The Road Ahead

What the future holds for U.S. potatoes in the Mexican market

Published in the August 2014 Issue Published online: Aug 10, 2014 Sarah Reece and John Toaspern, U.S. Potato Board
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At the point U.S. fresh table-stock potatoes gain full access to the Mexican market, it is very important U.S. growers and shippers understand the dynamics of the market. It is the intention of the United States Potato Board (USPB) to establish a long-term market for U.S. potatoes in Mexico, and it will require the U.S. industry playing a role in that process. The following information is designed to help growers and shippers become a part of this process.

We believe the overall market in Mexico for potatoes, both domestic and imported, can be substantially increased with proper marketing and promotion efforts. Total per capita potato (including processed products) consumption in Mexico is currently around 8 kilograms (17.6 pounds) per annum, compared with 55 kilograms (121.3 pounds) in the United States.

This leaves a lot of room for growth with sufficient supply in the market and increased consumer awareness and understanding of potatoes as a healthy and affordable food.

MEXICO POTATO PRODUCTION

In Mexico, fresh potatoes are produced in 21 states with a total volume of 1.8 million metric tons in 2012, but only six states represent 65 percent of total domestic production. Between 2007 and 2011, Mexico’s fresh potato production decreased by 23 percent, but it rebounded to higher levels in 2012. Local potato production typically goes down during the summer period, representing an excellent opportunity for U.S. potatoes. Mexico’s potato production is predominantly made up of Alpha potatoes at 86 percent; there is a small production of red potatoes with Criolla making up about 1 percent.

Other varieties, which include chipping varieties, make up 13 percent. More than 50 percent of domestic potatoes are used for fresh consumption, while 29 percent are used for processing and 15 percent are used for seed.

The United States is the only supplier of imported fresh potatoes to Mexico.

Despite being limited to the border region, U.S. exports have grown not only in volume, but also in value from 56,107 metric tons in 2009 to 78,229 metric tons in 2013 valued at $36 million.

Local potato wholesale prices in Mexico for domestic potatoes have doubled over the past six years from around 7 pesos ($0.54) per kilo to 14 pesos ($1.08). We see the same thing at retail, where prices have increased from 10 pesos per kilo to over 20 pesos in 2014. In the spring of 2014, the average price of U.S. russet potatoes at retail was 10.42 pesos ($0.80) per kilo and U.S. white potatoes were available from between 9.90 ($0.76) and 10.50 ($0.81) pesos per kilo.

"Getting everywhere. Fruit stands like this one in Manzanillo still represent a significant share of the Mexican retail market.

PRODUCE DISTRIBUTION SYSTEM IN MEXICO

Unlike the U.S., wholesale markets still play a crucial role in produce distribution within Mexico.

In most cases, both local and imported potatoes go to the wholesale markets, though there is an increasing amount that goes directly to retailers. From the wholesale market, the potatoes are distributed to consumers through traditional channels: public markets, street markets, mom and pop stores and fruit stores. It is estimated traditional channels still represent 60 to 70 percent of total produce sales. There are more than 750,000 traditional retail outlets throughout the country. Within the 64 wholesale markets across Mexico, there are 55,000 wholesalers. Mexico City has the largest wholesale market with 300,000 daily visitors. Wholesale markets not only distribute, they also gather products grown in different regions by many small growers for repacking.

"On the market. More than 750,000 traditional retail outlets exist in Mexico

While Mexican consumers still buy most of their produce in traditional channels, supermarkets are gaining more market share as they open new stores and provide different shopping formats for consumers. The major retail chains in Mexico have 3,369 outlets, though this figure is constantly increasing. All chains have different store formats that vary in size and reach different levels of consumers. Just as we’ve seen in the U.S., the number of different products sold in the produce department of supermarkets has grown tremendously, with an increase of 87 percent between 1996 and 2013.

CONSUMER INSIGHTS

Potatoes are Mexico’s most consumed vegetable, even ranking above tomatoes and onions.

Consumers consider potatoes to be an irreplaceable vegetable because they are versatile and can be used in any dish. Since 2001, per capita consumption has been decreasing due to the decrease in local production. If we look at per capita consumption in Mexico’s border area, it’s much higher than the rest of the country (27.7 pounds vs 17.6 pounds). This is because border consumers have access to U.S. potatoes that offer more affordable prices. Compared to the rest of the world, Mexico’s 18.22 pounds per capita consumption is very low. With all of Latin America at 45.64 pounds per capita consumption, there is room to increase potato consumption in Mexico.

