Potatoes and Onions: Partners Through Time

Potatoes and Onions

Ways to merchandise two leading vegetable categories through all seasons and throughout the store.

Purple PotatoesPotatoes and onions are, more often than not, paired together in retail produce departments. When visiting supermarket produce departments, when shoppers see one, they will find the other.

As the two commodities require similar temperatures, retailers frequently merchandise them alongside each other and find sales improve for both items. Potatoes and onions are supplied and transported together, which also makes both vegetables easier to manage than other categories.

The colors of Russets, Reds, Yellows, Whites and specialty potatoes, such as Purples, contrast well in displays and storage with sweet onions. The various colors of onions also liven displays. Potatoes are loved by all shoppers and, like onions, are found in all cuisines and appeal to people in all ethnic groups, according to marketers.

In supermarkets, potatoes and onions are powerful category leaders. Potatoes are the top-selling vegetable, and the commodity continues to see consumption growth, according to Denver-based Potatoes USA.

Leading Produce Categories

In terms of weekly volume sales per store, potatoes are the second-leading commodity sold in the produce aisles, second only to bananas. In weekly dollar sales per-store, the commodity is the third leading vegetable, behind packaged salads and tomatoes, according to the 2016 FreshFacts on Retail, published by the Washington, D.C.-based United Fresh Produce Association and Chicago-based Nielsen Fresh.

In the vegetable category, onions are second in movement and in overall movement, sixth, also behind melons, citrus and apples, according to FreshFacts. Potatoes and onions are also high in annual household purchasing. At 88 percent, potatoes maintain the highest produce penetration rate — higher than bananas’ 86 percent — while onions capture 83 percent market penetration, the third-highest in the entire produce department and ahead of value-added fruit, tomatoes, berries, apples and packaged salads, according to FreshFacts.

“When you have a high purchasing rate like that, it tells you potatoes are important to every demographic, regardless of ethnicity, income or social status,” says Ross Johnson, Potatoes USA’s global marketing manager. Potatoes and onions are two items shoppers purchase throughout the year, he says.

“When retailers consider potatoes, they should understand shoppers don’t usually buy potatoes by themselves. When shoppers place bags of potatoes in their shopping carts, they’re planning meals, and the potatoes are going into something else,” says Johnson. “Research shows the fresh potato shopper spends more than any other type of shopper out there,” he says. “Basket sizes average nearly two times larger when fresh potatoes are in the basket. That’s remarkable for an item that’s usually buried in the back of the category (the produce department).”

“The Millennials are a lot pickier. They don’t eat as much and want something new. Millenials don’t want to buy 20-pound bags that will sit and rot in pantries. The key is to provide a better balance between the Russets and the other varieties.”

— Phillip Nelson, MountainKing Potato Co.

Nine out of 10 potato purchases are planned, says Kathleen Triou, president and chief executive of San Francisco-based Fresh Solutions Network. “Research shows consumers who buy more potato types are, overall, larger consumers of potatoes,” she says. “When we educate consumers how to prepare and use multiple potato types, like Russets, Reds, Yellows, Whites, Fingerlings, Petites and Purples, they in turn are more comfortable buying more types, and thus buy more potatoes in total.”

Smaller Sizes Gaining Ground

Red PotatoesWhile Russets command the bulk of the potato business, Yellows, Yukons, Reds and other varieties, including the smaller-sized potatoes, petites and other new specialty types, can provide display variety. Russets, in bulk, 5-, 8- and 10-pound bags and Reds in bulk, 3- and 5-pound bags account for 75 percent of retail movement. Still, other varieties and formats are gaining ground, says Angie Hanson, director of category development at Idaho Falls, ID-based Category Partners, which is an analytical firm. Yellows, convenience and premium items continue to rise in popularity, she says, citing Nielsen statistics.

“As potatoes are the No. 1 vegetable mover in the produce department and onions No. 2, they deserve sufficient space,” says Hanson. “It’s essential to deliver the right varietal, packaging and bulk assortments and to allocate proper space, per demographic and geography. It’s an area where retailers continue improving.”

Newer potato varieties, including the smaller-sized ones, are gaining ground, observes Tim Huffcutt, marketing director for RPE Inc., in Bancroft, WI. A decade ago, bite-sized potatoes comprised 2 percent of the category. Today, they account for 17 percent of overall sales volume.

In average fresh potato sales velocity per-store, per week for year-to-date October 2017, 5-pound bags showed a 36 percent share, while bulk and 1- to 4-pound bags each held a 21 percent share. The 10-pound bags accounted for 13 percent, followed by 8-pounders at 3 percent, according to research from Potatoes USA and others cited by Huffcutt.

In 2016, Yellow potato varieties increased their pound share to 13 percent, up 1+ point while other specialty varieties increased to 2 percent, says RPE’s Huffcutt. Russet’s pound share declined 2.1 points to 53 percent, he says. On onions, the sweet varieties continue to be the most popular with consumers, says Huffcutt.

