USPB Studies Price Sensitivities

Published online: Apr 02, 2015
Viewed 2482 time(s)

New research from the U.S. Potato Board (USPB) reveals the complexity and range of price sensitivities within the potato category. 

The relationship between price and consumer demand is a fundamental understanding, but not easily determined. As a potato industry partner, the USPB recognizes the value in understanding consumer reactions to changes in potato pricing. In order to understand this complex question, the Board commissioned the Nielsen Perishables Group to conduct a comprehensive price elasticity study on the potato category. The study comprises more than five years of U.S. retail sales data and includes more than 800,000 sales records. An essential part of the analysis design was to break the potato category into 24 product groups, by both potato type (russet, red, yellow, etc.), and package size (5-pound, 8- to 10-pound, etc.). 

The research revealed a wide range of price sensitivity within the potato category, concluding that there is no “one size fits all” approach to pricing across fresh potato products. For example, larger bags of russets are the least price sensitive and inelastic, meaning demand for these products generally remains steady despite price fluctuations. The rest of the category is more price sensitive, indicating demand levels rise or fall in accordance with price fluctuations, typically depending on potato type and package size. 

The study also revealed regional variance in price sensitivity. The New England area is more price sensitive than the Pacific or Mountain regions. For example, a 10 percent increase in price of smaller than 3-pound packages of fingerling/medley/purple potatoes in the non-holiday, price strong period would drive a 43 percent decrease in volume in the New England subregion, while only a 26 percent decrease in volume in the Mountain subregion. 

Research findings are available at the USPB Resource Center
The USPB encourages the U.S. potato industry to utilize the study when reviewing pricing strategy with their retail customers in order to move away from commodity-driven strategies to consumer-centric ones.