The consumption of chips at catering establishments, festivals, canteens and events has in many cases been reduced to almost zero. Yet potato processors still manage to sell French fries. Sometimes even increasingly. How is the European chips market shaping up, now that society is slowly getting going?
Dutch potato processors produced approximately 2019 million tons of pre-fried fries in 1,28. Of this, about 150.000 tons (12%) remained in the Netherlands. The rest crosses national borders. Especially within Europe (about 70%). The rest goes to North and South America and Asia, among others. Compared to other European countries, the catering industry in our country has been less affected by the corona crisis. Snack bars for takeaway, McDrives and home delivery remained possible. In other countries the entire sector was closed, especially in Southern Europe. What does this do to chip consumption?
Snack bar sales halved
“The Dutch cafeterias are weathering the corona crisis relatively well,” says fast food watcher Ubel Zuiderveld. “Turnover has decreased by 40% to 50%, while the entire catering segment is suffering between 60% and 80% loss of turnover. Catering at events and in canteens in particular has dropped to almost 0. The Dutch FoodService Institute expects a decline in turnover of €2020 billion in the catering industry in 7,1. That is almost a third of the total of €22 billion.”
“Companies that have a good sales mix are the best crisis responders,” he continues. “Cafeterias or restaurants with takeaway, delivery and little dining space. Personnel costs are now lower, which means that positive stories can also be heard in individual cases. Dutch people are used to always ordering fries. Wherever you go, there are fries available. It is a very important product.”
Distribution of consumption
Zuiderveld uses 150 million kilos for annual Dutch chip consumption. Fast food chains such as McDonald's, Burger King and KFC are estimated to account for between 10 and 20 million kilos. Cafeterias are much larger, with a turnover of 40 to 45 million kilos. The rest of consumption is divided between retail, food service and restaurants. The last 2 segments are missing almost all of their turnover, which indicates how great the pain is in the land of fries. “An average McDonald's restaurant in the Netherlands has an annual turnover of €3,6 million, he explains. “€600.000 of this comes from pure chip sales. It is an important pillar.”
It is not known how many fries supermarkets sell. It is therefore difficult to say to what extent sales have grown here. It is certain, according to experts, that it has increased. Potato processors who focus on private label fries (sold under the supermarket brand name) are therefore slightly more resilient to the crisis. At Aviko Potato, retail accounts for 16% of annual turnover, says CEO Chris Deen. Aviko is actually very large in the food service segment.
Fresh fries
In addition to frozen fries, there is fresh chip production, which has made significant progress in recent years. Zuiderveld: “Of the total fries volume, 16% are made fresh or semi-fresh (delivered cut) by cafeterias. Market agency Datlinq even estimates the fresh fries volume in the Netherlands at almost a quarter, but that is a lot.” For fresh fries, or the delivery of potatoes for this purpose, buyers often make direct agreements with growers. This segment is also experiencing a significant decline in turnover.
Potato growers respond to this by selling to consumers themselves, for example through a drive-through on the farm. The success is great, but the volume turnover is relatively low. Every little bit helps, that's the idea. Processors stopped fresh chip production at the beginning of the crisis due to the very limited shelf life of this product.
Cafeterias and restaurants usually have contracts with the producer, but there is an intermediary such as catering wholesaler Sligro. Such a contract does not force mandatory purchase, Zuiderveld knows. This is in contrast to the contract that factories conclude with growers. The processor therefore sees his stock of end product increase. “Factories work with bonus systems. The more boxes of fries are sold, the greater the sales bonus. This year that story does not apply, which is a downer for cafeterias because the bonuses are significant.”
McDonald's loses mainly in Europe
As described, the Dutch chip market - despite a chip consumption of 12 kilos per capita - is relatively small in total. Elsewhere in Europe, the catering industry has been hit hard, often with a total shutdown. Chip shops, fish & chip shops and other businesses are slowly opening their doors again. McDonald's quarterly figures reflect the situation well. Global sales growth of 8,5% was achieved in January and February. This fell sharply in March, resulting in a turnover in the first quarter that was 6% lower than in 2019. The pain is greater in Europe. There turnover fell by 35%. In the US it was -13% and in other international markets it was almost 20%.
The fast food king has now reopened more than three-quarters of their restaurants in May. Especially for the McDrive and delivery service. In Europe, more than half of all branches were closed, compared to 1% in the US. Elsewhere in the world, 20% of restaurants were closed. Other fast food chains show similar figures.
Europe is lagging behind
Growth in catering turnover is particularly noticeable in Asia. The volume of fries converted increased in Japan and China. In Europe, the recovery is expected to take much longer and will continue to falter this year. It is kept in mind that this growth could quickly be canceled out in the event of a new outbreak of the coronavirus.
The future is uncertain for events and the coming year is already a black blanket. French fries are increasingly consumed outside the home. In the US this accounts for more than 80% of sales and Europeans also use the deep fryer less often. The catering industry is now fully committed to delivery meals, takeaway and the drive-thru, which gives a positive boost to chip consumption.