Market Drivers:
Increasing demand for processed potato products: The demand for processed potato products is increasing significantly across the globe, thus driving the growth of the market. Population growth coupled with changing food preferences is driving significant growth in the snacks industry. As potatoes can be processed into a variety of convenient snacks like potato chips, potato sticks, and others, this is contributing considerably to the rising demand for processed potato items. According to data from the Food and Agriculture Organization, average potato consumption per capita has increased from 46.7 kg in 2000 to 54.2 kg in 2020 across different countries.
Rising consumption of fast food products: The fast food industry has been growing significantly across the world over the past few decades. As populations and disposable incomes rise, especially in developing economies, consumption of fast food has skyrocketed. Convenience and affordability are the major factors attracting more customers. With its versatility and low cost of production, potatoes have emerged as a popular ingredient for fast food products like French fries, patties, and snack foods. As fast food chains expand their footprint globally, the demand for processed potato products is increasing steadily.
According to data from the UN Food and Agriculture Organization (FAO), per capita potato consumption increased by over 10% in Asia Pacific and Africa between 2018 and 2020. Countries like India, China, and Nigeria posted some of the highest gains in potato demand, reflecting their rising young populations and growing appetite for Western fast foods.
Rising disposable income: Rising disposable incomes across many developing and emerging economies are providing strong tailwinds for the growth of the market. As people's incomes increase, their dietary patterns shift away from staple grains toward more resource-intensive livestock and dairy foods as well as vegetables, fruits, and snacks. Potato is increasingly becoming an important ingredient as well as standalone food item in daily diets globally.
As living standards improve, people have more discretionary funds to spend on processed and convenient food items. This allows them to save time on cooking and devote more time to other activities. Therefore, the demand for ready-to-eat as well as ready-to-cook potato products is surging rapidly. Changing work dynamics with more people joining the professional workforce also means less time is available for elaborate at-home food preparation. This makes potato snacks, frozen potato items, and other such lightly processed categories very appealing options.
Market Opportunities:
Innovation of new potato varieties: The innovation of new potato varieties offers immense potential for growth in the market. Developing potatoes with improved traits such as higher yields, pest and disease resistance, longevity, and processing characteristics can help address various challenges and needs of the processing industry.
For instance, potato varieties that are ideal for chipping, frying, or dehydration can help companies scale up and diversify their product portfolio. Chips, snacks, and other convenience foods made from potatoes have been in high demand globally. However, available varieties may not consistently provide optimal processing qualities. New varieties tailored to specific processing methods could, therefore, help companies boost productivity and product quality. This in turn allows them to cater to the evolving taste preferences of health-conscious consumers who prefer natural, minimally processed snacks.
Increasing export opportunities: Export opportunities can open promising avenues for growth in the market. As per data from the United Nations Food and Agriculture Organization (FAO), global potato production reached 381.7 million tons in 2020, with exports of processed potato items relatively lower at around 15 million tons. This indicates significant headroom for expansion in potato exports, provided suitable strategies are undertaken.
Market Restraints:
Price volatility of raw materials: The volatility in the prices of raw materials has emerged as one of the key factors hampering the growth of the market in recent years. Potato is one of the major raw materials required in large volumes for manufacturing various processed potato products. However, prices of potato tubers have witnessed significant fluctuations depending on various factors like weather conditions, demand-supply dynamics, etc. For instance, according to data from the United Nations Food and Agriculture Organization, potato production in Europe decreased by around 12% in 2021 compared to the previous year mainly due to unfavorable weather. This led to a substantial increase in potato prices across major producing countries. Higher input costs squeeze profit margins of companies and impact their ability to scale up operations and cater to rising demand.
Counter Balance: The potato industry can explore the possibilities of demand creation and develop higher value products to shift the demand curve and maximize income.
Stringent food safety regulations: Stringent food safety regulations have been posing challenges for the market growth globally. More rigorous norms and compliance requirements related to pesticide residue limits, hygiene, packaging, and labeling have increased operational costs substantially for processors. Potato is a staple crop consumed worldwide, but its processing helps reduce post-harvest losses and adds value. However, processors have had to invest heavily in upgrading facilities, ensuring traceability systems, recall management processes, worker safety protocols and more to meet the evolving regulatory standards.
Ensuring compliance has also become complicated due to the varied limits set by different countries. For instance, the maximum limit of the residue of chlorpropham, a sprout suppressant, was reduced from 0.1 mg/kg to 0.05 mg/kg in the U.K. and the European Union, which was effective from 2021. This left little time for processors sourcing from these regions to make arrangements. Similarly, new packaging rules in North America require easy identification of genetically modified content on labels, if any. Adapting supply and production chains at short notice to satisfy multiple sets of divergent norms increases overhead costs.
Counterbalance: Companies can mitigate the impact of price fluctuations by diversifying their sources of raw materials. This can help reduce dependency on a single source and provide more stability in procurement. Entering into long-term supply agreements with raw material suppliers can provide stability in prices and supply, reducing the impact of short-term price fluctuations.
Potato Processing Market Report Snapshots
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