The Good Oil

The Boundary Bend Limited Story

"Squeeze an orange and you get orange juice; squeeze an olive and you get extra virgin olive oil," says Rob McGavin, co-founder and executive chairman of Australia's largest olive oil production and marketing company, Boundary Bend Limited. If only building the business had been that straightforward.

Like thousands of other hobby farm enthusiasts, Rob McGavin and his business partner Paul Riordan started simply: growing olives and pressing oil. But they have turned their interest - Boundary Bend - into an international vertically integrated business.

McGavin and Riordan now control all facets of their business from nurturing saplings in their olive tree nursery to bottling and distributing extra virgin olive oil to consumers worldwide. After a recent trip to the US, Rob is feeling very positive about plans to expand Boundary Bend's operations to Argentina.

The Challenge

Rob says his biggest headache has been "pioneering a new industry to grow olives and produce extra virgin olive oil in a modern and mechanical way".

The Solution

Rob says that Boundary Bend has spent "an enormous sum of $10 million on research and development" over the past 10 years acquiring better olive varieties and developing new harvesting and processing methods.

Sourcing the right olive varieties was tricky. The barnea and picual varieties produce more than twice the volume of oil per kilo of raw olives than many existing varieties in Australia. But barnea and picual had to be imported as root cuttings from Israel and that was a big problem.

The trees are distributed in 5,000-unit lots but each cutting has to be individually inspected by Australian Customs. In 1998, 50,000 trees (worth US$1.50 each) was ordered destroyed by Customs because insects were detected. Rob says: "I don't blame Customs - they were only doing their job - but we were devastated at the time."

Devastation was the mother of innovation. In 1998 Rob and Paul set up Modern Olives Nursery at Lara, near their company's Victorian headquarters. It propagates proven olive tree varieties for wholesale markets in Australia and provides horticultural and technical advice to growers.

European Union trade barriers have restricted Boundary Bend's access to the world's largest market for olive oil. Rob says: "We have had ongoing difficulties with the import tariff of €1.235 a kilogram for extra virgin oil which makes it impossible for us to compete in that market. This is significant as the EU consumes 70% of the world's olive oil. The EU includes the UK, which is a natural market for us."

The Australian olive industry unsuccessfully applied to the Australian Government to introduce a $1.85 tariff on European olive oil in order to create a more level playing field. When this plan was rejected, Rob wrote an open letter to Australian olive growers noting that "[we] will have to continue to compete with imported oils that are subsidised by approximately $1.85 per litre [but] if Australian growers try to enter the European market they will tax you approximately $2.31 per litre for every litre you try to send to Europe."

Rob hasn't let European trade barriers faze him. He has sought out other markets beyond Europe, with the US now Boundary Bend's biggest market. It is also carving out a market in Asia, exporting to Hong Kong, Thailand and Japan. About 45% of Boundary Bend's oil is packaged and sold under the Cobram Estate label; 55% is sold in bulk. "Sales in Australia are about 55% of what we produce; export is about 45%. North America takes the lion's share of the exports but we also export to fifteen different countries."

The ongoing drought has tested the business. Yes, olive trees are tough, but they need a certain amount of water to produce to their full capacity. Rob says that lack of water can cut output by 90%. As irrigation costs in south-eastern Australia have skyrocketed Boundary Bend has bought land in the central-west of Argentina. Rob says: "Ground water there is plentiful as it is recharged by the Andes and it's less than 10% the cost of water and land here."

Boundary Bend has seven production and processing sites in Victoria and NSW. These include: 2.5 million trees on 6,636 hectares of olive groves at Boundary Bend Estate on the Murray and management of Timbercorp's Boort plantation in north-central Victoria; Modern Olives Nursery and Modern Olives Bottling, Laboratory and Storage at Lara in Victoria; and Cobram Estate in Port Melbourne.

Boundary Bend's vertical integration extends to manufacturing harvesting equipment through its subsidiary Maqtec. It makes the monster Colossus XL harvester, which weighs 30 tonnes and stands 5.5 metres high. The Colossus XL harvesters straddle the top of the trees and vibrate the olives off with finger-like mechanisms. These rattle harvesters have greatly increased the modernisation and efficiency of the production process. "We formed Maqtec in 2004 in a joint venture with an Argentinian company; 60% is owned by them and 40% by Boundary Bend. We bought them out in 2006."

The Result

Boundary Bend's investment in harvesting technology is producing results. Rob says: "Harvest efficiency was improved to 92% of all fruit on the trees this year; we had 8% losses, which includes fruit left on the tree and on the ground after we harvested." At its worst, in past years harvesting efficiency was just 73%.

Oil production has risen from 80,000 litres in Boundary Bend's first commercial harvest in 2002 to 164,000 in 2003 to almost 6,000,000 litres in 2008.

Boundary Bend's oil quality and export success has been recognised by an avalanche of awards including:

• June 2008. A gold medal at the Los Angeles Extra Virgin Olive Oil Awards.
  
• November 2007. Boundary Bend wins the 2007 Australian Agribusiness Exporter of the Year Award.
  
• October 2007. Boundary Bend wins the Governor of Victoria's Agribusiness Export Award.
  
• 2005. Named ‘Olive Grower of the Year' by the Australian Olive Association and is the most awarded producer in 2005 and 2006 in the Australian EVOO awards.

Rob McGavin sees a bright future for Boundary Bend. He says: "There is a need for a global producer of high-quality extra virgin olive oil. Most of the oil on the supermarket shelves is not extra virgin and has been refined, removing many of the health benefits. Extra light and pure oils have been refined, a process which causes the oil to lose many of the health benefits associated with extra virgin olive oil."

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