POTATO CHIPS PB whitepaper Volume 1-2019 Potato chips have been a favorite consumer snack around the world for a long time. They are sold and purchased everywhere and currently represent a multi-billion dollar market. POTATO CHIPS Keep Getting Bolder and Healthier Global potato chips markets are constantly influenced by changing lifestyles and preferences. According to data towards Western countries and nations offered by Food for with larger populations. The U.S. has the Thought, the potato world’s largest market, followed by the snack segment – UK, Russia, Brazil, China and India. A which also Emerging economies such as the latter encompasses potato two – where annual per capita chips – in North consumption remains at 1kg or lower – are America and Europe grew at an annual believed to offer the biggest opportunities 2.4% rate during the 2012-2017 period, for expansion. In markets such as these, rising from USD29.6bn in 2012 to growth in demand is more evident USD37.4bn in 2017. This represents an amongst younger urbanized consumers, average annual increase of USD831m. who lead more time-pressured lifestyles and also possess higher levels of EVOLUTION BY COUNTRY disposable income. The UK, US, and Mexico are the largest Additional data reveals that in 2017, potato snack markets, while the UK, Ireland was the leader with 4.4kgs per Ireland, and Canada represent the top 3 in capita consumption, followed by the UK terms of per capita expenditure. Regarding with 3.5kg and Canada with 3.4kg. The the five-year value growth rate, Romania numbers then drop significantly for Spain comes first, followed by Bulgaria and at 2kg and the U.S. at 2.32kg. The Poland, with all three markets showing surprisingly low figure in the U.S. can be high potential for future growth. explained by the fact that Americans enjoy More specifically, the global potato alternative snacks such as popcorn and chips market reached USD29.7bn by corn-based tortilla snacks. the end of 2017, riding an average Mintel notes that, in the UK, potato chips annual volume percent growth of 5.9% are eaten regularly by 93% of the over the 2012-2017 period, reports the population, while 63% of UK people admit research company. to snacking every day. In developed Alternative estimates regarding the size of markets such as the UK, there has been the global market value sales at between strong growth in the adult snacking sector USD25bn and USD30bn at present. Sales in recent years. This trend is a result of of potato chips remain heavily skewed manufacturers developing more premium PB whitepaper 2 1/2019 and luxury chips to cater to increasingly future annual growth of 1% is still 30 demanding trends. probable in these regions. On the upside, The BRIC countries (Brazil, Russia, India, the Central and Eastern European bn USD and China) which have started from a countries show a lot of promise in terms of is the small base market, show very high growth. Consumption is anticipated to estimated historical per capita volume annual increase due to the young consumer growth. This trend is expected to continue category, which is expected to push global at least by 2020 at similar rates, making growth for the next 10 years. A busy market these markets quite attractive for lifestyle is once against the main driving value for manufacturers of chips. In China, the factor for the chips market in Bulgaria, the potato market for potato chips is expected to Czech Republic, Romania, and Hungary. chips. reach a value of over USD2.4bn by 2020. The new generation of young people are For most of the other countries, the moving away from classic meal-taking, and growth rate in terms of market values is so the marketing industry has not been stable, in the 2-4% range. Development is slow to target this market. According to backed up by flavor diversification and Food for Thought, a variety of modern experimentation. Another driver is the situations have led to the phenomenon of emerging trend of using potato chips constant snacking. For example, watching alongside main dishes. For example, a movie or spending time with loved ones serving hamburgers accompanied by chips is easily conductive of sharing snacks. covered with different toppings. Alternatively, people living alone – a Alternatively, consumers in Austria, category on the rise – are increasingly Germany, and Denmark are not big chips replacing classic meals with snacks such as consumers. In these countries, potato chips or others. consumption per capita in kilograms is not only a modest one but has had a tendency THE HEALTH TREND IS SHAPING to slow down in recent years. Even so, THE INDUSTRY N Demand for snack foods such as potato chips continues to remain high throughout In the UK, potato chips are eaten regularly the world. With consumers leading active by 93% of the population, while 63% of UK lifestyles, the need for foods