Deoleo studies its entry into the cosmetics business with a focus on Asia

Deoleo, one of the main oil groups in the world, with brands such as Carbonell, Bertolli, Carapelli and Koipe, is considering diversifying its business into a new category: cosmetics. The company has identified that the main use of its olive oil products in Asia, and especially in India, the second most populous country on the planet, is not for food but for skin care, as well as for massages.

The company has not yet launched a specific product line to exploit this business niche, although it has adapted the sizes and packaging of its products to meet this demand. This is the case of the Figaro brands, the best-selling in India, or Sasso, in Saudi Arabia. However, Deoleo is now considering creating a specific line of business focused on cosmetics, according to sources familiar with its plans.

various uses

The company has identified various cosmetic uses in which olive oil can be used and which could lead in the future to products specifically aimed at meeting those needs. Some examples are the use of olive oil as a hair revitalizer (applying it before shampooing), but also as a make-up remover, moisturizer or exfoliant.

The potential business that the company could access with this new line of business is significant. On the one hand, we are talking about countries with a huge population. In the case of India alone it amounts to 1.3 billion people. But, in addition, these are markets where there is no strong tradition of using olive oil for cooking or seasoning food, as is the case throughout the Mediterranean arc, which makes it difficult for a company in this sector to experience strong growth due to this way.

On the other hand, they are markets where the oil is used for cosmetic purposes, which has caused a natural growth in Deoleo's sales for this purpose. The company estimates, in fact, that about 20% of the clients of its international business unit already use its olive oils for cosmetic purposes. And all despite the fact that the company has not adopted a determined strategy to exploit this business. At least until now, when he is considering it, even if it is not his strategic priority.

The drop in turnover and the financial problems that Deoleo has had in recent years have caused the current management team, led by Ignacio Silva, to adopt a dual strategy. The company maintains its intention to prioritize value over volume, buying quality raw material, even if it is paying a premium, with the aim of distancing itself from the banality into which the category has fallen and asserting the strength of its brands. In addition, it is focusing its investments on profitable markets to take care of the income statement. Deoleo's objective is to reach an EBITDA of 55 million in 2023, which would mean doubling the 2019 figure: 27.7 million.

It faces the final stretch of its restructuring

The group reached an agreement with its creditors in September 2019 to restructure its 575 million debt. The agreement includes a debt capitalization of 283 million for 49% of the capital, while the current shareholders, with CVC at the helm, will keep the remaining 51%.

The January meeting approved the agreement, along with an accordion operation and the entry of creditors into the capital. The company reached an agreement with the Salazars in February to end their litigation, a condition that the creditors demanded.

Just a few days ago, Deoleo obtained a judicial green light for the pact, whose next step is for the current investors to increase capital by 50 million euros. The moment is not the most propitious, but the company expects to complete the process in the first half of the year. Its debt will drop 242 million and it will extend maturities.