Mexican consumers recognize there are a lot of advantages to eating potatoes—they are filling, have a good price-yield ratio, are nutritious and their families enjoy them. Consumers are also motivated to buy potatoes because they are the family’s—particularly children’s— most accepted vegetable, they reduce the consumption of meat, they provide a feeling of satiety, they are versatile, they are a fast mealtime solution, and they do not require refrigeration for storage.

Consumers are purchasing potatoes once a week and are purchasing 3 to 4 kilos (6.6 to 8.8 pounds) at a time, usually in bulk. Consumers prefer medium potatoes, about four potatoes per kilo. Potatoes are associated with a wide range of dishes. It is very important to highlight that potatoes play an important role in Mexicans’ regular diet and are included in a lot of traditional dishes. Mexican housewives started learning how to cook when they were young and used potatoes to increase a stews’ yield to serve a large family. They learn to cook by observing and helping their mothers and, later, the mothers-in-law. They learned by practicing basic and easy-to-cook dishes (potatoes with eggs, mashed potatoes and potatoes and sausage).

USPB MARKETING PLANS

Our marketing program targets are the trade, including importers, wholesales, traditional channels, supermarket chains and snack manufacturers as well as consumers. Our objectives when targeting the trade are to provide information to increase their awareness about U.S. potato varieties and provide technical support to educate them on proper storage and handling throughout the distribution chain.

When communicating with consumers, we want to position U.S. potatoes as an excellent product that can be used in Mexican cuisine, communicate that U.S. potatoes look different than local potatoes but have good flavor, nutritional value and versatility.

In order to establish and maintain relationships with the trade, a series of e-newsletters will be developed and sent via email to trade contacts. These newsletters will provide information on varieties, availability, flavor, nutrition and handling. Our representatives have created an ABCs of Fruits and Vegetables online training program that will be made available to the trade to help train their associates on proper storage and handling. We will participate in trade shows. The ANTAD trade show (National Retailers Association of Mexico) is a must for expanding distribution through supermarket chains. This show is Mexico’s largest and most important retail trade show and takes place in early March in Guadalajara. By participating in ANTAD we will reach many retailers and wholesalers across the country.

Through the support of an engineer, wholesalers and retailers will be trained on proper handling at wholesale and retail, merchandising techniques and promotion ideas. During technical support we will also monitor potatoes, schedule technical seminars and offer promotional support. We also have a team of merchandisers who will keep in close daily contact with the trade.

This team is our eyes in the market, allowing us to have current information and react to the market needs, business opportunities and, most importantly, constant contact with the trade. This year we will also have an RTM to bring importers and retailers to the U.S. to learn about U.S. potatoes firsthand. This will likely happen in conjunction with PMA.

This year, we will also be working on category management. The main objective of the category management activity is to take a closer look at the relationship between U.S. growers,  the USPB and retailers, with the aim of unifying efforts and increasing sales. The merchandising team will be visiting supermarket stores by format, income level and type of store to obtain information on the potato category.

This coming year it will be important to start addressing the Mexican foodservice industry and making them aware of the availability of U.S. tablestock potatoes as well as their versatility, quality and advantages. For this the USPB will create a new foodservice brochure that will feature the different U.S. potato varieties as well as recipes that show how versatile and delicious they are. The USPB will also hire the services of a chef already working with the USPB on the frozen potato program to meet with restaurants and give a seminar about using U.S. potatoes.

We will reach consumers by conducting in-store promotions at retail.

During retail promotions we work with retailers to get prominent display space with point-of-sale materials and will offer tasting samples of a U.S. potato recipe. At retail we will also conduct cooking workshops inside the stores.

During this activity, a chef will teach a cooking workshop to consumers. During this workshop, he will give information about U.S. potatoes, their seasonality, health benefits, versatility and, of course, uses in Mexican cuisine. The Mexican cuisine recipes will be fresh and simple, communicating the benefits of cooking with U.S. potatoes, in order to motivate consumers to cook them at home and incorporate those products in their daily diets. These activities will be evaluated by the sales of U.S. fresh potatoes before, during and after the activity is developed.

We will also be using Facebook to interact with consumers to share their recipes, tell how they enjoy eating U.S. fresh potatoes, and share photos.