Potato & Onion Category Management

Originally printed in the December 2018 issue of Produce Business.

Despite their staple status, there are still profits to be made off vegetable-category leaders.

Potatoes and onions, two of the highest-volume items in the produce department, are continually well-performing destination categories. These two items have other similarities that place them together in a category manager’s portfolio.

Although often merchandised in close proximity to each other because of their handling and storage needs, both lend themselves to bulk displays with creative color changes and the introduction of different consumer packaging options. Both are preplanned consumer purchases, and both have historically healthy margins. With many of the large packer-shippers providing both potatoes and onions year-round, the logistics make sense for retail buyers to handle the buying and merchandising as a group.

Despite their consistent sales success, potatoes and onions can be overlooked as static categories that go on autopilot. However, with some additional focus, planning and category management techniques, potatoes and onions can see increased margin dollars year-round.

PROMOTING STAYS ESSENTIAL

Although potatoes and onions are rarely bought on impulse, retailers and wholesalers agree they can benefit from year-round marketing. In-store advertising, utilization of social media platforms and other media channels are keys to boosting sales.

According to Category Partners, LLC, sister company to Wada Farms, Idaho Falls, ID, potatoes continue to be a key produce sales driver, delivering the third-highest dollar sales per store across all vegetables, citing statistics from the 2016 FreshFacts on Retail, published by the Washington, D.C.-based United Fresh Produce Association and Chicago-based Nielsen Fresh. Not only are potatoes affordable, but they also have some of the highest penetration of all vegetable groups in the produce department. Category Partners reports that with just a mere 16 percent of retail potato volume coming from the holidays, it’s easy to see how some additional love for potatoes can result in better volume and better margin dollars throughout the year. In addition, because both potatoes and onions end up on produce shoppers’ grocery lists, deep discounting leaves money on the table.

Jim Ehrlick, president of the Colorado Potato Administration, Greeley, CO, sees cross promotions as not particularly beneficial economically for retailers, and not particularly logical for consumers. “Potato and onion partnering at retail makes sense logistically, but not from an inspirational, meal-planning standpoint,” he says.

Seth Pemsler, vice president-retail/international for the Idaho Potato Commission, Eagle, ID, concurs. “Although the largest shippers provide both potatoes and onions, and retailers buy them together, they are not logical merchandising partners. You don’t see potato promotions in conjunction with onions. There are similarities … they sit on the same table; they both have good shelf life.”

With consumers making shorter and more frequent trips to the grocery store, and the demand for time-savers in meal preparation growing, merchandising all potatoes and onions in one location does help the consumer shop the category.

According to the Colorado Potato Administration, consumers shop potatoes by variety first, followed by use in food preparation. Offering all varieties together, along with showing different packs, not only gives consumers the ability to make the right decision for their needs but also increases sales. Specialty and premium products can generate incremental volume sales and profit dollars. Offering high-end and value-added alternatives in demographic-appropriate stores can lead to an increased interest by consumers and put stores on the leading edge of varietal/packaging options.

The importance of potatoes and onions being a destination category has implications for placing potato promotions in the front of the department. The negative would be that consumers don’t see all their options because they aren’t making their way to the back of the store. Jeff Cady, director of produce and Floral for Tops Friendly Markets, Buffalo, NY, says making an attractive display is the most-important factor in placement. “Depending on the season, bulk potatoes will make their way up front,” he says. “Bag potatoes up front just aren’t particularly sexy.”

Mickey Stringham, director of produce with Weis Markets, Milton, PA, says Weis has potatoes and onions in its circular every week. “We rotate the selection based on the season, holidays and consumer preferences,” he says. Weis uses its ‘power displays’ typically near the front to move product.

Rene Hardwick, director of public and industry relations for the National Onion Association, Greeley, CO, also recommends using seasonality to move onions. With domestic supplies of almost all colors being available on a year-round basis, she says, “take advantage of the boons in supply to highlight how and what consumers are cooking.” Hardwick also recommends creative cross-merchandising to build visibility and increase sales.

TIMING IS EVERYTHING

Although sweet yellow onions are higher in sugar, and therefore slightly more perishable than hard yellow onions, Trish James, vice president of Produce for Kids, a subsidiary company of Reidsville, GA-based Shuman Produce, says “our sales in December rival our highest sales on Vidalia’s during that season.” Shuman moves to Peruvian produce until late February/March. “Since the product coming from Peru is the same seed as the Vidalia, the quality, taste and profile are the same, so consumers know what to expect,” says James. We will go with Peruvian product through Feb/March until we switch to Texas to fill in before Vidalia’s.

Dick Okray, president of Okray Family Farms, Plover, WI, is seeing a shift from red potatoes to yellow potatoes. “We’re seeing a movement once again in reengaging consumers in heirloom varieties, such as fingerlings, and the colored varieties.” According to Okray, this is providing an upward kick in image for many retailers.