Though smaller bags, the 5-pounders, rule the everyday business. As the holidays approach, savvy retailers should consider promoting the larger 10- and 15-pound bags. Family gatherings will increase demand for the bigger quantities, says the Idaho Potato Commission’s Rhodes.

Newer Offerings

While Russet sales remain strong, the variety has matured. Retailers need to focus on other more profitable varieties, such as the Reds, Golds and Fingerlings, says Phillip Nelson, business development manager of MountainKing Potato Co., a Houston-based potato grower, packager and shipper.

Retailers can charge higher prices for the specialty varieties, which aren’t as commoditized as the Russets. Instead of merchandising 70 percent of a retailer’s potato display to Russets, Nelson recommends balancing the mix to 50 percent Russets. Over five years, the move could add $2 billion in national potato sales, he asserts.

“A lot of the produce category is seeing more of a move toward specialty products,” says Nelson. “The Millennials are a lot pickier. They don’t eat as much and want something new. Millennials don’t want to buy 20-pound bags that will sit and rot in pantries. The key is to provide a better balance between the Russets and the other varieties,” he says. “Display more and provide for more impulse purchase opportunities, particularly for your smaller sizes, which is what Millennials and smaller-sized families are looking for.”

The convenience and organic segments are also growing. While value-added potatoes still account for less than 10 percent of all potato sales, it is a rapidly growing product group that experienced double-digit growth from 2016 to 2017, says Fresh Solutions’ Triou. “The convenience segment is growing to meet the demands of the growing one- to two-person households which require smaller serving products,” she says. While organics appears to be a small category in potatoes (representing 4 percent of all potato sales), sales of organics jumped 18 percent from 2016 to 2017, says Kathleen Triou, president and chief executive of San Francisco-based Fresh Solutions Network.

Cross-Merchandising Success

Primary and secondary displays are key and should be placed in high-traffic areas, she says. “Effectively cross-promote them — within and out of produce — and/or as part of a meal deal or meal kit,” says Hanson. “As potatoes are a household staple, cross-promoting — especially when potatoes are the coupon carrier — could generate plus sales and help drive other perimeter and center-store sales.”

Effective cross-promotions could include root vegetables, fresh herbs, peppers, celery, avocados and tomatoes, as well as with deli and convenience items, including fresh dips and juices (for breakfast). Dairy (cheese, sour cream, milk) and eggs would be good for cross-promoting potatoes in the meat and seafood departments, and alongside salad ingredients. In the center store, chili, soup and stew fixings or ethnic ingredients and spices, particularly Indian, Hispanic and South American cuisines, would also work in cross-promotion programs, says Hanson.

Onions, particularly sweet onions, can help retailers achieve bigger sales, says
Teri Gibson, director of marketing and customer relations for Peri & Sons Farms, which grows and ships onions from Yerington, NV.  In addition to potatoes, onions can also be paired with party dip ingredients, with stuffing mixings, with seasonal side dishes and tailgate fixings, and at the meat counter.

“As a must-have item, retailers can use onions’ popularity to boost sales of other items in and outside of the produce aisle,” she explains. “There’s plenty of opportunity for cross-merchandising promotion. Also, now that sweet onions are a year-round favorite, it’s important that retailers distinctly display them separate from Yellow onions and with signage that reflects what seasonal variety is being offered.”

Promotions are instrumental in capturing incremental and impulse buys, says Hanson. Retailers should promote potatoes during eating periods beyond dinner through breakfast-, lunch- and snacking-themed promotions. “Merchandise to provide eating inspiration throughout the day and year by including with or adjacent to items that pair well, or that can be rounded-out for a meal,” she advises.

Because of increased demand, many retailers have found it advantageous to offer bulk or loose jumbo sweet onions and consumer bags of medium sweet onions. End caps, stand-alones, value-added product offerings, multi-size strategies and consumer bagged displays offer consumers multiple buying options and ensure sales lift, explains Keystone Fruit Marketing’s Kamer.  “Sweet onions present an opportunity for incremental produce sales if merchandised,” says Kamer. “Many retailers strive to take advantage of cross-merchandising by strategically placing onions and products that can be utilized with sweet onions. Sweet onions also offer ample opportunity for promotion and cross-merchandising with a variety of products in and out of the department.”

Sales Opportunities

“Sweet onions pair well with numerous items inside and outside of the produce department and increase sales of many other products. That’s why they continue to drive the onion category,” says Shuman Produce’s Shuman. “Consider displays outside of produce to maximize sales during the fall months when grilling and tailgating are top of mind for consumers. RealSweet Peruvian sweet onions make the perfect pairing for burgers, sausage and chicken on the grill, and research shows merchandising them together increases sales of both products.”

Potatoes enjoy many cross-merchandising opportunities to increase sales throughout the store, says MountainKing’s Nelson. “Retailers need to do a better job creating secondary locations for potatoes,” he says. That could involve merchandising potatoes in the meat department or as part of a meal solution.

