This time, I really need your help.
What is the REAL effect of the current economy on the potato processing industry? Really!
I have seen the recent news reports:
- French fry stocks up 7% in the US (normal for this month in the year)
- Fresh potato prices remain high
- Simplot and Lamb-Weston renegotiate grower contracts (growers are realistic)
- Lamb-Weston moves toward JV raw potato supply in Idaho (growers are angry)
- Frito-Lay sales are doing well
- McDonald's is building restaurants
- Etc.
To say the overall message in the news is mixed is a bit of an understatement. Are things getting better or worse or staying about the same?
Who knows?
For Key's potato business, we have seen some projects move out in time... but hey, they do that all the time, no? And no word from McCain on that new plant in the NW US they announced a couple of years ago. Maybe no news is bad news?
I have spent some time recently, traveling around to various points on the globe, to get a sense for how the industry is doing. I must say, there are quite a few new plants and new lines being planned, perhaps as much as we have seen since the Atkins scare about the same time as 9-11-01. Not huge lines, mind you, but several small-to medium projects. And many who are not planning new lines are planning equipment upgrades and modernization. So the industry seems to be planning to spend money over the next couple of years. Will they really?
As I have written before, it is times like these when I am quite pleased to be in the processed potato industry. Times are tight, consumers are not spending money in lots of areas. Computers and cars are in the tank. But everyone, it seems, needs to eat- and potato products offer a very nice mix of taste, value and nutrition. Comfort foods, I call them. Sure, people are coming home to eat rather than going to a restaurant, that is a trend to be expected. More customers for McDonald's and Safeway, fewer for TGI Fridays.
But they are eating potato products and always will.
Of course, there is reality of the current economy that will affect the processed potato industry. More people are unemployed right now, providing wonderful opportunity for our stable market to acquire employees with different views and backgrounds, broadening our perspectives. Prices for fuel have more or less come back to planet Earth, making lower cost raw product something of a possibility. And governments are stimulating the economy by providing tax incentives for business investments, cutting the cost of improving yields for an industry with cash.
So we keep working on solutions, and looking to find areas where we can apply solid technology to solve real-world problems. From my perspective, opportunities abound.
Tim
2 Comments (Click Here to View or Comment):
Great blog! I stumbled upon this site which may be useful to your visitors.
International Produce Training
From my friend David Brenchley of Crier Communications (Potato Processing Int'l):
Hello Tim.
As you say, the news can seem troubling, but is it really?
There are exceptions to every rule, though in Europe the industry seems to be in good shape and holding volumes, except for some 'upmarket' items.
Australia and New Zealand have their own, unique problems, but I cannot see any real evidence that the economy is having any significant there over the other problems.
Apart from North America, all other global regions seem to be marching ahead.
For North America, the news items do seem to indicate a possible problem if taken at face value.
OK - there seems to be a small drop in volume, which brings me to the point I really wanted to make, which is that in times of uncertainty, stockists tend to reduce holding volumes.
There is quite some tonnage tied up between product leaving the factory and being bought at point of sale, especially in frozen.
We have seen on a fairly regular basis over the last few decades that in times of uncertainty that supply chain tends to go tight and reduce stocks.
That should be borne in mind when reading 'spin' about reduced volumes.
Keep up the great Blog!
David Brenchley
Potato Processing International magazine
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