (Karagiannis and Velentzas 2004). To begin with, it was found that the income effect appeared to be a stronger indicator of demand changes than the total substitution and habit effects, among all the commodity types. Moreover, food products were considered as basic components due to the inelastic total expenditure and food consumption was proved to be persistent to changes on tastes and preferences (Karagiannis and Velentzas 2004). For instance, Greek islanders still remain loyal to Mediterranean diet patterns (MDP), even Western practices and food habits have been extensively adopted by the Mediterranean world (Romaguera, Bamia et al. 2009).  Younger Cretan women appeared to have persistence with traditional recipes and cooking practises with only few changes on behaviour. They showed an aversion towards some green vegetables and pulses and preference to red meat (Tsakiraki, Grammatikopoulou et al. 2011). However, the Mediterranean diet, which is inextricably coherent with olive oil, is predicted to be gradually transformed in the near future considering that only 57% of a sample of Greek population still follows MDP (Romaguera, Bamia et al. 2009). Obesity and increase on the mean weight of Greeks was mentioned proving that even populations, like Cretan farmers, strongly connected with traditional diets can change their lifestyle habits.  Spanish population showed a greater Westernisation of their diet, while Mediterranean diet in Malta and Sardinia is not disappearing (Romaguera, Bamia et al. 2009).

During the post-war period, Greek population had experienced a significant increase on the real income and a positive income effect on total consumption (Karagiannis and Velentzas 1997). Wealth growth was the main driving force of the increase of the total expenditure, whereas food expenditures have shown a permanent annual decline of 0.98 per cent (Karagiannis and Velentzas 2004). That drop on the food share can be explained by the habit formation, reflected by the Engel’s law, in compliance with the rise on food prices. A characteristic example of the habit effect is the fact that Greek consumers purchase less bread and cereals, while consumption of meat and livestock products (i.e. milk, eggs) has been given a boost (Karagiannis and Velentzas 1997). What is more, food expenditure has been redirected against oils and fats, as a matter of their new preferences. Finally, Greek households became more price-concerned as the substitution effect increased at a greater level comparing with the income and the habit effect (Karagiannis and Velentzas 1997).

Nevertheless, over the last two decades, Greeks have tended to consume more food away from home, an activity that is strongly depended on household income, household size and urbanization (Mihalopoulos and Demoussis 2001). Recent changes on income could turn consumers to home-made food; a prediction that implies less consumption of olive oil in restaurants, but at the same time more cooking and olive oil usage respectively. However, the latest research on the behaviour of Greek households discovered new trends towards reduced meal preparation time (i.e. ready meals from supermarket or take away food restaurants) (Mihalopoulos and Demoussis 2001).

2.6          Summary

To sum up, regarding the objectives of the research, literature review provided adequate evidence on the extend that olive oil is associated with Greek diet and culture. Food consumption and behaviour was examined in terms of the affordability of the Greek households to cover food necessities, during the recession period. Changes on food expenditure due to income reductions were also taken into account. Moreover, olive oil was examined in terms of the purchasing and consumption, finalising to the approval of that coherence. Finally, the research analysed the implications on the demand of olive oil that caused by the entrance of multiple substitutes, considering the role that price differences play to the consumer food choices of Greek population.

Next chapter attempts to provide a deep understanding on the methods that were used. Data collection applied by a combination of different research techniques, considering both quantitative and qualitative measures

Τραγούδι σήμερα επιλέγω εγώ. Calla, It Dawned On Me

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