Changing Shape And Size Of Potato Category

Originally printed in the September 2018 issue of Produce Business.

Smaller and specialty varieties earn shelf space.

Potatoes may be as familiar as just about anything in produce, but retailers do well to notice how changes within the category are affecting demand in their area and store.

“As 86 percent of households purchase potatoes annually — I think the largest in the produce category, tied with bananas, according to recent data — this is a critical category and shopper base, in which to respond with a targeted and diverse assortment to drive overall produce sales,” says Angie Hanson, director of category development at Category Partners, Aurora, CO.

Category Partners, owned by potato shippers Wada Farms and Farm Fresh Direct, offers detailed demographic analysis to retailers and shippers of many produce commodities.

“Every store is different, based upon geographic location, ethnicities, ages, household sizes, household incomes, etc., so it’s hard to say what is certainly most important for any one chain or store,” says Hanson.

Although U.S. fresh potato consumption has declined from 47 pounds per capita to 33 pounds this century, those numbers hide the emergence of important popular new varieties.

“The category is evolving,” says Kevin Stanger, president of Wada Farms Marketing Group, Idaho Falls, ID. “You’re seeing more and more colored or specialty potatoes. Ten years ago, if you walked into a supermarket you would see reds, yellows and Russets. Now, you also see mini potatoes, the specialty varieties, and value-added items.”

Russet potatoes made Idaho famous, and they are still by far the dominant variety, but the category is defined these days by a steady shift toward specialty, largely smaller potatoes.

“The two biggest growth items in the category are mini, or specialty, and yellow potatoes,” says Ralph Schwartz, vice president for sales and category management at Potandon Produce, Idaho Falls, ID. “The Russet potato is not found in many of the countries people are coming here from. Right now, Russets are 51 percent of dollar sales, reds are 20 percent, yellows 16 percent, and whites 5 percent. My recommendation is to carry a broad mix; the category is changing.”

Relatively large bags and bulk Russets are still leaders in the category, but they are not growth leaders.

“While core items — 5- to 10-pound bags and bulk — represent the majority of the category, smaller bags, and especially premium and convenience items such as micro/oven trays, and express bakes are driving dollar growth,” says Hanson. “Organics also are supporting growth, especially reds and yellows, although growth has stabilized in recent years.”

Specialties on the Rise

An increasing number of consumers is coming to prefer smaller potatoes, and in smaller packs.

“People want smaller serving sizes and quicker meals,” says Stanger. “We’re living in smaller households, and you are seeing people who are so busy they don’t have time to spend 45 minutes cooking a potato.”

Restaurants are leading the way introducing consumers to smaller and more interesting potatoes.

“The growth of specialty items has been happening for a while,” says Ken Gray, vice president for sales and marketing at Bushwick Commission Company, Farmingdale, NY. “You’re continuing to see growing demand not just for organics, but for other specialty potatoes. If you go into a restaurant and see ‘B-’ or ‘C-’ sized potatoes, you take that information to the supermarket. People are looking for smaller packs, smaller sizing, more gourmet potatoes.”

The change is appearing in the shift toward smaller-sized packs, as well as in the growth of smaller potatoes.

“We are seeing a trend toward smaller, more convenient packaging,” says Coleman Oswald, director of sales at Eagle Eye Produce, Idaho Falls, ID. “Younger generations usually don’t buy bulk, and they usually don’t like to store potatoes for long. We also need to provide value with our packaging. For example: provide steam bags and microwaveable trays of potatoes.”

Although growth in the category is largely in the smaller and specialty potatoes, the variety that put Idaho on the map is still No. 1 in market share.

Russets are 65 percent of average U.S. volume, reds 15 percent, yellow 10 percent, white 5 percent, and other or medley 5 percent,” says Tim Huffcutt, marketing director at RPE, Bancroft, WI.

There are shippers doing just fine offering nothing but the finest Russets available.

“We still find an interest in the Russet Burbank variety, which is the one that made Idaho famous,” says Kevin Searle, general manager at GPOD of Idaho, Shelley, ID. “We don’t do any other variety. Maybe we will become the niche market.”

Even some gourmet chefs continue to prefer this traditional, familiar potato.

“There are culinary schools and chefs on the East Coast who are asking for the Russet Burbank,” says Searle.

Not One Size Fits All

The optimum mix of varieties changes depending on the region of the country and the demographics of a particular store.

