OLIVACOIN : The financial solution of the olive oil market

  • by Ismael Santiago Moreno
  • May 15, 2018
  • 0

In recent times, the accurate and timely traceability of products and activities in the supply chain has become a new factor in food and agribusiness. Increasingly, consumers in many parts of the world demand for verifiable evidence of traceability as an important criterion of food product quality/safety.

The mission of OLIVACOIN is to contribute to the development of a global Culture of Food Knowledge, thanks to its own traceability technology, which will improve consumer protection and safety.

A recent example is Deoleo, which has been forced to pay compensation of 5.8 million euros to avoid a collective trial in the United States. Plaintiff Scott K. accused the company of falsely labeling Bertolli extra virgin olive oil, Bertolli extra-clear olive oil and Bertolli Classico olive oil.

One of the big problems in this false labeling class action was the true country of origin for the olive oil. The labeling indicated that the oil was strictly ‘imported from Italy’.

The product can pass through Italy, where Bertolli extra virgin olive oil and other olive oil products are mixed and bottled. But according to the applicant, the oils come from olives grown and pressed in several countries. Only some of those countries were Greece, Chile, Spain, Australia, Turkey, and Tunisia.

If Deoleo had used OLIVACOIN’s traceability technology, this situation would not have occurred and would have saved an amount of money that represents more than 2% of its market capitalization on the stock market.

The analytical traceability technology of OLIVACOIN allows structuring the digital history of olive oil to end up executing in a smart contract, thus ensuring the veracity of the product and enabling the execution and access to the funds associated with each intervening agent.

In economic terms, the objectives pursued by Olivacoin are to contribute directly to the drastic reduction of the financial costs borne by companies in the olive oil sector and indirectly to the reduction of 5% in the supply costs of the companies in the sector. This in Spain accounts for 90% of sales, which generates low levels of Ebitda.

In addition, Olivacoin makes it possible to minimize the financial risks of an adverse fluctuation in the prices of olive oil, through the use of a Blockchain Futures Olive Oil Market (MB-FAO), using Smart Contracts technology, as instruments for guaranteeing the Clearinghouse.

The purpose of Olivacoin is to provide the sector with greater financial autonomy, creating a system of exchange and payment for the agents involved in the global supply chain of such raw material, allowing greater agility, profitability, liquidity and disintermediation thanks to the integration of our own blockchain and an analytical system of traceability for olive oil.

Olivacoin’s technology will allow integrating, in a more efficient way, the global supply chain of olive oil, which would result in a drastic reduction of intermediation and supply costs of the companies.

In order to know the financial situation of the olive oil sector, an exhaustive study of the thirty most representative companies in this sector in Spain has been carried out, for which the balance and the representative results account of the olive oil sector in Spain have been obtained, from the sum of the different items.

The study has shown us one of the main financial problems in this market, the provisioning/sales ratio is considered at 90% levels.

The methodology used for the financial valuation of the sector has been the discount of free cash flow for the shareholder and for the discount rate the CAPM, according to the listed company Deoleo and a risk premium of olive oil of 25%.

The resulting data, based on a discount rate of 6.25% and an intangible ratio of 8%, is a valuation of the olive oil sector of 1.180.714.003.11 euros and its intangibles of 94.457.120,25 euros.

Olivacoin technology could reduce the value of the supply/sales ratio by 5%, which would give us new and promising figures: an assessment of the sector of,35 euros and its intangibles of 324.240.319,15 euros. So a reduction of 5% in the cost of provisioning in relation to sales would cause an increase in the value of knowledge of 229.783.198,90 euros. Part of the increase in value added should be mainly due to OLIVACOIN.

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PhD. University of Seville