Potato processors have been given little breathing room this summer and fall to recover from the coronavirus. Processing and export has indeed recovered, but the previously achieved backlog has not been made up. Now that a second wave of contamination is clearly noticeable, the question is what this will do to sales.
The 5 major chip exporters in Europe all hit a low point in April. The export market subsequently recovered. This recovery went more smoothly in the Netherlands than in neighboring countries. Belgium managed to expand its exports in March, but had to make a significant decline in the following month. In the Netherlands, this decline had already started earlier, but the recovery was also faster.
Processing and export remain fifth lower
The most recent export figures for frozen fries are for June. The Netherlands exported 117.750 tons of fries in that month. This figure is 20% below the 5-year average. Looking at the Dutch processing figures, 20% to 25% less pre-baked product was produced up to and including August. Insiders say that some companies are operating at 90% of their normal capacity, depending on the sales market. For example, some processors have started producing more for bulk production instead of, for example, food service, because the export market is doing well.
Belgian fries producers have traditionally been more focused on the bulk market and white label production, fries that are sold under the brand name of supermarket chains. This may be an important reason why the sales figures of Belgian factories have not shrunk, but have even increased. In June, sales were 4,4% above the 5-year average. An upward trend in exports is clearly noticeable. If we look at the last 3 years, exports are 5% lower this year.
Price differences in end product
Another notable change is the price per ton of fries sold. In the Netherlands it increased by €20 per tonne between May and June, while in Belgium it decreased by €20. Belgian producers remain undisputedly the most competitively priced supplier worldwide, which gives them enormous growth in market share for all destinations.
About 85% of Dutch and Belgian fries remain within Europe. A lockdown or partial lockdown, in which catering, sports and company canteens have to close, is detrimental to sales. Events are a major buyer of fries, but this sales channel was completely eliminated in advance. The many sports and company canteens have been able to open their doors for a while. The fast food chains have also not been sitting idle. For example, McDonalds achieved almost 5% more turnover in the US in the third quarter compared to 2019. In the previous quarter this was a loss of 8,7%. Worldwide turnover was 2,2% lower, mainly because fewer customers visit the business. The reason for this is mainly a changing consumption pattern. There are fewer customers who come to have breakfast at the most famous hamburger chain.
Drive-tru scores
The reason that McDonalds, but also Burger King and KFC, are doing relatively well is their drive-thru concept and delivery options. This is purely good news for chip sales. To achieve this, the chains must pull out all the stops. For example, McDonalds spends significantly more money on marketing. Burger King sold 3,2% less in the US in the third quarter. In Europe, among other places, sales were 10% lower.
In the US there may be a wildcard for Dutch and Belgian factories. The country still consumes a huge amount of fries, even though significantly fewer potatoes have been planted (-24.000 hectares) and fewer harvested (-1,14 million tons). The country imported fewer fries in August, but still a quarter more than last year. The Netherlands and Belgium in particular sold less this summer, but compared to 2019, sales are half as high. These fries are also very attractively priced. The price advantage is more than €130 per tonne compared to Canada. Other global destinations also continue to demand fries, although trade relations are sometimes fragile. Dutch and Belgian factories were faced with several anti-dumping complaints. The American sector also fears for its position and has repeatedly urged the Minister of Agriculture to tax European fries more heavily.
European catering industry continues to operate
As mentioned, Europe remains by far the largest consumer of fries. The Netherlands is not alone in taking strict corona measures, although the number of infections in our country is rising very quickly. This also applies to European leader Belgium. Small countries are more susceptible to infections than large countries. Our southern neighbors have not (yet) closed the catering industry and sports clubs. In Germany the situation is better under control. The catering industry closes at 11 a.m., just like in Belgium, but the number of infections is considerably lower. In the UK - despite the many infections - this is 10 am and the many pubs are open as usual. As far as chip exports are concerned, Brexit currently plays a greater role here than the coronavirus. The catering industry is also continuing in Spain and France.
What about table and export potatoes? The export figures through August show only a small backlog. Insiders confirm that this market is doing relatively well. Here too, Europe – just like Africa – has a good market. Eastern Europe is important here. In contrast to the past two years, Poland has about 2% more potatoes. Much more than the country needs. This oppressive supply is hindering the sector. Eastern European destinations do not require much product at the moment. Poland is a loss for the Netherlands because lower quality potatoes have been in great demand here in recent years. This year the Poles are staying at home.
Domestic consumption remains strong
There is positive news for Dutch retail. Sales of table potatoes have increased due to the coronavirus and supermarkets have managed to maintain this level. The 'stew season' has now arrived and retail is doing everything it can to sell a lot of product. Lots of food for a low price appeals to consumers these days. Packers are therefore very pleased with the market, with consistently good prices. Cultivation for domestic consumption is closed and highly professionalized. A world in itself, where a free grower cannot easily intervene. Insiders certainly see opportunities in the export market, especially in the new year. For example, for Agria, for example, there is currently a stable market that, compared to the chip potato market, pays prices that are triple the price of chips.
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