The Supply Side: Colavita family business embraces growth

Italy-based Colavita, a longtime Walmart food supplier, embraces the challenges of balancing online commerce and subscription-based meal kits with expanding its brick-and-mortar presence. It’s not often a family-owned business based in the Molise region of Italy finds retail success in the U.S. in the grocery category.

Three generations of the Colavita family, who started their olive oil business in Italy, continue to expand their footprint in the U.S. The signature product, Extra Virgin Olive Oil, is sold nationwide at Walmart and is also found in 44 Harps Food Stores in Arkansas, Oklahoma, Missouri and Kansas.

Giovanni Colavita, CEO of Colavita USA, said he moved to the United States in 2008 to help the family grow its footprint of products beyond Walmart and the food service industry, given the rise in demand for the Mediterranean staple in U.S. diets. Colavita said the company’s relationship with Walmart has grown over the years.

“We offer a premium product, and when Walmart began expanding its assortment several years ago, we were able to get shelf space,” he said. “At the time, we were selling in specialty stores and to lots of restaurants who wanted the product.”

Since that time, Colavita has expanded its product mix sold at Walmart to include: balsamic vinegar in 3,800 stores; Colavita sauces (three flavors) in 300 stores; and pasta nests in roughly 1,600 stores. The Colavita products at Walmart are priced higher than most competitors, including the retailer’s private-branded items. That added cost, according to Colavita, relates to the highest quality ingredients sourced by the family and processed in its three small manufacturing centers in Rome, Italy; Edison, N.J.; and Dixon, Calif. The company also recently opened a warehouse in Waco, Texas, that exclusively handles sales to Hello Fresh in the meal kit category.

Colavita said the family company doesn’t believe in resting comfortably in only one sales division or channel. Colavita continues to see tremendous growth in online sales. He said because the company was based abroad, online sales through its own website have been a part of the business for more than a decade.

“This foresight to get involved in e-commerce early on has been key in our rapid growth in digital sales,” he said.

From 2014 to 2017, Colavita reported a 1,700% growth in e-commerce sales, and the company ranked as the top-selling olive oil on Amazon. Today, e-commerce represents 20% of the company’s total sales. Colavita said he expects triple-digit growth this year in the e-commerce space.

Colavita said 40% of the company’s sales are to food service customers, including meal kits. He expects to see meal kit sales grow by 50% this year, and the company has chosen to work exclusively with Hello Fresh in this area.

Brick-and-mortar sales account for about 40% of total sales, and Colavita expects sales to grow about 10% in this channel this year. He said meal kits and e-commerce sales are growing much faster than brick-and-mortar sales, but it’s important for the company to have products in all food channels.

ONLINE RISE, CHALLENGES
Colavita said the company’s strategic location in New Jersey is great for port access to the product arriving from Italy. He said the California facility works with local oil growers to supply that plant, which helps to serve the western half of the U.S. The facility in Dixon, Calif., was also built to facilitate the growth in online commerce. The California facility is run by Giovanni Colavita’s cousin, Paolo Colavita, who serves as vice president of Colavita USA.

“We had the opportunity to work with Amazon early on as well as Jet.com,” Giovanni Colavita said. “We looked at how the cosmetic industry was moving online and began to apply some of what those companies were doing to our model. We set up an e-commerce team and began investing heavily in those platforms.

“We looked for opportunities to tailor our offering to specific retailers like Jet.com, and it’s paid off,” he said. “With Jet, we said we would fulfill any quantity order if they would carry our entire assortment of products. It went very well. Now that Walmart owns Jet.com, we continue to honor that deal and have a deeper relationship with Walmart.com.”

Colavita is also working with Safeway Marketplace as well as Albertson’s and Kroger, saying it’s important to “play with everyone” in the e-commerce realm. The company also sells to Whole Foods and Costco. He said they negotiated a special deal with Costco to offer olive oil in handmade ceramic bottles made by artisans in three colors to represent the countries of Spain, Greece and Italy.

“We look for ways to work differently with each retailer, but we treat them all equally,” Colavita said. “This has been key to the growing success of our family business that is sold in more than 80 countries today. I value our relationship with Walmart and enjoy my trips to Bentonville to talk with buyers about where certain food categories are going.”

HELLO FRESH
About six years ago, Colavita began to recognize Hello Fresh was doing a lot of business on the company’s own e-commerce website for food ingredients it was using in its meal kits. Colavita said he wanted to meet with the Hello Fresh team to learn more about its young team of entrepreneurs who were also passionate about quality food.

“[Hello Fresh] was a tiny operation at the time, but we made a decision to treat them like a retailer because it was business-to-business transactions and not business-to-consumer transactions,” he said. “We were filling five cases here and 10 cases there for Hello Fresh, but we gave them service as if they were a major client. It has paid off.”

In 2017, the Colavita family invested in the Hello Fresh initial public offering (IPO). The company has since partnered with Hello Fresh to open a new warehouse in Waco, Texas, dedicated to fulfilling its orders.

“We chose to work exclusively with Hello Fresh in the meal kits space because their business aligns well with ours,” Colavita said. “They offer a premium box that contains a lot of our products. This relationship has been golden for us. Consumers can get a taste of our product quality via Hello Fresh, but they can also buy the ingredients outright at Walmart and lots of other retailers in their neighborhoods.”

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.