Potato supplier is invaluable to retail giant

As Tesco prepares to invade California with convenience stores, the company’s leading supplier of potato products is developing new strategies to grow with the retailer.

The U.K.-based retailer has taken over the British Isles and much of Europe with its innovative approaches and by offering convenience to its customers. Tesco controls about 30 percent of the retail market in the United Kingdom and about 40 percent of households buy from the supermarket chain. More than 12 million customers have a Tesco Clubcard, which is used in more than 80 percent of purchases.

Suppliers to the retail giant take active involvement in marketing their products and developing new products that are in line with Tesco’s goals. One of those companies, Branston, has made the transition from being a packer and shipper to a processor and the leading potato distributor for Tesco.

British Potatoes

The U.K. potato market is well established and suffering from some of the same issues as the U.S. market. About 6 million tons of potatoes are produced in the U.K., and another 1 million are imported, mostly from Europe. About 3 million tons are sold to the fresh market and another 2.3 million tons are used for processing. The rest are lost or used as stockfeed.

The industry has become incredibly consolidated in a short amount of time. Forty years ago, there were around 60,000 potato growers in the United Kingdom. There are now about 2,000 growers, producing the same tonnage. The registered area in the U.K. has decreased slightly, but the remaining growers have seen yields increase, a phenomenon that also has been seen with U.S. growers. The number of packers is down to a handful as well. In 1990, there were 28 U.K.-based packers. Today, there are only eight.

“They are innovators that have all brought something to the table,” said Mark Willcox, development director for Branston, Lincoln, U.K.

The consumer market is changing in ways similar to the United States. Eating out is almost as common in the U.K. as in America, although restaurants in the country have heavily ethnic foods that feature rice, not potatoes. Younger people are eating fewer potatoes, and Willcox said it’s estimated that about a quarter of the market will be lost as the generation ages. Health is becoming an issue as well, and the media are shaping public opinion against potatoes right now.

“We have a huge crisis looming,” Willcox said. “The message is not good to potatoes right now.”

The U.K. potato industry needs to proactively educate consumers about the healthful benefits of produce, Willcox said. But there’s also the customers’ tendency to say they want healthy products, but still consume junk food.

“I think there’s an element where people say one thing and do another,” Willcox said.

The Tesco Connection

Branston has focused on making its partnership with Tesco the core of the business. The company ships more than 255,000 tons of potatoes and potato products to Tesco, about 81 percent of the large retailer’s total volume.

Branston leaders developed a five-part strategy for working with Tesco. First, they wanted to be indispensable. Second, they aim to be the low-cost producer in the sector. Third, they want to lead innovation and new product development. Fourth, they are working to develop business opportunities outside the United Kingdom, and fifth, they want to deliver good returns to investors.
The company has taken the five-part strategy and used it to create a strategy for developing new products for Tesco, because innovative products will always generate demand, Willcox said.

“We can buck the trend with well-chosen product innovations.”

Product Innovation

Developing new products for Tesco’s multinational distribution is a process that can take months to years. Branston has 10 employees – out of 550 total – dedicated to the “luxury” value-added side of the business.

“We can only do that because we have critical mass,” Willcox said.

They’ve looked at the overall trends in the United Kingdom and other European countries that their products go to and they’ve looked at trends in the potato industry to bring new, innovative products to Tesco.

“We’ve taken the attitude that we go to them with solutions, not problems,” Willcox said.

That includes a staff that’s been trained in sensory evaluation. Branston has trained people how to respond to different varieties and flavors to have an objective tool to measure new products. What the company found was many people don’t have the sensory sensitivity to evaluate the products, something they would not have found if they hadn’t implemented the sensory training.
A new product that came out of this process was cut potatoes in Easy Steam packs.

“We believe we are the only packer filling a pack format of this kind with a solid,” Willcox said.

The product development team at Branston took a long time designing and testing the steam packs before introducing them to the public. They had to be sure the potatoes cooked evenly and that vents would be safe.

Branston is only two years into its value-added venture and has launched 12 products so far. Willcox said about half the products they develop make it to stores and only one in 10 or one in 20 products are still in stores. The value-added products account for about 9 percent to 10 percent of profits for the potato company, Willcox said, and although the value-added products only amount to about 0.5 percent of the firm’s tonnage, they account for 5 percent of its total revenue.

Target the young and affluent. One of the most successful launches for a potato product was aimed at the younger generation with money to spend on finer foods. Branston introduced the line of Exquisa variety potatoes packed in 1-kilogram bags last year, and it now accounts for more than $10 million in revenues for the company.

Most of the new products are in 1-kg packs, Willcox said. Sales of 5-kg bags are down and the company has dropped all of its 12.5-kg packages.

A product targeted at the affluent is a tray of diced potatoes in French goose gravy, a popular dish in the United Kingdom. The prepared product creates less mess for customers because it can be cooked in the tray it’s packaged in and the tray can be thrown out after the meal.

Redefine convenience. Although U.K. consumers are time-crunched and want convenience foods, they also want to have some control over the meal. To appeal to this broad cross-section of the consumer market, Branston offers a line of Charlotte variety potatoes for roasting, and they have a line of cook-from-fresh potatoes that have been cut and stuffed with herbs and butter. The products are easy to prepare, but customers can feel that they’ve “cooked” part of the meal, Willcox said.
Branston experimented with complete meal kits, but they weren’t as successful as hoped for. Willcox said the company might have overestimated the level of involvement that customers want to put in.

Focus on pillar brands. Tesco attracts many demographic and geographic groups, so the company has created brands that focus on cost or social values. Branston has capitalized on some of Tesco’s pillar brands, offering bags of five to six baking potatoes for the Value line, which retails at about half the cost of a standard bag. Some of the value-added products are part of Tesco’s Finest category, which typically retail at twice the standard price. Other categories are harder to break into with potatoes, Willcox said. For example, Tesco has a Healthy Living, Free From and Organic line – the fastest growing category right now.
Provenance. The trend to eat local food is gaining prominence in the United States and the United Kingdom.

“People want to reconnect with food,” Willcox said.

To make that connection, Branston is redeveloping its packaging for the Tesco products to include a photograph of a real farmer in a real field.

Branston created local marketing campaigns specifically designed around informing consumers in the area about the health benefits of potatoes. The campaign in one city, Cornish, resulted in an increase in sales of about 66 percent, Willcox said.

“Shortly, all of our potato products will be displayed in this way,” Willcox said.

Health and wellbeing. The U.K. government is concerned about the health of its citizens, so it is requiring all products to carry nutritional information.

“However, it’s poorly understood by consumers in the U.K.,” Willcox said.

Branston has developed its own system that displays the information required by the government in a clear way. Willcox said customers were reading the “clean ingredient declarations” and were buying the products with clear health information over products with the standard format.

Trends in the U.S. and European markets are becoming similar, and companies that are in tune with customers and technology could benefit on either continent. Willcox said he wasn’t sure if his company would be supplying potatoes to the Tesco stores that will be opening in California next year, but the potato packer, shipper and processor is looking at ways to create markets in the United States and abroad.