Ehrlick, with the Colorado Potato Administration, believes Colorado product is well-positioned to supply the retail market with all its potato needs. “We’re also seeing a trend to smaller packaging,” says Ehrlick about the increase in 3-lb. over 5-lb.

The Idaho Potato Commission’s Pemsler looks to the potato category to continue to evolve in products and promotions. “There are many new items being introduced into the potato category — fingerlings, specialty packs, microwaveable packs with sauces, without sauces, creamers, and small potato value-added.”

Inspiring consumers with a Home Sweet Holiday theme is part of Bland Farms’ fall and winter promotion strategy. A high graphic bin promotes its sweet onions. Kevin Dunleavy, part of the marketing arm of Bland Farms, Glenville, GA, says, “We inspire customers to try something new with our tear-off recipe pads. Pairing sweet potatoes and sweet onions is a great way to get consumers’ attention.” According to Dunleavy, each tear-off has a text-response code that the customer can use to view a video of the recipe. Bland promotes its Peruvian Mayan Sweet through the holidays and into the Bowl season. It also has the Vidalia-branded line of value-added products.

THE SPACE RACE

Ted Kreis, marketing and communications director with Northern Plains Potato Growers, East Grand Forks, MN, believes that while retailers are doing a better job in diversifying the potato category with color, varieties and pack types, there is still room for improvement in space allocation. “Yellow and red potatoes are taking more market share away from Russets. Most retailers are adjusting to that and changing their space allocation strategies.” Per Kreis, fresh yellows have steadily increased from 5 percent 10 years ago, to more than 20 percent of the crop represented by the Northern Plains Potato Growers.

Idaho Potato Commission’s Pemsler believes retailers are over-allocating space to new products and under-allocating their core product. “Look to an 85/15 split and study specific demographics”, he advises. “Currently, you’ll find roughly 45 percent of shelf space is allocated to value-added because of the seduction in the higher margin.”

In working with retailers, Pemsler explains, “our biggest initiative is in working with retailers to help them access their space allocations and understand and make business decisions based on their individual needs, ultimately to identify the important part of their profit mix.”

Delbert Bland, owner of Bland Farms, says, “Bland Farms provides retailers with all the support they need to maximize category sales.” Besides providing signage and POS materials, Bland also has recipes for meal solutions, a variety of packaging options and high-graphic bins available.

“When I go in stores … the stores with the small displays and the picked-over displays are the ones not selling much volume. The stores that build larger displays tend to do much better and are realizing higher sales and higher margin dollars.”

— Mike Blume, Keystone Fruit

Mike Blume, director of sales and marketing for Greencastle, PA-based Keystone Fruit, reflects on category management. “Originally category management was a grocery plan”. According to Blume, retailers don’t stock displays the same way, with product moved around based on seasonality and supply. “Our biggest obstacle to increasing sales is under-allocation of shelf space,” he says. “When I go in stores … the stores with the small displays and the picked-over displays are the ones not selling much volume. The stores that build larger displays tend to do much better and are realizing higher sales and higher margin dollars.”

Ralph Schwartz, vice president of sales and category management for Potandon Produce, Idaho Falls, ID, says, “Potatoes are a solid, high-destination category … not an impulse item; they’re an ingredient. However, many retailers are mismanaging the category because of the wrong amount of space allocation.”

According to a 2012 consumer survey conducted for Bland Farms by the Chicago-based Nielsen Perishables Group, two-thirds of shoppers rely on good in-store signage and packaging to identify sweet onions.

Keystone Fruit’s Blume recommends retailers allocate enough space to sell through their sweet onions in approximately two days. Simplistically speaking, Blume says, “If you put out 3-5 cartons in a 3-foot-wide space, you’ll open up the category and you’ll make more money.” Although Blume, tongue in cheek, admits that an onion display in the front of the store ‘isn’t particularly sexy,’ and perhaps not even necessary for increasing sales, he does add, “secondary displays and end displays can help to build incremental sales before consumers even get to the back of the produce department.”

CATEGORY MANAGEMENT Or CATCH PHRASE

Kleenex is to tissues as category management is to promotions. In its simplest terms, category management is data-driven decision making that entails devising a strategic plan for the highest maximum sales. So what exactly goes into category management? In a nutshell, it is price and assortment analysis, promotion scheduling and analysis, and state-of-the-art trending and forecasting.

Original category management models have evolved over the years, and many suppliers and retailers mention Nielsen’s streamlined five-step model: review the category, target consumers, plan merchandising, implement strategy and evaluate results.

