A new study suggests consumer demand for Idaho-branded bagged russet potatoes is less sensitive to price changes than potatoes from other states.
The study, commissioned by the Idaho Potato Commission (IPC) and conducted by economist Timothy Richards of Arizona State University, used retail scan data for the two-year period ending April 17, 2016.
The numbers indicate that Idaho potatoes have a higher consumer preference and can command a more premium retail price or mark-up, according to the study.
“The research showed that for russets, Idaho russets are less price elastic than non-Idaho russets,” said IPC vice president of retail and international programs Seth Pemsler. “When price goes up on Idaho (russets), the resulting lost volume is significantly less than non-Idaho russets.”
Pemsler said the findings suggest that if retailers don’t discount Idaho russets to the same degree as non-Idaho russets, there wouldn’t be a significant effect on volume sold. The study showed that overall price elasticity of bagged Idaho russets was 1.26 compared with 1.91 for bagged russets from other areas.
The study breaks down data from the entire U.S. and eight separate regions over the two-year period, according to an executive summary of the research.
According to the study, Idaho potatoes are the least vulnerable to competitive pricing, according to the study. Based on scan data of 5- and 10-pound bags, Idaho russet potatoes have the highest profit margin potential compared with potatoes from other origins.
“The fact is that even if you pay 10 cents a bag more for Idaho russets, you can charge 20 cents per bag more at retail,” Pemsler said
Bulk potatoes were not evaluated because of inconsistencies found in the data due to the nature of price-look-up stickers and misidentification of variety and brand/origin at checkout registers.
Bagged potatoes represented 70 percent of all potato volume tracked during the two-year study, according to the executive summary.
Pemsler estimated about 60 percent of retailers in the U.S. carry both Idaho and non-Idaho bagged russets. The data has not yet been published, but more details are available by contacting Pemsler at Seth.Pemsler@potato.idaho.gov.
Source: The Packer