Spudman

Learning From The UK

It’s no secret that supply of potatoes in the United States exceeds demand. The gap between the two may slowly be narrowing as growers make an effort to plant fewer acres, but it’s still there. It won’t close unless demand increases. To do that, the industry needs to innovate, said Ray Meiggs, chairman of the U.S. Potato Board (USPB).

“By cutting back in acreage, you’re still not addressing the challenge of how we are more relevant to the consumer at the dinner table,” he said. “By reducing supply, we’re just addressing the reduced demand, not increasing consumption. The cutback in acreage is a Band-Aid to keep the industry solvent, but it’s not a solution in the long term.”

Decreased demand has taken potatoes off the dinner tables of U.S. consumers, who are showing the industry that products need to be quick, convenient and healthful.

Potatoes already are healthful. It’s just a matter of making them relevant to the hurried lifestyles of consumers.

“The consumers are going to eventually let us know with their purchases what they want us to offer,” Meiggs said. “We see this long, slow, steady decline in consumption. It’s a long, slow conversation, but they’re telling us what we need to do. If we don’t do something about that, it’s going to hurt us in the pocketbooks.”

Meiggs recently visited the United Kingdom with several other members of the U.S. potato industry. UK potato growers and marketers have seen similar problems that the U.S. industry has seen with potato consumption, and the USPB group went to the UK to see what the potato industry there is doing to increase demand. This trip was a follow-up to a similar one made in 2002. The group visited retailers in the UK to see how the retailers and the potato industry were addressing consumer issues.

“The retailers are driving it (innovation),” said Tim O’Connor, USPB president and CEO. “And they’re driving it because of the competition in their marketplace that fuels the consolidation and requires them to differentiate themselves.

“Those in the supply chain that have been more innovative in response to retailers’ request for innovation are the winners.”

Some of the products UK consumers can find on store shelves include pre-packaged, ready-to-cook meals made up of potatoes, spices and other vegetables. Everything the consumer needs to make the potato dish is included. Most of the products come in a microwaveable package. Some even come in disposable roaster trays. Packages tell exactly how long it takes to cook in the microwave or oven.

But it’s not just the major retailers offering innovation in the grocery industry. Small lay-out stores are doing it, too.

Meiggs said there are corner stores where the products all are value-added, whole-meal items that consumers can quickly pick up and have for that day’s lunch or dinner. These stores were about 900 square feet with only one cashier, he said

“You’d be amazed by the number of people who walk in, pick out what they need for that dinner and take it home,” Meiggs said. “(Consumers) are paying a lot of money for that stuff – just a teeny tiny bit of food – and they do it every day.”

Learning from the UK

One of the important lessons from the trip that O’Connor wants to share with the U.S. industry is that innovation doesn’t mean reinventing the wheel.

“It’s been done,” he said. “We can learn by what’s being done over there.”

The UK retail potato sector has come up with new potato products. They’ve found new ways to merchandise them. They’ve actively marketed. And they’ve succeeded.

“They’re doing it, and it’s working,” O’Connor said. “Let’s take their years of learning and do something with it.”

So, what’s it going to take to get the U.S. industry on board?

“Potatoes have become a category (in the United States) where you stack it high, sell it cheap and fight for market share,” O’Connor said. “Retailers here have been a part of the problem, but to date we have a majority of retailers who know they can unlock profits in the potato category by executing new products.

“The playing field has shifted. It’s a precursor to what we see in the UK.”

Meiggs credited USPB’s Best in Class program with some of the slow shift in the marketing of potatoes.

Currently the Best in Class program is in Phase I, Meiggs said. This phase involves innovating the displays and merchandising practices at retail. Phase II, which is just beginning, is innovating the products offered.

“The second phase is providing more innovation to the consumer where we think we’ll see more sales: new convenience products tailored to this huge section of the population that are empty nesters and dual-income families with no time to cook,” he said. “All that ties together with what we see going on over in the European marketplace.”

O’Connor likened this phase to what happened when pre-cut salads first entered the marketplace. In the beginning, processors were taking head lettuce and cutting it up and bagging it. Now, fresh-cut salad has ballooned to a $15 billion industry that’s become a produce department staple.

“When the lettuce industry started innovating, it was convenient, but it wasn’t useful. What really broke the category open was salads and kits,” O’Connor said. “That’s the revolution we’ve seen in the UK. It went from quicker-to-cook to fully prepared, fresh with spicing, flavoring and meal presentation all taken care of.”

If the potato industry can take what’s going on in the UK and build on it, consumers will respond with their wallets.

“It gives the consumer that very specific meal idea in a package in which they go home, put it in the oven and eat it,” O’Connor said. “You no longer have to be a creative cook. You have a finished meal.”

The foundation for this type of industry innovation is there. It’s time to take it to the next level, Meiggs said.

“If there’s anything I’d like to see happen, it’s somehow this concept of convenience and innovation will really catch fire and do something for us in this industry,” he said.

Next Steps

If feedback from UK retailers about reinventing the potato category is any indication of the success of innovation in the United States, Meiggs is upbeat.

“It’s unbelievable how open they were to us to share their excitement and enthusiasm about maintaining their position on the dinner plate,” he said. “We need to catch some of that enthusiasm that we see in their retail and break out of our box of doing things the same old way and somehow develop alignments with retailers, growers/shippers and test groups.”

It may take a while to get the innovative juices flowing, but once that happens, O’Connor said the U.S. potato industry is positioned to take the potato market to the next level.

Potato growers, shippers and packers need to work closely with retailers. There needs to be a partnership to get these ideas going. A new product won’t get to consumers’ tables unless retailers are willing to rethink the way they merchandise potatoes. And a retailer can’t offer new products unless there’s someone there to supply them.

“As a fresh shipper steps up and delivers this kind of value to the retailer, it’s no longer a buy-sell relationship; it’s a partnership,” O’Connor said. “That’s the next step here in the U.S., and some retailers are already moving down that path.”

Opportunities exist for those packers and shippers who are willing to be proactive.

“If all you have is potatoes to sell and I have the ability to help grow the category as a partner, you’re going to have a more difficult job,” O’Connor said. “It’s a matter of building a relationship in a price environment that separates one supplier from another in the marketplace.”

Originally posted Saturday, Apr. 7, 2007