Potandan’s Schwartz says not a lot of retailers want detailed Nielsen information available to them on potato category management. “We track quarterly data where the breakdown goes across the category, and have the best practices, merchandising and correct traffic-flow information,” he says. Potandan uses data to analyze and understand traffic flow in order to upsell. “Consumers find potatoes. Place them at the end of the traffic flow. Understanding placement is key. Think destination vs. showcase,” he adds.

On category management, Schwartz admits that ad plans meet the lion’s share of a customer’s needs. “Promotions are part of category management, and they’re a required part of doing business with our customers.” To get down to the nitty-gritty of category management, however, is another thing entirely, according to Schwartz. “There’s a high level of partnership between supplier and customer. Scanner data shrink and profit margins are shared information, which are all taken into account and analyzed.”

As one of the largest onion and potato shippers in the country, with four packing facilities in Idaho and growing operations across the country, Wada Farms works closely with buyers, as category partners. “We’re data-driven,” says Kevin Stanger, president of Wada Farms. “We have data available in all the categories we deal with. We can take data to the retailers on their marketplace,” he explains. “We can show them what’s going on in the regions and their stores and what’s missing. We look at the varieties, packaging, all the way down to the pricing.”

According to Stanger, some retailers will share their data to utilize all that category management entails, and some won’t. “There is the old standby category management, which is ‘we want you to watch our potatoes and then send us a load when we need them,’ ” he chuckles.

The Idaho Potato Commission is a check-off, industry-funded program, with international representation and category management field representatives who work with retailers to maximize profits in the potato category.

Nielsen data is provided for all markets, and the reps provide general observations. “We work with retailers two times per year, and our field people are armed with ad data to target the retailers’ needs in managing the category,” says Pemsler.

Weis Markets, based in Sunbury, PA, operates 205 stores in the Mid-Atlantic region. Stringham says the chain uses produce specialists in the field to employ scan data and market demographics for each department. “We have strong relationships with our suppliers in both these commodities,” he says, adding that Weis has developed a system of communication with its grower/packer partners that assists in managing categories.

Having a built-in consulting and strategy partner gives Wada Farms a big boost in assisting its customers. Sister company Category Partners provides a variety of data analysis services on an ongoing basis for retailers. “The trained staff can provide state-of-the-art forecasting, as well as assist with promotion scheduling and price analysis,” says Stanger.

Shuman Produce in Reidsville, GA, also helps its customers target its markets. “Our sales team has Nielsen data in hand when they visit our retailers,” says James. “Shuman’s field staff talks to retailers about their current sales and how to boost sales going forward. “We find our retail category managers responsive and interested in the information we’re providing,” she adds.

A SWEET CAUSE

Shuman Produce, Reidsville, GA, has its highest sales months for sweet onions in November and December. “Because sweet onions are mild, and there is great recognition from the summer and fall, they are a holiday favorite,” says Trish James, Vice President of Produce for Kids, a subsidiary company of Shuman Produce. In 2002, the company founded Produce for Kids, which raises funds for children’s charities. Since its inception, the program has raised more than $5.5 million.

This is also the time of year when Shuman runs its premier giving campaign program with Feeding America. During November and December, Shuman provides its Real-Sweet Peruvian onions in bags with the Feeding America logo on them. “We provide 50,000 meals through Feeding America. One in eight children struggle with hunger in the U.S. today,” explains James. “During the holidays, consumers are looking for a way to give back. Knowing they are able to help in this area is important to retailers,” says James.

GET THE WORD OUT ABOUT POTATOES

At the Colorado Potato Administration, the newest ad campaign, Power Performance, is sending the message that potatoes are healthy and a good carb in your diet.

Jim Ehrlick, the Adminstration’s president, says the new Power Performance program is making inroads with consumers. “Our marketing efforts are focusing around this critical message, with TV commercials in the Denver market, and using all social media platforms.”

Supporting and building on the message, Potatoes USA works with leaders in the nutrition industry to develop recipes, nutritional information and additional information for nutrition professionals in school foodservice, retail, and prepared foods manufacturers.

Idaho Potato Lover’s Month, the annual celebration of the beloved Idaho potato, is the entire month of February. With a whopping 5,266 entries last year, the display contest from the Idaho Potato Commission, which runs from mid-January to mid-March, is the largest produce display contest in the U.S.

Seth Pemsler, vice president-retail/internation for the IPC, says of the promotion, “it is a great way to get both produce departments and consumers excited about potatoes.”

PEI Potatoes, Charlottetown, Prince Edward Island, is a grower-based organization, and the marketing arm for PEI potatoes. As the largest potato producing province in Canada, PEI runs research and extension, and has a seed farm that produces disease free seed. To assist their retail partners, PEI Potatoes has a Brand Barn on its website, where retailers can access the promotional and branded materials necessary for launching a successful ad campaign with PEI potatoes.