The potato market is proving difficult to predict as returns fall short of expectations against the backdrop of cut-throat competition in a scenario that will test major players as the sector moves towards the new season.
Suppliers in particular have been caught in the middle by maincrop growers seeking higher returns for limited supplies on one side and retailers continuing to put pressure on price on the other. However, the situation is likely to shift as it becomes increasingly clear that forecasts might just have been wide of the mark.
“There’s a real mix of positions in the market,” says one source. “Maincrop growers have been very confident, not falsely so but overly confident for the supply versus demand balance. In reality, the balance of supplies is just tipping to the realisation that we are not quite as short as we thought we were and the market is starting to soften up. In fact, I think we will see an easing of the market, particularly if we have a reasonable spring. January and February have already been relatively mild and early plantings in Jersey and Cornwall are underway. An early spring will go another step to undermining the overconfidence in the market.”
Suppliers who have secured contracts are more comfortable than this time last year, when they lost out on low prices on the free market. However, those who are relying on free-buy material are now suffering.
One major supplier who challenged prices from a retailer was even warned that if it asked for price rises, it would risk losing the contract.
“Retailers are coming up to the end of their financial years and they are showing no signs of wanting to move on price,” he says. “We were told that our competitors had not asked for price rises, which we know not to be true. We were told that if we asked for price rises, our contract would be put out to tender.”
The market itself has seen a boost in the last 12 months and the Kantar Worldpanel figures for the year to 20 February rate the potato market at £1.04 billion, up 1.5 per cent in value but falling 0.9 per cent in volume. The rise comes mainly from price increases, which have contributed £24 million to the growth.
Shoppers are changing the way they buy potatoes by picking up smaller packs but paying comparatively higher prices, which is driving inflation in the category.
“Everyone is watching their basket spend and consumers are going for smaller packs, rather than the bigger value packs that they used to go for,” says a supplier. “People are conscious about how much their shopping bill is and are not building up stocks at home in the same way that they used to.”
However, one sub-category to watch out for is the premium potato tier, which is enjoying the strongest value growth at 16.8 per cent, albeit from a low base and with a value share of just five per cent.
Suppliers are registering a keener interest in these lines from buyers, as long as they command a reasonable premium. “Retailers are looking to increase their revenue in potatoes and they are looking to encourage shoppers into the premium offer,” says a source. “The drive for availability of premium potatoes has suddenly become fairly intense - everyone is scrabbling around for varieties to go through the premium panels and I believe that this will continue.
“But it is all about pitching it at the right price - if it has a premium but not a ridiculous premium then there is certainly a lot of interest around at the moment.”
No one is keen to predict how the market will shape up in the coming months, but the countdown has started to the beginning of the new season with plantings underway in the earliest regions of Jersey and Cornwall.The first Jersey Royals grown under glass hit the shelves in Marks & Spencer at the end of February, attracting attention to but making very little impact on the market.
For the moment, however, the sector is keeping a close eye on supplies coming out of stores until the new season gets underway. A lot will depend on whether the UK is set for an early or late spring, so growers and suppliers are watching out for this to inform their next move.
“We are reasonably comfortable about where we are on quality, though we are beginning to see an increase in internal defects as the storage season continues,” says one supplier. “We just have to watch and monitor that, but so far quality coming out of stores is pretty satisfactory.”
ANDALUSIA REVEALS FORECAST FOR NEW POTATO SEASON
Andalusian Early Potato president Mariano Ruiz tells Anna Sbuttoni about
his expectations for this season and how the brand is bringing together the region’s growers and suppliers to strengthen their export offer.
What is the forecast for the 2011-12 season in terms of production volumes?
A reduction of farm land is expected to range from 10-15 per cent, mainly caused by the bad results of the last two planting seasons and by the financial difficulties resulting from the economic downturn. However, the sector hopes for a better year thanks to the limited potato harvest in the mid- to late season in Europe, the great demand in Russia and the countries in the west and consequently, the likely scenario of acceptable prices.
As for the timing of planting, the continuous rain in December has caused a slight delay, although it is underway and will not signify the delay in the harvest that occurred early last season.
What characteristics do Andalusia potatoes offer in comparison with the rest of market?
The main aim of the Andalusian Early Potato brand is to be conscious of the final consumer, the enormous sensory differences compared to stored potatoes and of the importance of knowing that it is only between April and July that you can enjoy the first potatoes of the year.
We highlight the freshness of a seasonal product that is natural and without conservative treatments. The potatoes have a great flavour thanks to the optimal combination of the climate, soil and water. They make it from the field to the table in only four days and are of course produced in an eco-efficient way.
What are the main varieties of early potatoes that are produced by your members?
The leading varieties for the domestic market are Mona Lisa, Melody, Soprano, Accord, Música, Spunta and Agria, all high calibre varieties. On the other hand, the export market prioritises the sensory and culinary aspects so Agatha, Marabel, Melody, Inova and Nicola are the principal varieties grown by this market.
Andulusian Early Potato represents the majority of producers, marketers and exporters of early crop in the region, encompassing almost 20 partners, which make up Asociafruit. In the case of exports, the integrated companies represent more than 95 per cent of the early potato export quota.
What are the principal markets for Andalusian Early Potato?
Around 70 per cent of the early potato production grown in Andalusia is intended for an international market. When it comes to the European market, 30 per cent is principally intended for the markets in Germany, the Netherlands, Belgium and the UK, highlighting in the last few years the growth of new markets in the Czech Republic and Poland.
What measures are you taking as a business to promote the consumption of early potatoes in these markets?
The sector is going to continue developing its collective brand, Andalusian Early Potato, with a differentiation strategy in the domestic and international markets. We are going to maintain a presence in the principal trade shows, Fruit Logistica and Fruit Attraction. Next, we are going to develop a collaborative promotion with the Club Ibérico de Profesionales de la Patata (CIPP) during the principal months of harvest in May and June. The aim of this joint promotion is to build demand of Andalusian early potatoes by enhancing freshness and flavour of this preserved potato, as well as achieving a high level of awareness for the brand, Andalusian Early Potato.
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