The Pandemic to Hinder Robust Growth of the American Potato Chips Market

IndexBox has just published a new report: 'U.S. - Potato Chips - Market Analysis, Forecast, Size, Trends And Insights'. Here is a summary of the report's key findings.

In 2019, the U.S. potato chips market increased by 3.4% to $9.6B, rising for the third year in a row after two years of decline. The market value increased at an average annual rate of +3.5% from 2013 to 2019; the trend pattern remained relatively stable, with only minor fluctuations throughout the analyzed period. 

The COVID-19 pandemic remains the main constraint on market growth. In early 2020, the global economy entered a period of the crisis caused by the outbreak of the pandemic. In order to battle the spread of the virus, most countries in the world implemented quarantine measures that put on halt production and transport activity.  

The combination of those factors hampers economic growth heavily throughout the world and disrupts the international supply chains. The result will be a drop in GDP relative to previous years, which is to cut consumer spending. The U.S. is struggling with a drastic short-term recession, as the hit of the pandemic was harder than expected, and unemployment soared due to the shutdown and social isolation. According to the World Bank forecasts, despite the gradual relaxing of restrictive measures and unprecedented government support, the expected contraction of GDP in the U.S. may amount to approx. -6% in 2020.

The food market is extremely vulnerable to quarantine measures and restrictions due to the pandemic due to the disruption of the usual sales channels and supply chains. Against the background of the closure of the HoReCa sector due to quarantine restrictions and lower incomes of the population, as well as a decrease in the frequency of consumer visits to supermarkets and shops, a certain decrease in potato chips consumption can be expected.  

In the context of falling incomes, consumers primarily tend to exclude non-staple goods from purchases, which include potato chips. Thus, a sharp drop in household incomes is a powerful factor that will restrain the growth of the market in the medium term. On the other hand, people who like potato chips may most likely keep their preferences, which is to support the market.

Accordingly, in the medium term, the market is expected to continue an upward consumption trend over the next decade. Market performance is forecast to decelerate, expanding with an anticipated CAGR of +0.7% for the period from 2019 to 2030, which is projected to bring the market volume to 3.2M tonnes (IndexBox estimates) by the end of 2030.

Production in the U.S.

In 2019, the production of potato chips increased by 3.4% to 3M tonnes, rising for the third year in a row after two years of decline. The total output volume increased at an average annual rate of +3.6% from 2013 to 2019; the trend pattern remained consistent, with only minor fluctuations being observed throughout the analyzed period. The most prominent rate of growth was recorded in 2014 when the production volume increased by 14% year-to-year. Over the period under review, production reached the peak volume in 2019 and is expected to retain growth in the immediate term.

In value terms, potato chips production expanded slightly to $9.8B in 2019. The total output value increased at an average annual rate of +3.5% from 2013 to 2019; the trend pattern remained relatively stable, with only minor fluctuations being observed in certain years. The growth pace was the most rapid in 2014 when the production volume increased by 13% year-to-year. Over the period under review, production attained the peak level in 2019 and is likely to see gradual growth in the near future.

Imports into the U.S.

For the third consecutive year, the U.S. recorded growth in supplies from abroad of potato chips, which increased to 57K tonnes in 2019. The total import volume increased at an average annual rate of +3.7% over the period from 2013 to 2019; however, the trend pattern indicated some noticeable fluctuations being recorded throughout the analyzed period. In value terms, potato chips imports expanded slightly to $205M (IndexBox estimates) in 2019. 

Imports by Country

Canada (28K tonnes), Mexico (20K tonnes), and China (3.7K tonnes) were the main suppliers of potato chips imports to the U.S., together comprising 91% of total imports. These countries were followed by the UK and the Dominican Republic, which together accounted for a further 3.9%.

From 2013 to 2018, the biggest increases were in the Dominican Republic (+53.1% per year), while purchases for the other leaders experienced more modest paces of growth.

In value terms, the largest potato chips suppliers to the U.S. were Canada ($91M), Mexico ($82M), and the UK ($6M), with a combined 91% share of total imports. China and the Dominican Republic lagged somewhat behind, together accounting for a further 3.4%.

Import Prices by Country

The average potato chips import price stood at $3,448 per tonne in 2018, therefore, remained relatively stable against the previous year. Over the period from 2013 to 2018, it increased at an average annual rate of +1.9%. The pace of growth was the most pronounced in 2014 an increase of 10% y-o-y. Over the period under review, average import prices hit record highs at $3,492 per tonne in 2017 and then dropped slightly in the following year.

Prices varied noticeably by the country of origin; the country with the highest price was the UK ($4,571 per tonne), while the price for chips from China ($913 per tonne) was amongst the lowest.

From 2013 to 2018, the most notable rate of growth in terms of prices was attained by the UK, while the prices for the other major suppliers experienced more modest paces of growth.

Source: IndexBox Platform