Potatoes effectively merchandise in retail promotion programs, including those where consumers who purchase one item, such as steak, receive other items, including seasonings and other components of a complete meal preparation, for free, says Nelson. Other promotions involve merchandising Red potatoes within crawfish boils, which are popular in Texas and Louisiana. Concentrating on the convenience trend by displaying smaller-sized and microwaveable and steamer bags helps shoppers who want smaller portions that don’t require lengthy preparation, he says.

“The display piece is the critical part,” says Nelson. “There needs to be more of an emphasis on placing potatoes in secondary locations. Putting those items in places where people can really see them and create impulse buys is very important. Retailers need to do everything they can to be creative and think of different ways to sell the product.”

In the past few years, RPE has seen its retail customers become more focused on directing resources toward potato assortment and pricing optimization, says Huffcutt. “Developing and executing a strategic marketing/merchandising plan is a largely untapped area of opportunity for suppliers and retailers alike,” he says. “Strategy should focus first on in-store environments where shoppers are at the purchasing point with attention paid to clever, meaningful content delivered at particular times of year, such as prior to holidays and summer grilling season.”

While potatoes are heavily promoted during the winter, especially November through December, supermarkets should promote them more consistently throughout the year and during non-traditional periods, holidays and events, including the Super Bowl, Mother’s Day and Memorial Day. Additionally, diversify promotions and highlight Reds, Yellows and Purples during St. Patrick’s Day and Easter.

Varietals should also be promoted in tandem. For example, Russets and Reds work together. Stores should provide varietal-specific information, including flavor profiles and best applications, pairings and recipes, as well as health and grower information, both in-store and online, says Hanson.

Ensuring Proper Assortment

When marketing executives from the supply and retail sides collaborate and involve category managers and others, they can reach new consumers and a larger audience that lives near the stores, explains RPE’s Huffcutt.

Developing strategy begins with finding the right assortment, he says. Growth-generating assortment strategies include balancing stock — keeping unit shares across potato sizes and types, swapping stronger performing items in each pack size segment (small, convenience, medium, large, bulk), and shifting shelving space to accommodate improved shares across pack sizes and potato types, says Huffcutt.

“Finding the ideal category mix depends on store demographics and retail strategy,” he explains. “Optimal merchandising should be aligned with clear business objectives and related strategy. Merchandising approaches can vary from bulk bins, wrapped singles, new items, in-and-out products, value items, including increasingly popular trays and cups, and different bag types and sizes.”

Potatoes USA promotes recipes and other point-of-sale material, which is well-received, says John Toaspern, Potatoes USA’s chief marketing officer. The organization markets potatoes through advertising and through articles in retail in-store magazines. Potatoes USA isn’t planning joint promotions with the onion industry. New for 2018 is a promotion with Denver-based Ibotta, an app that allows users to earn cash rewards on store and smartphone purchases.

Onions remain a favorite amongst shoppers. “With nearly 70 percent of consumers regularly purchasing onions throughout the year, they’re deeply rooted in America’s kitchens,” says Peri’s Gibson. “We’re looking to shake up consumer’s comfort zones by providing free seasonal recipes that use a variety of onions — White, Red, Yellow and sweet — in new and fun ways that match-up to lifestyle changes throughout the year.”

Consumption Gains Eyed

Peri also promotes onions as a part of a vegetable-rich healthy diet. “The population here in the States continues to grow in number and in diversity,” says Gibson. “The wide range of ethnicity includes groups whose onion consumption is much greater than what’s typical in America, so it stands to reason onion sales will grow to meet demand.” The Millennials and Gen Zs she knows are eating more vegetables and replacing some of the meat they used to eat with plant-based proteins.

Potatoes can be a destination category, says Dave Rhodes, retail sales director for the Northeast for the Eagle, ID-based Idaho Potato Commission (IPC). Merchandising the right mix with the right type of onions is also crucial for success. In the Midwest, Vidalia onions are the most popular onion to merchandise alongside potatoes, he says. As that time of the year, spring to early fall, coincides with outdoor grilling, summer usually represents the strongest season for promotions.

“I truly believe if you keep the category active, you will keep people coming to the category on a weekly basis,” says Rhodes. “As you continue to do that, you reduce shrink in the category. By showing shoppers what you have to offer, you will have a strong category presence. Try to build your category into a destination category, where you have the variety they’re looking for.”

There is a positive outlook for potatoes says Potatoes USA’s Toaspern. “The future of the category is very bright as consumers continue to buy, and there are more varieties and packaging options in stores,” he says. The new packages help expand the number of potato offerings and meet consumer needs, he adds. “Potatoes are the No. 1 side dish at restaurants in the United States, with 97 percent menu penetration. Consumption is going up. Consumers love to eat potatoes when they go out and cooking at home.”