Spain is one of the largest producers of olive oil in the world. It is one of Spanish kitchens’ most commonly used ingredients. Therefore, the price of olive oil, often referred to as ‘liquid gold’ due to its essential role in cooking, is closely monitored by Spanish households. Especially, since the price of olive oil has doubled in recent years due to prolonged drought and inflation.
Mercadona has sparked a fresh wave in the existing olive oil price war. Spain’s leading supermarket chain is now reducing the price of its one-litre bottles of olive oil to below €7. Starting this Wednesday, the price for both the Suave and Intenso varieties will drop to €6.95, down from the previous €7.62. Additionally, the price of the three-litre bottles will be reduced to €19.85, offering a significant saving compared to the earlier price of €22.76. This marks a 25% price reduction for olive oil at Mercadona so far this year.
Competitive edge amidst price wars
This strategic move positions Mercadona with the most competitive olive oil prices in the market, putting pressure on its rivals. According to data from the Organisation of Consumers and Users (OCU), Carrefour currently offers the highest average price per litre at €11.33, followed by El Corte Inglés at €10.87, and other competitors like Día, Alcampo, and Lidl with prices ranging between €9.89 and €8.39 per litre.
Expectations of a better agricultural season
Mercadona’s price cut follows a recent trend among major supermarket chains to lower prices as wholesale olive oil prices begin to ease, partly due to expectations of a better agricultural season. The ongoing price reductions are seen as a response to the severe inflationary crisis that has driven up the cost of this essential kitchen staple. The Spanish government has also extended the reduced VAT rate on olive oil to 0% until the end of September, with plans to maintain a super-reduced rate from 2025 onwards.
Government scrutiny
Mercadona’s decision comes on the heels of an investigation by Spain’s Directorate General of Consumer Affairs, which is scrutinising whether supermarkets, including Mercadona, are correctly applying VAT reductions on essential goods. The competitive landscape in the food sector has intensified as the inflationary crisis subsides. It is leading to fierce price competition in an industry already known for its tight margins. According to the Bank of Spain’s Business Margins Observatory, the food distribution sector saw profit margins of 12.7% in the first half of the year, a notable increase from 2023.