Kailis Has The Good Oil On Expansion
Cathy BoltThe Australian Financial Review
Kailis Organic Olive Groves, in Western Australia, intends to establish the the largest organic olive grove in the world.
The Kailis family has grand plans for its olive oil business. Over the past 80 years, the extended Kailis family empire has become synonymous with the food industry in Western Australia.
Within the next few years it is set to add an ambitious $15 million to $18 million olive oil venture to the portfolio of seafood, pearling, packaged food and other interests the separate arms of the family have built since its first members arrived from the Greek island of Kastellorizon in the 1920s.
Mark Kailis, the managing director of Kailis Organic Olive Groves, or KOOG Ltd, says the company intends within the next two years to establish the biggest single organic olive grove in the world and within eight years to be producing a million litres of premium extra virgin olive oil a year.
To date, it has planted 30 hectares of olive trees on a property it bought a year and a half ago at Preston Valley in the state's south-west and another 207 hectares are scheduled to be planted in the next two years.
In total that will be about 80,000 trees, more than three times the next biggest organic grove that Kailis is aware of in Puglia, Italy.
Its plans also include the construction of a 1.7 million litre-a-year dedicated organic processing plant by 2005 at Margaret River in the heart of WA's fast-growing and most prestigious wine region.
Kailis acknowledges the plant will be 100 kilometres from the grove but says the location it is looking at several potential sites along Bussell Highway will give it access to resources, including transport and trained labour, which already exist or are drawn to the Margaret River region.
"We would have had to build a lot of our own infrastructure where we are when two hours away by truck is a well-established area," he says.
Kailis says the decision to go organic was based on the fast- growing consumer demand for organic produce in Europe and the US. That offered an export marketing opportunity in which Australia could differentiate itself and be competitive because of the economies of scale offered by broadacre production, particularly compared with the small groves that dominate in Europe.
KOOG's aim is to pitch its extra-virgin olive oil in the export market at a retail price point of the equivalent of about $20 a litre, the higher end of the conventionally produced premium market but the lower end of the premium organic market.
Kailis says certification by the National Association for Sustainable Agriculture Australia, one of several certification bodies in Australia, also gives the brand a quality standard that is recognised internationally.
"I love an idea that makes it easy to sell before you go ahead," he says. "Our form of organic farming is not baying at the moon and hoping the gods are going to be friendly. It's quite scientific and a lot of it is leading edge in world terms. From day one you make it your culture so that it becomes second nature to everyone that works for you. They think organically, they don't think chemically."
Mark is the son of Peter Kailis, founder of the Red Rooster fast-food chain, and the grandson of George Kailis, the first of the family to arrive in Perth just before the Depression.
Peter Kailis also owned Baldivis Estate winery just south of the Perth metropolitan area before selling the business to Palandri Wines two years ago for about $2.5 million.
But the family has retained the Baldivis property, where it planted its first olive trees 20 years ago and its first commercial-scale olive grove seven years ago, now about 5000 trees.
There it has trialled a range of different varieties and organic farming methods. It is the source of the small medal-winning volumes KOOG is marketing locally and to Selfridges in Britain.
At Preston Valley, it has planted the varieties frantoio, leccino, cortina, WA mission, correggiola, and kalamata. Kailis is a blending enthusiast, questioning what he says is a developing mentality in Australia to produce a single variety olive oil.
"Not only does it give you a buffer as far as consistency goes but it also makes a more rounded product."
The NASAA-certified inputs used include soluble fertilisers such as molasses and kelp, naturally occurring rock phosphate, green waste, mulches for weed control, and white oil and coppers to combat the few pests that attack olive trees.
Kailis is budgeting on yields at Preston Valley of 55 kilograms a tree, which he regards as conservative given the oldest trees at Baldivis yield 75 to 80kg.
In addition to the scrutiny from NASAA, KOOG employs consultants and has an advisory committee under its board which includes Lynette Abbott, a professor at the University of WA's school of earth and geographical sciences.
"We have four forms of redundancy to make sure what we are doing is right," Kailis says. ``From the family background and being in the food business, you can't be too careful to ensure there are enough areas of double-up to make sure that things are done correctly."
WA, like many areas of Australia, has experienced an explosion in olive tree plantings in the past decade, much of it funded by tax-effective managed investment schemes.
Most of the WA plantings are in drier areas north of Perth, where land is cheaper but there is access to underground water for irrigation.
Kailis says it opted for the south-west because of its consistently higher rainfall and because the property includes a dam of half a million cubic metres and access to water from the Preston River, secured through licences.
"They are paying $500 to $1500 a hectare up there and we paid $11,000, but we did that because the site is very important to how we farm and how we grow olives," he says.