Victorian Olive Oil Producer Recieved $670,000 In Funding For Plant And Equipment

Victorian olive oil producer Rob McGavin is, like many agri producers, a charismatic, friendly and down to earth person. He’s also executive chairman of Boundary Bend and together with Paul Riordan, they have helped transform the olive oil industry in Australia, putting it on the world stage as a first class producer of extra virgin oil under the Cobram Estate label. Switching from wine to olive oil McGavin says health has been a big driver in this remarkable entrepreneurial story (and a prescient move considering grape prices have crashed). Marshaling large licks of capital from friends and family is a critical factor. “I lost both my parents to cancer and thus had an eye on the health aspects I was questioning what is it that we are eating that could be harmful to our heath? The vineyard was about money; olive oil is not just money; it’s about health, knowing how olives could be healthy. And my friends and family who backed us are still talking to us.”

Extra virgin olive oil has proven health benefits. It is the natural juice extracted from fresh, high quality olives and is a key component of the Mediterranean diet. Of all the mainstream cooking oils available, extra virgin olive oil is the only oil that has not been heat treated or refined, and therefore retains its full health benefits. The oil is 100 percent natural, replete with antioxidants, is cholesterol and preservative free.

Producing it at scale offers considerable financial benefits. Today, Boundary Bend covers approximately 6,532 ha of planted irrigated olive groves making it one of the largest producers of extra virgin olive oil in the Southern Hemisphere by both area and production and in the top 10 of the world. Selling oil to both the domestic and export markets, the company employs a 100 staff and grosses $40 million in revenues. With a 15 percent market share and a 30 percent share of the Australian category, McGavin claims market leadership. “We now have the Europeans buying our product and planning to double production.”

Until Cobram hit its straps, 80 percent of Australian olive oil was imported from Europe. McGavin asserts that much of that product does not meet ‘extra virgin’ standards. “When you squeeze an orange you get orange juice; when you squeeze an olive you get extra virgin olive oil. All the other products you see on the supermarket shelf are refined. The refining process carries real health issues. Virgin can be good for your health and it tastes good too.”

Growing up on a farm in Barcaldine, Western Queensland (where the Labour Party started in the early 1900’s after the Shearers Strike), McGavin says that his background on a small farm gave him the impetus to seek wider opportunity, completing an Advanced Certificate in Agribusiness Administration. “I started to think what I could do to become more educated. I saw opportunities all over. We had a small farm that could support one family. I wanted something bigger. I looked at where I could buy a vineyard and convinced Dad to mortgage the house and purchase a modest vineyard at Renmark (SA) for $235,000 in 1994.” Expanding the “modest” vineyard from 35 acres to 600 acres and selling out in 2003, McGavin says it gave him “a good financial start.” With friend, Paul Riordan he then went into olive production. “I wanted to diversify. I could see no reason why extra virgin olive oil couldn’t be successfully produced in Australia.”

To achieve scalable, commercial olive oil production requires a mix of capital, climate, soil, efficiency in processing and savvy marketing. In competitive terms an Australian producer is confronted by European producers which are heavily subsidised with product introduced into Australia that was heavily refined. Margins in this industry are tight. “We realised we wouldn’t have the scale to have a cost base that could (enable us) to compete with the Europeans.” Olive oil costs $5 a litre to produce Canola cost $1 so there is great incentive to blend in cheaper produce. McGavin says there is a problem here with adulteration. “About 75 percent is labeled extra virgin but it’s not. For us to survive it was necessary to get the higher quality, in scale.”

Scale requires capital and, apparently in the bush you go to your family and friends and their friends. This loose coalition have become cornerstone investors in the Boundary Bend enterprise, with friends etc tipping two tranches of $6 million each into the business, and, more recently, raising a further $20 million to fund the acquisition of olive oil assets of the failed Timbercorp. “It’s not all that profitable in this industry to be boutique. You need to go onto the supermarket shelves and into export markets.”

Apart from the loose collaboration of friends and family Boundary Bend recieved funding from the Federal Government under the The Geelong Investment and Innovation Fund (GIIF). According to company executive Andrew Burgess the fund was very valuable to the company. “It came at a good time”. He said the company received a total of $670,000 in funding. “The fund allowed us to put in plant and equipment that was eligible under the grant terms.
“Like many government grants it was a case of the government matching our funding on a one-for-one basis. The funds gave us more capability to analyse our olive oils and improve our bottling capacity. These are important assets to the company.”
The GIIF was established by the Australian and Victorian Governments, together with Ford Australia following Ford’s restructure of its manufacturing operations in Geelong.
The Fund will assist industry development in the Geelong region by providing grants to support new investment that will create sustainable jobs.
Round one of the Fund closed on 30 October 2007 and four projects were awarded a total of $3.3 million in funding, creating 193 full time jobs.

He says years or research led them to Boundary Bend. “We surveyed huge tracts of land looking for right soils, right climate till we found land on the northern side of Murray. We raised $6 million to plant the first grove and 500 acres of plantation.” As a result of the capital raising the two partners retain “about” 30 percent with the rest were friends, family and the like. Another $6 million from investors built further facilities leaving the group with no debt on the grove. Once production was under way the company raised a bank loan to build the processing plant.

Demonstrating the efficiencies and yields that can be achieved from this scale, Boundary Bend produces 25 percent of Australia’s oil on only 2.5 percent of Australia’s planted area. “We were swinging about our weight; the right climate the right soil the right techniques. The Timbercorp deal, initially a management contract gave the group a leap in volume and a move which gave the company about 50 percent of Australia’s oil.”

McGavin says that the company’s key differentiator is quality and freshness. “It’s all to do with the processing on site. This is were mechanical harvesting comes in. We never have fruit sitting around. Australia does a good job because we don’t get subsidies and we have high labour costs. Because we control the fruit, the processing, we can produce freshness that’s why we have so much of the share of the market. If you want to know its extra virgin, buy Australian.

“I went from sheep and cattle to wine grapes. I didn’t even know they went dormant in winter. Then to olive oil. This olive game has been so challenging. I don’t know if I’d have the kicker to do it again. (But) It’s highly rewarding; on any measure we’re in the top one percent of the world.”

Would you like to get funding to develop your business idea? There's money available now for qualified existing and start-up businesses. Phone toll-free 1800 813 863.

No claim is made the above funding success is due to ABFC.