EEUU: Potato Board provides spud price tool

DENVER — A new tool developed for the U.S. Potato Board analyzes how the price fluctuations of fresh potato products affect demand.

The price elasticity tool is available to USPB members by accessing the “resource center” link fromwww.uspotatoes.com.

Sarah Reece, USPB global retail marketing manager, said shippers may use the tool to work with customers on pricing decisions. Reece said USPB has also posted links to webinars demonstrating how to use the tool. Tool users must enter their region, the time of year and the fresh potato product.

USPB has a contract with Nielsen Perishables Group, which developed the tool in conjunction with a price elasticity study, based on 5 1/2 years of retail data involving more than 800,000 sales records.

Reece said the study marks USPB’s first analysis of price elasticity, which gauges how price impacts the demand for certain products. USPB analyzed 24 different potato products, with different varieties and sizes of bags, finding wide variability in how price changes impacted demand.

Specialty potato products in smaller packages were the most price sensitive. Furthermore, the study found East Coast consumers were the most sensitive to price changes.

For example, a 10 percent increase in the price of a 3-pound bag of colored fingerlings drove a 43 percent decrease in sales in the New England area, compared with a 26 percent decrease in demand in the Mountain region of the West.

Large bags of Russets, which offer the most food per dollar, were the least price sensitive.

“The study helps us to know we should promote some of those specialty varieties versus Russet varieties or the larger package varieties that consumers are less price sensitive with,” Reece said.

Juliette King, associate client manager with Nielsen Perishables Group, said the study was her company’s first look into the price elasticity of potatoes. King said Nielsen has done similar work with private companies involved in other crops, though USPB is one of the first commodity groups to request an elasticity study.

“(Potatoes) are not a one-size-fits-all category,” King said. “You really do need to look at each product individually and see how people react to changing prices within that product.”

King was also interested to find potatoes had relatively little cross-elasticity — meaning purchases of one potato category, such as Russets, didn’t necessarily correlate with reductions in purchases of other categories, such as reds.

Chris Wada, marketing director for Wada Farms in Idaho Falls, Idaho, and co-chairman of the USPB’s domestic marketing committee, said his company has been analyzing price elasticity of potatoes from its own information source and sharing findings with customers since 2008, among other data. He anticipates the USPB tool will be heavily utilized by the industry.

“We see value in it,” Wada said. “We’ve been doing it and will continue to, and will incorporate the Potato Board’s elasticity pricing model as well.”