Many years ago I was pulled away from my usual assignments to do a major product production tolling agreement between two of America's larger food companies.

It was a stroke of luck for me because it provided something new for my interest in multivariate risks management. Since then I have prepared many multivariate high risk agreements, and it is always an enjoyable as well as remunerative adventure.

When you think of every brand as a franchise in itself, it fits perfectly into my customary practice of managing franchise relationship disconnect issues.

Recently, I have been able to mix some of my more basic interests, consuming olive oil, with my interest in being able to negotiate and prepare the enabling agreements that bring together great marketing companies in America. More specifically, working with the best producers of great Extra Virgin Olive Oil and managing risks inherent in horticulture to delivery.

This is a wonderful exercise in multivariate risk management.

Olive Oil - Fraud and Standards

The notoriety of product purity fraud in the extra virgin olive oil business has stimulated my interest intensely. I love good olive oil to a degree that borders upon religion, I think that I probably consume good olive oil at the level of a Greek.

I am now eating the world's most incredible and unquestionably pure olive oil, and every meal is almost a religious ritual.

Olive oil is something with soul. You consume it with such incredible gratitude. I long ago gave up on European wines, with occasional ventures back there only when the auguries compel it.

California and the American Pacific Northwest is to me the world's most fantastic wine producing area, but has yet to arrive when it comes to top quality and taste olive oil.

Inasmuch as good wine also enjoys the presumptuousness of highly specific imprimatur, especially in France and, to a somewhat similar degree elsewhere in Europe, one might well expect that the snooty who insist upon their nomenclature prerogatives would, when put to it, lie cheat and steal to keep the black ink flowing on their financial statements.

Tom Mueller's book and blog, Extra Virginity, depicts the degree of hardship that olive oil producers are facing in the current economic difficulties and the "blending" that has become rampant to enable what is labeled Extra Virgin Olive Oil, "EVOO", to be sold profitability.

What is blended into it is often not even olive oil.

What most Americans buy as EVOO isn't, to make a long story short.

Whole Foods Market and Standards

However, there is some hope.

I was browsing in a new Whole Foods Market in Houston last Sunday, sitting at their new wine bar placed next to the olive oil shelves.

A rather nice looking woman was looking rather lost as she tried to determine which bottle of olive oil to select.

I walked the few steps over to her and pointed to the Lapas olive oil. She asked why I suggested that and I explained to her that it was from a reliable producer and told her that it was a house brand for Whole Foods Company, one of the very few trustworthy house brands in the world olive oil trade and completely organic.

She smiled and took the Lapas bottle as her selection.

Risk Management of Sole Source Producers

Whole Foods Company had to have carefully researched this project. Contracting for a single source agricultural product in a distant and troubled economy is high risk to say the least.

I know what terms the agreement has to include, but I wondered how each of the contract risks in the Whole Foods - Blauel Group agreement was dealt with.

Fritz Blauel is an Austrian who went to Greece in the 1970s and became interested in olive oil production and cultivation in the Peloponnesus and Kalamata in particular.

The Greeks of that area were still using rather ancient methods, and he sought to influence the producers of the area in totally organic methods.

To make a long story short, he succeeded, and Whole Foods Company's house brand of really top grade olive oil (not their 360 brand), Lapas, comes entirely from Blauel's operation. He produces about 650 tons of organic top grade olive oil each year within his group of farmers, and it may be found also under the brands Mani Organic and Kalamata Gold.

The Challenge and Rewards of Risk Management

What does one think of when contemplating the establishment of such a relationship, beyond the market research and the position of the brand as a "fit" within one's business?

For the lawyer crafting the seminal protocol it is a wonderful challenge. It requires input from several specialists who will probably be found within the client company or be on retainer for the client company.

In the matter of food and agricultural products, those would include not just the market research folks but also the agronomists, food chemists, manufacturing technique specialists, those in transportation and delivery as well as the financial staff.

The issues, especially in the instance of purchasing foreign agricultural output from a single producer or single group of producers include the management of numerous risks.

When you have accounted for absolutely everything you and the group can think of you have to start playing "what if..." games. The what if games should continue throughout the process of building the relationship and the agreement, right up to the moment of signatures.

Even then you can be assured that there are contingencies you missed. When that jumps up and stares you in the face you have to rely for relief upon the credibility and trust you were able to build up during the relationship right up to the moment when the event arises, and your approach to dealing with it must be obviously fair for it to be successful.

By way of illustration, a client lost total supply from a sole source vendor for a whole product line because someone served a subpoena on the vendor without handling the diplomacy properly.

The vendor was in Iceland and it required a several day long "social event" with its Vikingesque CEO just to get talks started on the real problem. It took a few weeks to recover from the "social event". You simply cannot think of everything.

Particularly in the instance of olive oil being produced at an exceptionally high level of quality within one of the most troubled economies on the planet where no one feels secure, just the notion that minute controls can be expressed in a single writing seems farfetched.

The cultural and economic divides standing alone would be insurmountable without bringing into acute focus many talents and skills in common easy to read and effective ways.

The resulting economic engine microcosmically and with mutual compassion and grace generates profitable product integrity without sacrificing the art or the nuances of timeless beauty encapsulated within a sacred tree fruit. We are speaking of olive oil, sacred, healthful and delicious.

Commercial lawyers rarely get to work on a symphony of nuances that embrace a fundamental expression of an entire culture. Smoothing the contrapuntal rhythms into a composed useful protocol calls upon artistry of expression as it seems to seek a trivializing of the ephemeral, a capturing of spirituality.

This is an example of the grace notes of law practice. It comes to very few.

What must be produced is a reliable encapsulation of many inherently indefinite forces that are answerable in the normal course to the uncertainties of agricultural crops and worked on by farmers and associated trades as well as social and political upheaval.
At many points along the lines potential leakage can occur if care and sensitivity are not brought to bear. Investing in great things is not to be approached without the willingness to support a work of very fine art as well as a mundane agricultural food product.

Doing that with an eye upon effective economics is rather breathtaking. If you are already in this business as you read this you understand the nuances and risks.

I really enjoy this kind of work because I find myself working with extremely competent committed people who take an almost worshipful approach to the products.

Whenever I get such an assignment it is a call to celebration and wall to wall happy in addition to remunerative. Professional life doesn't get much better than that.

As always, you can call me, RIchard Solomon,  at 281-584-0519.

Authors

Archives

Search for Articles

Follow Us