European potato shortage will impact promotions and pricing

Akshay Jagdale, a packaged food analyst with Jefferies Inc., stated on a webinar: “Europe is having one of the worst potato crops in 40 years. The harvest is now complete. And the shortage in Europe is likely to start playing through in the export markets pretty soon.”

Belgian open-market potato prices are 11 times higher than this time a year ago, for example, according to analyst Cedric Porter, editor of the United Kingdom-based World Potato Markets. And those price hikes are expected to ripple through the global markets.

For quick-service brands, especially, fries are not only a staple side item and a fixture on their value menus but they have become an area where companies can offer special marketing promotions and menu creativity.

While large restaurant brands’ commodities contracts can insulate them from large swings in prices, the European potato shortage will likely impact promotions and pricing.

“Volatility in commodity prices is a nightmare for restaurants,” said Leslie Kerr, founder of Boston-based Intellaprice, a restaurant consulting firm. “It’s hard to resist a knee-jerk reaction, and often operators will take a price increase to compensate for cost spikes.

Those price increases could impact planned promotions across the restaurant landscape. One-dollar fries frequently pop up as a successful traffic driver, such as the offers at Tampa, Fla.-based Checker’s/Rally’s, which gives free fries as part of its loyalty program signup and has run $1 specials in the past.

Source: nrn.com


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