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- Potato Promotion Group
Drops Generic Marketing Program
- By Matt McCallum
Publisher
- The National Potato Promotion Board (NPPB) isn’t asking consumers if they’ve “Got Potatoes.” In fact the national promotion organization hasn’t run a generic ad for potatoes in several years. While this sounds like a funny thing to do for a commodity promotion organization, the NPPB has embarked on a program to “re-invent” the potato.
“The winners will be the ones who figure out what matters and apply it to their business strategy,” said NPPB’s CEO Tim O’Connor during the organization’s Fresh Summit held Jan. 11 in San Antonio, Texas. “There is a compelling need for change by growers and shippers in the fresh potato industry.”
All produce segments face the same trends - major changes in the retailing industry and the changing consumer marketplace.
Consumer
Consumer segmentation, or providing specific products based on different consumer wants and needs, is a time-tested, well-proven marketing approach, according to NPPB’s research.
“The data clearly indicates that the appeal of fresh potatoes is concentrated most heavily among traditional families who have become a minority of the U.S. population,” O’Connor said. “Should potato growers and shippers choose to ignore this data, further decline of in-home fresh potato consumption per capita is inevitable along with the attrition of growers and shippers driven by constriction and competition within the industry.”
In-home fresh potato consumption has dropped 23.5% from 1990 to 2000, according to NPPB, while frozen products increased 4%.
Non-traditional families, now the majority of the U.S. marketplace, consume potatoes at home significantly less frequently, O’Connor said.
Traditional families now only make up 15% of the population and eat potatoes 189 times a year at home. Empty nesters, who make up 25% of the United States, eat potatoes at home half as much. Single people, who make up 19% of the population eat the fewest potatoes at about 30 in-home eatings a year.
“The potato industry needs to offer new products targeted to the needs and interests of these new markets to have the opportunity to create profitable incremental growth for the potato industry without sacrificing its core traditional family market base,” O’Connor said.
The diversity of the United States is also changing. By 2020 the Hispanic population will increase from 13% of the U.S. population to 20% and will include 75 million people with $1.3 trillion in purchasing power.
Retail
The retail industry is also changing dramatically, and if the potato industry isn’t in business with the new mega chains, potato sales will also drop off dramatically.
“The retailer isn’t the enemy,” said Mac Johnson, vice president of marketing for the NPPB. “Like you, they want to build sales and profits. You must partner with the chains to increases sales. The world of retail is changing and you can’t stop it, so take advantage of the way they are going.”
The top 10 grocery stores now move 53% of the volume. In a few years this could grow to 70%, according to Johnson.
Potatoes have some good and bad things going for them into the future. On the bright side, they have a 100% distribution, nine out of 10 Americans consume them every two weeks and people consume them from birth to the grave. “How many products have that going for them?,” Johnson said.
On the negative side, potatoes used to be the number-one profit center in the produce aisle - now they are number six, Johnson said. Over 60% of retailers said sales of potatoes are flat or declining and that profits are also decreasing, he said.
Making the change
To help shippers adapt to these changes NPPB has introduced the Shipper Toolkit to help transform the association between the shipper and the retailer from an order-taking relationship into a partnership, building value and profit for the industry as a whole, Johnson said.
The Shipper Toolkit provides ideas and direction for becoming more involved in a retailer’s category management and best practices program.
There is a workbook that provides valuable instruction on how to get past the order desk. Also included is a CD-ROM with a program to create a business plan. Finally, a video demonstrates how to make a pitch and how to improve performance of the potato category.
“You have to look at your business like you are a products and services company,” said Bruce Axtman, CEO of the Perishables Group. “Quality and price is just the ticket to the show. You must customize your product to the individual retailer. Price is meaningless. We can sell lots of potatoes, but if we sell them all at a bargain price, we don’t create value.”
Axtman said the retail market is changing from a distribution-based strategy where the retailer purchased the cheapest product. Now, retailers want supply partners that can document performance and plan on how to build the business. They also expect the shipper to know the customer better than they do.
For more information on the Shippers Toolkit or the research report call NPPB at (303) 369-7783.
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