During the breakfast general session of POTATO EXPO 2013, Ken Schmidt, former brand visionary and communications strategist at Harley-Davidson Motor Company, told growers and potato industry reps Las Vegas’ dirty little secret.
The tagline for Sin City is a misnomer.
“What happens in Vegas stays in Vegas” is a clever marketing ploy to get people to come to Vegas. And yet Vegas’ tourist industry in reality doesn’t want visitors to keep anything they do in Vegas a secret—it “desperately wants and needs” tourists to tell everyone <<<all>>> their shenanigans so it will get more business.
During the POTATO EXPO, held at Caesars Palace in January, it was clear the potato industry needs that as well—to keep nothing presented at POTATO EXPO 2013 a secret.
One Big Pile of Potatoes
The meetings kicked off with the North American Potato Business Summit, sponsored by United Potato Growers of America, United Potato Growers of Canada and the Potato Marketing Association of North America.
UPGA CEO Jerry Wright presented the challenges facing the U.S. potato industry, which are, first, declining domestic consumption in the fresh, dehy and frozen categories.
“We have a consumption problem that as an industry we’ve yet to be able to correct.”
Second, increasing trend-line yields, something called “yield creeping.” On average, the U.S. industry has been adding 5 cwt per acre each and every year to production. Both of these combined trends have yielded significant over-capacity. Finally, growers in each sector have acted independently of other sectors—treating their own sector as if a separate supply from another sector.
“We need to work holistically, as an industry, to balance supply with demand, because that balance of supply with demand impacts all of our businesses, not just fresh, not just frozen, not just dehy.”
The variance in trend lines over a 50-year period predicts with 95 percent accuracy that, if the trend continues, in 2017 the U.S. potato industry will be producing 2,400 pounds of potatoes more per acre than today.
“Very simply, that means if we planted the same acres in 2017 as we did this year, we will have 32 1/2 million cwt of excess potatoes. We would have to cut 71,000 more acres to have the same amount of potatoes in 2017 as we have today.”
The movement of potatoes in between sectors isn’t helping—it’s doing the very opposite.
“Whenever we’ve got oversupply in any of these sectors, movement of potatoes between the sectors destabilizes every market. It destabilizes the market it first enters, and that instability quickly spreads to the others. Oversupply hurts all of us.”
Wright says that the trend line forecasted for next year states the real demand for fresh potatoes is about 91.75 million cwt.
“That’s the profitable level,” he points out. “We can certainly produce more, we can certainly ship more, but we won’t make any money out of it.”
Cary Hoffman, Chairman of the UPGA Supply and Demand Committee and CEO of Mountain King Potatoes in Houston, Texas, reiterated one of Wright’s points, saying of the potato industry, “It’s one big pile of potatoes.”
He related the story of the U.S. automobile industry in 2008. General Motors was bailed out by the federal government because it ignored what the market told them—consumers no longer wanted GM’s traditional money-maker of large pickups and SUVs. Instead, they wanted fuel-efficient and smaller vehicles.
“[GM] kept making these big pickups and SUVs because that’s what in the past they had made the most amount of money on,” he says.
“We have an advantage over the car companies,” he says. “We can turn this thing around faster starting now with what we plan on doing for 2013.”
POTATO EXPO 2013’s attendance, at 1,901, was more than double what it was its inaugural year, of 2009, at 911.
This year featured a new addition to the educational lineup: interactive panel and expert-led discussions held on the Tradeshow floor, called EXPO Stage. The panels presented critical business, production and consumer insights, and were held Wednesday and Thursday. One of the panels featured growers from throughout the U.S., discussing challenges and resources for farm managers. The panel was moderated by Potato Grower magazine editor, Tyler J. Baum.
During the breakfast general session on Thursday, Schmidt explained why the commodity mentality—selling your product for the lowest price possible—has infiltrated and affected nearly every industry out there. In a commodity mindset, customers believe there is no difference between your product and your competitor’s product except for price, and so price becomes the driving force behind every sale.
He explains that the raging success behind Harley-Davidson’s ability to sell a $20,000 motorcycle to someone when they could essentially get the exact same thing from another company for $8,000, is that Harley-Davidson’s customers aren’t “customers,” but “disciples.” People in general just want to talk about themselves, and Harley-Davidson gives them a reason to.
David Novak, Chairman and CEO of YUM! Brands—parent company of KFC, Pizza Hut and Taco Bell restaurants—focused on a different angle, that of employees. Novak devotes much of his time each year to personally train leadership skills to the company’s management and franchisees, with his trademarked, “Taking People With You” leadership program. He believes his formula for success is the same formula EXPO attendees need in their businesses.
The first is to put people first. If you do that, he says, you’re going to get more out-put, more satisfied customers and ultimately more money.
“Too many people in business start out thinking about the profit, but they don’t think enough about how you get there. I always say, ‘Show me a good business and I’ll show you a great leader.’ I have never seen one business that’s a great business on a sustainable basis that didn’t have a great leader. And so I made developing leaders my No. 1 priority.”
He also says that one of the biggest powers you have is the ability to recognize the people who really get things done.
“It’s the soft stuff that drives hard results,” he says.
Novak says his company has found there are two reasons people leave their jobs.
“People very rarely go to another company because they’re going to make more money. But people do leave if they don’t feel appreciated.”
The second reason is that they don’t get along with their boss. He says the word “boss” is archaic; the term “coach” inspires people today—a coach helps people win. He says the best leaders he knows go to work every day focused on trying to be their very best selves, knowing what their strengths are and their opportunities for improvement.
Back by popular demand, Supermarket Guru Phil Lempert moderated two panel discussions on the EXPO Stage both days as well as a “super panel” during the Wednesday evening general session. He spoke with a handful of consumers as well as a supermarket retailer and a Las Vegas chef to address the concerns that consumers don’t know enough about potatoes.
During the breakfast session on Friday morning, Dan Manternach, ag services director for Doane Advisory Services, spoke at length on the outlook for crop inputs, taxes, trade and land prices.
He recalled what Earl Butz, former Secretary of Agriculture under Presidents Richard Nixon and Gerald Ford, used to say: “The best cure for low prices is low prices, because low prices do two things: they cause producers to cut back and they cause consumers to consume more.” Conversely, he used to say, “The best cure for high prices is high prices, because high prices will discourage consumption and encourage production.”
“That’s what we’re seeing with the explosion of commodity prices since 2008,”
The final general session of the EXPO featured USPB Past Chair Todd Michael moderating a panel discussion on how new or improved varieties offer huge potential to address current challenges, such as sustainability, obesity and acrylamide.
During the National Potato Council’s Annual Meeting, following the EXPO, Randy Mullen of Pasco, Wash., was elected to serve as NPC’s president for 2013 and to lead the council’s Executive Committee. As president, Mullen will host the 2013 NPC Summer Meeting, June 26–28, in Walla Walla, Wash.
POTATO EXPO 2014 will take place Jan. 8–10 at the Henry B. Gonzalez Convention Center in San Antonio, Texas.
Story and Photos by Tyler J. Baum