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This week there was a lot of attention for the stock
markets and the fears of a recession in the United States.
Although today's stock markets recovered in Asia and North
America, the overall picture shows significant capital losses
since the start of 2008. Fear for a recession in the US
resulting from the sub-prime mortgage lenders and the credit
crunch that followed are the driving
Suppose it comes to a recession, what would the
consequences be for the potato processing industry? I did
some research and here are some of the pieces of the puzzle
I came up with:
Fast food restaurants in Japan, throughout most
of the nineties:
In Japan, during the recession in the nineties, overall
fast-food sales remained flat although total sales at all
restaurants in Japan have increased at a low-single-digit
rate at the end of the nineties, according to the Japan Food
Service Association, an industry group. However, that growth
has been outpaced somewhat by new openings, driving down the
per-location average volumes of restaurants open more than a
year, the JFSA said.
While most of Japan's foodservice industry has struggled
with flat, depressed or slight gains, McDonald's Japan has
continued to grow. From 1994 to 1996 the company's sales
rose from 216 billion yen, about $1.9 billion, to 299
billion yen, around $2.6 billion, while the chain's number
of restaurants in Japan grew from 1,171 to 2,006. In 1997
the company added about 400 additional locations and last
year opened more than 100 new units.
McDonald's has not been immune to Japan's recessionary woes,
however. In the summer of 1997 McDonald's Japan slashed the
price of its hamburger by 50 percent and completed a
system wide retraining of employees to emphasize service and
attempt to capture more adult male customers.
Case 2: Frozen Foods in Germany 2001-2003
In 2001 the German economy saw a sharp downturn, followed
by two years of virtually no growth. Sales of frozen potato
products in 2001 in Germany rose 6.3% both in volume and
value. In fact there was growth for the entire frozen food
which led to some speculation that the frozen food
sector was not effected by the economic downturn. That
proved to be too optimistic
as later articles state that
"the purchases of frozen potato products were down some in 2002". In
this entire period reduction in consumption of French fries
was partially offset by increased consumption of potato
Case 3: Snack foods
What better source to answer this question
than Indra Nooyi, CEO of PepsiCo/Frito-Lay. Here is what she
in an interview last December:
Q: I have heard that you said once that even if a
company like Pepsi is not recession proof, it is not
recession prone. We are hearing everyday about the impact of
the sub-prime mortgage crisis. Given that we are seeing the
unravelling of the financial markets, what impacts do you see
it having on the economy?
A: There are bulls and bears. The bulls would say we might
see a small slowdown but the US economy is very resilient.
If you see the recent GDP estimates for 2008, people think
the growth rate will be 2.5-2.6-2.7% in that range and life
goes on. Then there are the bears that say, “Hey you could
see a substantial slowdown in the US economy next year, in
the low 1%.” It depends on whom you talk to ‑ bulls or
bears. All that we have to do as responsible stewards of a
convenience food and beverages company is to make sure that
whether it is a slowdown ‑ deep or shallow ‑ or there is no
slowdown at all, we have to make sure we deliver our
financial algorithm. We have gone back and looked at
the last 4 or 5 economic slowdowns and seen how the consumer
behaved in the slowdown. The good news is when the economy
slows down, they still eat and drink our products because
they are comfort foods. When the economy is good
they still eat and drink our products because they feel
good. So, we are not particularly going to be impacted too
much by the recession.
Stock prices of Fast food restaurants saw already a
Wendy's), but it should be kept in mind that some
(e.g. McDonalds) were near an all time high.
My overall conclusion: from these excerpts the picture
emerges that the potato processing industry and related
sectors seem reasonably resilient in times of a recession.
Let's hope this will not be put to the test...
Paul van Eijck
A whole series of local potato conferences and
exhibitions is coming up shortly or have just started: these
include conferences/exhibitions in
Netherlands (Aardappelwereld congres),
Prince Edward Island (PEI). Visit an event in your area
and stay informed! And let us know if your event is not in
Tomorrow's Private Label Consumers
It has been suggested that a recession may create a shift
towards private labels. Therefore we highlight today a
market research report on Private labels:
Private label has been growing at least at twice the rate of famous brands over the last 10 years. It has grown so fast because it is very much aligned with the prevailing consumer trends and its creators have been adept at aligning it with relevant consumer segments. However, it is not yet as trusted as famous brands, meaning that these two competing groups can still learn from each other.
More Market Research Reports
Handbook of Alternative Fuel Technologies
In addition to enabling a clean and energy efficient future, alternative fuel sources are fast becoming a necessity for meeting today's growing demands for low-cost and convenient energy. The Handbook of Alternative Fuel Technologies offers a thorough guide to the science and available technologies for developing alternatives to petroleum fuel sources and petrochemical feedstocks.
Potato hot Box
Lishman SMQC Potato Hot Box is an economic bruise testing
device that assists with crop assessment on-farm before the
potatoes go into store or for processing. It can also bring
larger processing operations up to date.
The Hot Box indicates bruise levels after just 12 hours.
It has an integral heavy duty fan, thermostatically
controlled heater, water reservoir and timer. Separate trays
allow periodic sampling throughout the work period.
Different models are available to suit different size
This week we feature
the powerpoint presentation of Peter Brabeck-Letmathe,
President and Chief Executive of Nestlé.
Although his presentation does not directly address any of
the products we typically cover in PotatoPro, I find the
trends in the food industry he foresees and the future
direction of Nestlé worth taking note of.
French Fries and Potato Specialties
More News on French Fries and Potato Specialties
Chips and Snacks
News on Chips and Snacks
Dehydrated Potato Products
More News on Dehydrated Potato Products
on Potato Starch
Other Potato Products
More Other News
News on Processing Equipment
Potato Supply Chain
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on QSR Restaurants
Health and Nutrition
News on Health and Nutrition
Energy and Environment
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