South America is extremely interesting for French fries producers. After Simplot and McCain, Lamb Weston also announced plans to build a chip factory there. It will be established in Argentina, with the help of a local partner.
In June of this year, chip manufacturer McCain took one majority interest in the Brazilian potato processor Sérya. In Mendoza, Argentina, Simplot is active as a producer, together with a local producer. Last week it was announced that Lamb Weston will also become active in Argentina. In collaboration with the company Sociedad Comercial del Plata, it acquires Alimentos Modernos.
Lamb Weston after Farm Frites
Sociedad Comercial del Plata is now co-owner of Alimentos Modernos together with Farm Frites. After the takeover they will lose their shares. This company was founded in 1996 as a joint venture of Farm Frites. In the year 2017, it announced that it would invest $100 million in the new factory in Mar del Plata. The new factory is now being built partly under the Lamb Weston flag.
Argentina is a growing market for producers of French fries and other frozen potato products. It is also an important supplier to other South American countries. Entrepreneur Ignacio Noel is the director of Sociedad Comercial del Plata and has been working since 2014 to set up a chip factory in the coastal town of Mar del Plata. That year, Sociedad Comercial del Plata bought 60% of the shares of Farm Frites.
New factory
The chip factory, positioned so that it can supply Brazil and with an intended capacity of 70.000 tons of end product, is not yet running. With the help of Lamb Weston, this may change. Completion is scheduled for early 2020, involving $100 million in investments. Alimentos Modernos' current factory is in Munro, Buenos Aires. That factory is good for 60.000 tons of frozen fries per year, which are sold under 2 own brands.
In addition to Brazil, products from Argentina are also exported to Uruguay, Paraguay and Bolivia, among others. Lamb Weston and Sociedad Comercial del Plata have to compete in Argentina with JR Simplot and McCain, which are active in Argentina as well as in neighboring Brazil. This year the chip potato area in Argentina amounts to 35.000 hectares. This is an increase of 10% compared to the previous season. The increase is mainly due to the fact that the Simplot factory is now active.
Argentina as a back door
The chip makers are using Argentina as a backdoor to supply Brazil, which has imposed hefty anti-dumping duties on European suppliers. The World Trade Organization has now announced to intervene in this matter. Meanwhile, imports into the country are declining. Suppliers from the Netherlands, Belgium and Germany sold more than 5% fewer fries in one year due to the levy.
Argentina is benefiting from this measure. The export level over a period of 12 months is almost 40% higher than in the previous period. In the Netherlands the volume decreased by 35% and the volume from Belgium also decreased by 33%. Almost all frozen potato products that Argentina exports go to Brazil.