which can be people admit to snacking every day. eaten conveniently and on-to-go shows PB whitepaper 3 1/2019 no sign of abating, especially among the is also witnessing a move towards smaller younger age segments, who do not abide packaging formats and sizes in many of to strict mealtimes anymore. the large Western markets. While this Traditionally, potato chips have had a less undoubtedly assists with portability, helps than positive reputation, being viewed as to reduce the risk of food being wasted potentially causing health problems by and is ideally suited to the growing some experts. However, in recent years, number of single-person households health lifestyle trends have slowly throughout much of the world, health penetrated into the potato chips market. concerns are also thought to have Some start-ups and more enterprising influenced this trend. Smaller portion sizes manufacturers have been reviewing the have been linked to calorie control, traditional ways and introducing new chips enabling consumers to monitor their ranges with reduced salt content or more intake more carefully. exotic flavors. The bigger brands are also Additionally, private label products are keen on cutting down on fat content. As increasingly convincing customers in terms evidence for this rising trend, many of the of quality, and they are taking their share world’s leading manufacturers include too. The perception of private label being chips carrying some sort of health or an adequate substitute for known brands nutritional benefit within their ranges. In has been catalyzed by increased market Ireland, for example, the Tayto range share of discounter retailers across Western includes Tayto Crunch chips, which are Europe in countries like the UK, Ireland and marketed as containing less 100 calories Turkey. For example, retailers like Lidl and per pack. Aldi, stock mainly private label products, Although products such as low-fat and which in recent times, have managed to low-sodium chips have been around for impact the sale of A brands in categories some time now, recent evidence suggests such as potato chips or puffed snacks. that health-conscious consumers are According to Food for Though, the own increasingly seeking out all-around label market share remains at around 10- nutrition from snack-foods. This may 11%. The research firm believes that, when include gluten-free varieties, but also it comes to potato chips, own label can products manufactured using the process cover niches such as bio or specific flavors. of baking, as opposed to frying. The perception of potato chips has also Consumers, especially in Western Europe, been improving in the last few years. Some are looking to lead healthier lifestyles. This experts claim nutritionists have started to tendency has initiated a shift in snack admit that in the current landscape of habits, while providing a further incentive snacks, chips are not exactly as dangerous for manufacturers to innovate, by when it comes to maintaining a healthy reformulating their recipes. diet. This is because, today consumers can And while brand loyalty for savory snack find some varieties that spice up a products like potato chips is high in all balanced nutrition, with little risk to their markets, traditionally smaller brands have health, such as with low salt levels or with started leaving their mark on market share, less fat than the classic format. as heavily processed food wanes in appeal According to recent consumer behavior because of health-related concerns. studies, indulgence in healthier snacks N On a related note, the potato chips market tends to be heaviest earlier on in the day, such as mornings and launch times. The health trend has initiated a shift in Towards the evening, consumers are more inclined to move towards more snack habits, while providing a further indulgent products, carrying less of a incentive for manufacturers to innovate health appeal. But although an increasing by reformulating their recipes. focus on health has had an influence on PB whitepaper 4 survey. Other companies including Intersnack and Kellogg’s are present in less than half of these markets, and with significantly lower market share (4.94% and 4.61% respectively). Additionally, Lorenz Snack-World, Tayto Crisps, Calbee and General Mills are also notable, albeit smaller players. When it comes to major chips brands, Frito-Lay maintained its leading position in savory snacks in 2017 with a value share of 39%, a report by Euromonitor noted. The company continued to dominate in potato chips, puffed snacks, and tortilla chips, commanding value shares of 61%, 73% and 74% respectively with brands such as Lay’s, Doritos, Cheetos, Tostitos, Fritos and Ruffles. In March 2017, Frito- Lays launched a new brand in this space called Poppables, a light-textured potato snack in flavors such as White Cheddar and Sea Salt.