“In Florida, you see more of the minis because they are in smaller packages more suited to small households, and there are a lot of retired people in Florida,” says Potandon’s Schwartz. “In the Heartland, the white potatoes go away. The white potatoes are going to the West and East Coasts.”

The category is changing quickly enough that it is easy for retailers to miss merchandising opportunities.

“We asked a retailer in the Southeast if they knew the 20-pound bag of red potatoes are the fifth-fastest moving item in potatoes,” says Stanger. “They weren’t even carrying it. They did an experiment, and it became their fifth-fastest moving item.”

Retailers should be able to count on help from their shippers when it comes to analyzing the details of changing consumer preferences within the category.

“We typically make recommendations to retailers based on trends in the category,” says Schwartz. “I use the averages of what’s selling. I do a massive information dump every quarter. I would say a retailer should look at the category at least semi-annually.”

The result of this detailed analysis is a recommendation for the percentages of the potato shelf space that should be devoted to different varieties and products.

“Fifteen percent of the dollar sales are mini or specialty potatoes,” says Schwartz. “If a customer says here’s how much space I have for potatoes and if 15 percent of the category is minis, we recommend they give them that much space. The size of the display depends on the store, its size and customers.”

There are also differences among age groups and regions in preferences of potato varieties.

“Category Partners will look at the demographics and what is going on in the region,” says Wada Farms’ Stanger. “In Seattle, organics will play a big part. They are also going to be interested in smaller servings. In Texas you still need the specialties, but you also need bigger potatoes. In Idaho, you need Russets.”

“Millennials over-index for yellow, petite and Fingerling potato varieties and package sizes,” says RPE’s Huffcutt. “Petite or small potatoes and package sizes, 3 pounds or less, index higher in Florida, the Northeast and California. The West is the highest region for organic potato sales – five percent share of total dollar sales. The Northeast has the highest index for 5-pound and 1.5-pound packages; and the lowest for 10-pound packages. The Southeast indexes the highest for jumbo-size potatoes.”

Do not sleep on the possibilities because some grower-shippers are on the lookout for the next big or small thing in potatoes.

“Fresh consumption has been relatively flat, but the category is evolving,” says Stanger. “We’re always trying to adapt and come up with new varieties that work for both the consumer and the grower.”

Rules of Thumb

Although detailed demographic and trend analysis makes sense as a way to optimize selections, there are a few rules to start.

“The proper mix of varieties is 50 percent yellows, 20 percent reds, 5 percent Fingerlings/creamers, and 25 percent Russets,” says John Pope, vice president for sales at MountainKing Potato Co., Houston, who believes the optimal display is the 24-by-22-inch display pod.

Location and appearance of the display are as important as the size in capturing consumer attention.

“The optimal display size is obviously the more coverage the better, but it’s not only the size of the display, it’s the position,” says Eagle Eye Produce’s Oswald. “Customers usually aren’t out to wander aisles; they come to the produce department with a few items in mind. We need to present displays customers can see from the moment they walk in the front doors.”

A good display needs to be both large enough to hold all the varieties customers want, yet small enough to allow for quick turnover.

“The optimal display size should be no larger than what can be moved in a day or less,” says Paul Dolan, general manager of Associated Potato Growers, Grand Forks, ND. “The potatoes do not always get the right treatment on display — too much light and no cooling. Keep the display to what can be rotated daily.”

Equally as important as the mix of varieties is the selection of pack size. And this, too, is changing.

“We are seeing a trend away from bulk bags toward smaller serving sizes, and we need to nurture that while also not isolating the demographics still buying bulk,” says Oswald. “The potato industry also needs to be more personal than ever, giving customers the added value of simple recipes, pairing ideas, grower stories and more. Customers like to see the face behind the brand, and we can’t forget that.”

Retailers need to find a balance that offers the optimal combination of varieties and pack sizes.

“The sizes and packaging really vary with the consumer,” says Dolan. “I would say that 3-pound to 10-pound should cover most of the shoppers today with some bulk display on the bigger potatoes. Reds, yellows and Russets should all be on display, and the specialties such as Fingerlings and other colors should be separate from these. The yellow-flesh varieties have increased in the market.”

The selections should be kept simple enough to avoid overwhelming customers with too many SKUs to consider.

