Originally printed in the February 2020 issue of Produce Business.
Millennials and young families driving rise in value-added sales, preferring microwave-ready format above all.
As a newer category in produce, ‘value-added potatoes’ can be tricky to define. Generally, industry representatives agree these products make creating a meal easier or quicker by removing a step from either the cooking or the preparation process. There are many fresh, healthy, quick and convenient items, with formats such as: fresh prepared, single wrapped, microwave wrapped (bag or tray), pre-cooked or specially packaged.
In response to consumer demand for fresh foods fast, many North American potato growers, packers and shippers have introduced a value-added line of ready-to-serve potato products to enhance their offering. Today, there are various major players: Agrow Fresh Produce Co., Alsum Farms & Produce, Green Giant, Little Potato Company, RPE and Wada Farms Marketing Group to name a few, plus a handful of regional suppliers.
According to data from market research firm IRI, supplied by potato grower-shipper RPE, nearly 84% of U.S. retailers (including traditional grocery outlets and supercenters) carried at least one fresh potato value-added SKU in their potato set during the 52 weeks ending Dec. 1, 2019. Over that same period, value-added potatoes represented 5% of total category dollar sales, 2% of total category volume sales and nearly 8% of total category unit sales. IRI says that value-added potatoes sell on average 50+ units per store/week.
For shoppers, the attraction of value-added potato products is largely a promise of convenience and flavor at good value. “While the value-added potato category is a small-niche market, the category is growing and reinvigorating fresh potato consumption,” explains Christine Lindner, national sales and marketing associate at Alsum Farms & Produce in Friesland, WI. “According to Denver-based Potatoes USA, fresh market potato demand is continuing to gain.”
Ed Romanelli, vice president of sales and marketing at Agrow Fresh in Chicago, describes the category as growing at a fairly fast rate, whereas the total fresh potato category is fairly flat, with the exception of the yellow variety. “We have seen double-digit growth, and I am sure that we will see continued growth in the future,” he predicts.
Over the past four years, the convenience potato sub-category – (roughly 2016 – 2020)as defined by Nielsen – has grown approximately +13% in volume (pounds), says Tom Barnes, chief executive of Category Partners, an Idaho Falls, ID-based strategic insights company. Also, the potato category has declined approximately -8% in volume during the 48 weeks of 2019 ending Nov. 30, 2019, compared with the corresponding 48 weeks of 2016.
“So there is a 21% swing between the growth of value add and the decline of the overall category,” clarifies Barnes. “The only other sub-category to outperform the convenience sub-category is yellow potatoes; posting an approximate +15% growth in volume.”
Overall, microwave-ready potatoes appear to be the most popular value-added format, although consumer preferences do vary by region and retailer. “Microwave-ready potatoes steamed in bags or trays offer consumers a healthy, quick and convenient potato offering that can be seasoned based on consumers’ taste and preference,” notes Lindner from Alsum.
According to Bancroft, WI-based RPE’s insight, microwavable trays surpassed single-wrapped potatoes in 2017 as the highest dollar share of the value-added segment, representing 1.9% of the total category dollars. “Micro tray sales topped $50 million in 2018, and are on pace to do that again in 2019,” notes RPE category and brand manager, Rachel Atkinson-Leach. “Micro steamer bags and single-wrapped potatoes have been in steady decline since 2017, although they are still nearly 2% of value-add dollar sales.”
Atkinson-Leach attributes the popularity of the microwavable tray largely to a significant increase in distribution during 2017. “The boost gave the convenient tray higher visibility, more trial and repeat purchases, which continue today,” she says. “The micro tray also represents further acceptance of the small bite-size potato segment of the category, which continues to drive total category growth.”
RPE’s No. 1 value-added potato item in the United States is the Tasteful Selections Loaded Potato micro tray, which is sold mostly at Walmart. “This item is popular because it combines small bite-size potatoes with a simple seasoning that can be microwaved in minutes and served straight to the table; almost no prep and no clean-up,” says Atkinson-Leach.
Kevin Stanger, president of Wada Farms Marketing Group in Idaho Falls, ID, agrees that microwave kits seem to be doing well, supported by packaging improvements like the addition of flavorings. Meanwhile, Romanelli from Agrow Fresh considers steamable and petite-sized potatoes to be popular, as well as formats that enable consumers to add preferred flavors.
In the past year, Green Giant has introduced a unique steam bag featuring a flavor-packet in a separate chamber of the bag that releases during the steaming process, according to Romanelli. Similarly, Agrow Fresh has developed a Re-Sealable Steam bag of petite potatoes that allows the consumer to pull open a tab on the bag, add any flavoring, re-seal and microwave.
RPE’s Tasteful Selections has launched new flavors in both bite-size rounds and small sweet potatoes. “We launched eleven flavors in total that were consumer selected and crafted by flavor experts,” confirms Atkinson-Leach.
