This article appears in the July 2017 issue of Potato Grower.
When we say Idaho potatoes are a premium quality brand, we are simply using the same words that consumers have used to describe Idaho potatoes in numerous focus groups, audits and surveys the Idaho Potato Commission (IPC) has conducted over the years.
From a marketing standpoint, we know that consumers are willing to pay more for a premium brand. Look at Oreos, Cheerios, Doritos and many other popular grocery items: Their competitors are priced well below them, yet they remain the dominant market leaders in their respective categories.
Several years ago, a six-month long retail price audit revealed that 90 percent of retailers priced Idaho russets above non-Idaho russets. Why? Retailers know that consumers will pay more for a preferred brand like Oreos, Cheerios, Doritos…and Idaho potatoes. However, despite this hard-earned and well-deserved positioning, the Idaho potato industry continues to look at potatoes grown in other states as price competition.
Last year the IPC funded a research project that analyzed two years of actual retail data. The study concluded that Idaho russets are less elastic (meaning less price-sensitive when prices change) than any other non-Idaho russets. This means as prices change, up or down, there is less impact on Idaho’s volume than on others.
The research provides important and even profitable insights for retailers and shippers.
What it means for retailers
- Idaho russets generate more overall profit per bag than non-Idaho russets if priced properly. Even if consumers pay 10 to 20 cents more per bag, or if retailers charge 30 to 50 cents more, they will be more profitable per bag sold than non-Idaho russets.
- Retailers should promote what is most profitable to them, which means Idaho more often than non-Idaho.
- Retailers need to make sure Idaho russets are visible. The potatoes must have enough facings to ensure customers can find them.
- If a retailer isn’t carrying Idaho at all, which occurs at a few major retailers (mostly in the South), they are missing out on category profit that can be easily realized by adding 5-pound bags of Idaho russets.
- Super-deep discounting (which often results in contributions from shippers) is not needed when promoting Idaho russets.
What it means for shippers
- Consumer demand does not decline significantly with price increases, so don’t apologize for price increases.
- Consumers see Idaho as a brand. Consumers who are brand-loyal, which is many of them, will buy Idaho if it is reasonably priced versus the competition, but need not equal to it.
- You do not have to match delivered price with states that have logistical advantages.
The IPC encourages everyone in the Idaho potato industry to embrace Idaho potatoes’ premium positioning and always keep these powerful insights top-of-mind, especially when there are pricing changes in the category.