“While it’s important to offer a wide variety of potatoes to meet customer demand, it’s also just as important not to offer duplicates of the same product,” says Oswald. “We don’t need to overwhelm our customers with multiple offerings within the same variety. For example, it’s important to have Russets, reds and yellows in single-serving sizes like a 1.5-pound bag and a bulk size like a 5-pound bag, but we don’t necessarily need to carry 3 pounds, 8 pounds and ten pounds within the same variety. It’s important to have a wide variety of options, but we don’t need to overcomplicate within the variety.”

This trend toward buying smaller bags is also showing up in purchasing just a few potatoes from bulk.

“It’s not just the Millennials and the younger generations,” says Gray. “We’ve also seen an increase in older people just buying a few potatoes from the bulk.”

A challenge for the supermarket is fine-tuning general rules about varieties, colors, and pack sizes to fit a particular store.

“The retailers are challenged to have the perfect assortment and variety for their customers,” says Gray.

The popularity of potatoes among young families speaks well for the category’s future.

“Millennials are the most frequent consumers of potatoes, followed by Generation X,” says Hanson of Category Partners. “More than half, 57 percent, of Millennials with children report eating potatoes a few times weekly compared with 37 percent of Millennials with no children.”

Many consumers are looking to buy more than one kind of potato at a single shopping trip and use them for different purposes.

“The potato industry is working toward driving multiple units per transaction, per preference and 24/7 usage,” says Hanson. “For example, a 5-pound bag of Russets to have on demand for baking/grilling/mashing and a 1.5-pound bag of baby yellows or reds to roast for dinner that evening and an oven-ready tray to bring for lunch.”

Cross-Merchandising Helps

There are opportunities beyond having a good selection to increase potato sales through merchandising efforts.

“Providing simple meal solutions to our customers while also not forgetting the customers who do buy bulk and store potatoes for long periods of time,” says Oswald. “It’s important for retailers to cater to their own demographics. Providing meal solutions is always great cross-marketing. When selling potatoes, it’s always best to pair with products that customers can work into their potato dishes. We’ve seen a lot of success with baked potato ingredients like butter manufacturers, bacon bits, chili, etc.”

Meal solutions might be done best in cooperation with the nearby deli department.

“Deli cross-marketing is the most effective, with a 2015 study showing three times more incremental sales than other cross-marketing ideas such as Iron Man posters or mailers,” says Huffcutt.

Some varieties may work better than others when it comes to cross-merchandising.

“Cross-marketing works best for smaller potato types while focusing on a single variety,” advises Huffcutt. “While in-store demos may work well to feature new and innovative products, in-store demos are the least effective in driving incremental sales for commodity items. Cross-marketing with bulk potatoes is also very effective in driving sales.”

A visible, good looking display of high-quality potatoes is still the most important merchandising tool.

“Overall, when it comes to merchandising, a dynamic assortment, everyday placement at eye level, high traffic flow, space to sales, secondary displays, quality/appearance and information (pricing, usage, health, origin/sustainability) are key merchandising tactics to drive sales,” says Hanson.

Information can be another way to promote increased potato sales.

“Improved education – pairings, varieties and usage are the most important factor in increasing sales of potatoes in the United States and Canadian produce departments,” says Pope from MountainKing. “Cross-merchandising ideas work with execution. Stale and outdated merchandising are the most important hindrances.”

An effective way to merchandise potatoes can involve reminding people of their tremendous value.

“The nutritional value and cost per serving are major factors in the potato business, and we need to stay consistent in promoting these simple, but effective selling points,” says Oswald. “We also need to find ways to make conventional potatoes more convenient and provide consumers with simple meal solutions.”

Good health at an economical price is an important part of explaining the value of potatoes.

“It is important at the store level to promote the healthy facts about potatoes,” says Dolan from Associated Potato Growers. “People are into healthy.”

The long-term health of the category, however, also depends on maintaining mutually beneficial relations with the people who grow the potatoes.

“The most important factor is the challenge of getting a fair markup on our product,” says Dolan from Associated Potato Growers. “The price for our product does not change with the cost of the product. Right now, that freight is the biggest challenge, getting the trucks and then paying affordable freight once you have them. We need more trucks, and being able to use Canadian trucks in our area would really help.”

From the shippers’ perspective, cost flexibility also means dropping retail prices at times to spur additional demand.

“One of the largest challenges potato growers and shippers face is that potato prices at retail seldom drop when the wholesale price does,” says Ted Kreis, marketing and communications director of the Northern Plains Potato Growers Association, East Grand Forks, MN. “There is a tremendous opportunity for retailers to move a greater volume of potatoes when wholesale prices are depressed and still take a high-profit margin.”