'The chip bubble will burst sooner or later'

At the beginning of January, the global potato sector met in Austin, Texas. One of the speakers at the Potato Business Summit, held on Wednesday, January 10, was born British Daniel Metheringham. He worked for McCain in Europe and for many years in North America. There he is responsible for, among other things, grower affairs.

Personnel shortage
The entire potato sector, both in North America and Europe, is facing major challenges. At the same time, they have become the 'new normal'. In the United States, the unemployment rate is only 3,7%, making it difficult for McCain and competing companies to find new employees. In Europe, with an average unemployment rate of 6,5% among the working population, there is slightly greater availability, but that is not much. Retaining workers is also a challenge.

Logistical problems that already existed before the corona crisis in 2021 were significantly exacerbated by the pandemic. These problems have still not been resolved. Shipping inputs and end products worldwide has become more complex and challenging. What plays a major role in the potato processing industry is the availability and price of energy. This was a sticking point, especially at the beginning of the war in Ukraine. The theme remains current today. Growers have had to deal with sharply increased input costs for cultivation, especially in the last two years.

From eating out to delivery
Consumer patterns have been shifting significantly in recent years, Metheringham notes. This applies to both North America and Europe. A lasting consequence of the corona pandemic is that people eat out less regularly and have food delivered to their home more often. A significant growth in delivery services and apps makes this accessible and accessible. Due to rising food inflation, consumers are inclined to opt for cheaper (private labels) more often, although they continue to purchase expensive luxury products from time to time as a treat to themselves. This is positive for the potato sector. Fries remain a relatively cheap product that can also be consumed at home via your favorite ordering app.

In the years before the corona crisis, global consumption of potato products grew by 4% year on year, the McCain man calculates. This fell to 2019% in the period 2022 to 2. The growth rate is expected to return to 4% in the coming years.

4 million tons of growth
With this growth in mind, potato processors are building new factories to produce more fries and other potato products. Metheringham estimates that global processing capacity can grow from 16 million tons of end product to a maximum of 20 million tons in 2026. Capacity is growing in almost all continents, especially in North America. For example, McCain is investing $600 million (€550 million) in a new factory in the Canadian province of Alberta. Metheringham: "We should not level out production growth in Asia. It is difficult to know all new construction projects, because many smaller local investors are active there. They are taking market share from American and European exporters." Expanding and upgrading existing lines - which therefore become more efficient - is not included in the figures.

With its focus on growth, the potato sector will sooner or later reach saturation point, Metheringham thinks. "The potato bubble could burst if processing capacity grows faster than consumption at a global level." He therefore advocates protection of the sector and good cooperation between chain parties. The image of the potato is also important. For example, McCain has been focusing heavily on so-called 'Rain Fries' for several years, where cultivation takes place according to the principles of regenerative agriculture. This has been very successful in North America and the concept is now also being tested in a number of European countries. In the Netherlands, the company started a project last year that will last three years. The company's goal is to have all its potatoes grown regeneratively worldwide by 2030.