Other innovations include the evolution of the micro tray, according to sustainable packaging trends. “One supplier moved to a clear plastic tray with a resealable lid,” according to Atkinson-Leach. “Tasteful Selections will be introducing a new sustainable tray option in 2020 for our Season & Savor micro tray line.”
Furthermore, Lindner at Alsum is seeing a shift toward smaller pack sizes of 12 ounces to 3 pounds (lb). Barnes at Category Partners concurs. “When looking at pack size, it appears there has been a big shift away from the 2-lb pack size,” he reports. “The 1.5-lb pack size actually posted the largest volume growth from 2016 to 2019. The 3-lb bagged convenience items have also gained a significant amount of traction over the past four years. In 2016, the 1.5-lb pack size has gone from 23% of total convenience sub category volume to 35%.”
When it comes to shopping for value-added potatoes, suppliers agree convenience, flavor, no waste, quick/easy preparation/and perceived value top the list of desires.
Erin Gort, content and communications manager for Love Beets in Philadelphia, points out a big produce trend for 2020 is the growing need for convenient, on-the-go items that don’t sacrifice healthfulness or taste.
“The market for value-added potatoes falls right into place,” she says. “Capturing needs from different generations, whether it be the family that needs an easy, nutritious meal, or the Millennials hoping to explore new flavors while still getting the bang for their buck on something familiar.
“Additionally, value-added items attach a larger brand presence to the food, establishing a customer connection,” says Gort. “Millennials are driving the need for greater transparency and a desire for their wallets to align with their values. Having a brand they can clearly recognize and feel good about in the produce section means building a relationship with lifetime customers.”
Gort’s point is worth noting considering Millennials are deemed to be the biggest consumers of value-added potatoes. Equally, the category is highly popular among parents seeking fresh, healthy and quick meal solutions with flavors that children will love, notes Lindner from Alsum.
“Millennials and families with kids generate higher indexes versus Baby Boomers and couples,” confirms RPE’s Atkinson-Leach. “The value-added potato category is capturing younger (54 years or younger), affluent households.”
Romanelli of Agrow Fresh agrees Millennials love the convenience, while Baby Boomers are less enamored. “That is why we must cater to both segments to grow the category even further,” he points out. “At this point in time, we are dealing with two clearly different types of consumers: Millennials and Baby Boomers, so let’s not concentrate solely on one. There are enough value-added varieties of potatoes available that would appeal to each one, so pick one [variety] for each [type of consumer], and put them in the same ad; your loyal customers will thank you for it.”
MERCHANDISING, PRICING & MARKETING
Despite their popularity, Atkinson-Leach says RPE’s research indicates the segment has not found the right home yet within grocery stores, with consumers unaware of where to find value-added potatoes.
“I would encourage retailers to test value-added items across departments to see where their shoppers will settle on a destination,” she notes. “Test in produce, the refrigerated section, cross merchandise in the meat department or with meal-solution centers.”
Stanger from Wada agrees placement can be challenging. “Many retailers have realized they need to put them in a spot that gets traffic on the produce floor, while cutting back on less profitable items.”
Romanelli recommends a section for value-added potatoes, as well as cross merchandising with the meat or deli departments. Indeed, Stanger also suggests pairing with bagged salads, ready-to-eat chicken or other meats.
Lindner says cross merchandising can lift sales outside of the produce department. “Consumers will look to meat and potatoes as a natural meal solution, and are more likely to purchase potatoes if they see ready-to-bake or grill potatoes paired next to steaks, pork chops or chicken in the meat aisle,” she explains. “It’s a win-win for the retailer.”
Atkinson-Leach says the sweet spot for pricing is between $3.49 and $3.99 for micro trays. “Micro steamers generally retail between $1.99 to $2.99,” she adds. “Single-wrapped potatoes range between $0.89 and $1.25.”
Lindner points out the opportunity for retailers to capture a higher price per pound on a value-added potato offering versus a bagged product is significantly more. “Value-added potato products appeal to consumers seeking convenience, and they’re willing to pay for it,” she comments.
Price promotions work too. “As families are smaller, these items fit right in with today’s consumer,” says Romanelli. “A small package priced right with no waste for them is almosta guaranteed repeat purchase the next week for you, so promote them often because there are good margins to be had here.”
Atkinson-Leach says merchandising is vital to communicating how quick and easy value-added potatoes are to cook. “Signage and promotion are key,” she emphasizes. “Put these items in recipes and meal-solution circulars to add incremental sales.”
For Lindner, the best marketing method is attractive packaging that highlights the product’s benefits. “As new value-added potato products are entering the market, education is important for all audiences to follow a product’s label directions for the best possible eating experience,” she comments.
Romanelli agrees the more information, the better. “Packages that have great graphics have helped the category grow,” he affirms.