POTATO PROCESSING MARKET ANALYSIS

The potato Processing Market size is expected to reach US$ 56.89 Bn by 2031, from US$ 39.42 Bn in 2024, exhibiting a compound annual growth rate (CAGR) of 5.4% during the forecast period. Potato is a starchy root vegetable that is mainly obtained from the plant Solanum tuberosum. Potato tuber is widely processed to get a variety of food products, such as chips, fries, flakes, and other convenience foods. Potato is also processed for its application as filler, binder, and adhesive by various end-use industries such as paper, textiles, and pharmaceuticals. Furthermore, processed potato is used in animal feed and biofuels as well.    

Market Regional Insights:

• Europe is estimated to account for a major 42.0% share in the market in terms of revenue in 2023 and is projected to continue its dominance throughout the forecast period. Europe experiences significant demand for high-quality and nutritious processed and convenience foods. Several key players are using innovative processing and packaging technologies to attract consumers. In Europe, major potato processing companies are investing heavily in their plants, considering the huge demand for processed potato products.
• North America is the second largest market for potato processing, as potato containing processed foods are of high demand in this region owing to busy lifestyles of consumers, affordability, and taste.
• Asia Pacific is projected to be the fastest growing market in terms of revenue owing to changing eating habits and improvements in the standard of living. Also, the abundance of raw materials and cost competitiveness act as major growth drivers. According to India Brand Equity Foundation (IBEF), a trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India, the consumer spending on processed food will increase to US$ 3.6 trillion by 2020, which will augment market growth. Chinese food processing company, Xisen Potato Industry, along with Scottish potato experts from James Hutton Institute are going to establish a US$ 3.87 million potato laboratory in China during the next few years.

Figure 1. Potato Processing Market Share (%), By Region, 2024

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Analyst’s Views:

The market is expected to see steady growth over the coming years. As incomes rise globally, the demand for convenient, packaged potato products will increase. Several factors will drive this growth including urbanization, changing consumer lifestyles, and increased availability of processed potato products in various cuisines. Regions such as Asia Pacific and Latin America are anticipated to see the fastest gains due to their large populations and expanding middle classes. However, competitive pressures from substitute products could limit pricing power for potato processors. Snack foods made from corn, rice and other ingredients are increasingly popular options. Volatility in crop yields and raw material prices also poses a risk. Extreme weather events from climate change have the potential to disrupt potato supplies. Fluctuations in energy and transportation costs further impact profit margins.

Nonetheless, the industry will benefit from ongoing innovations. New product launches that cater to health and wellness trends, such as potato chips and snacks with lower fat, sodium or calories, provide opportunities. Advancements in processing technologies can help increase efficiency and optimize production. Companies are exploring value-added fruit and vegetable ingredients to enhance the nutritional profile of potato products. Partnerships with foodservice and quick service restaurant chains also allow for incremental revenues. In summary, while facing challenges, the market is well positioned for continued expansion. Those able to adapt to shifting consumer demands and macroeconomic uncertainties will.

Market Drivers:

Increasing demand for processed potato products

The demand for processed potato products is increasing significantly across the globe, which is one of the key factors augmenting the growth of the market. Population growth coupled with changing food preferences is driving significant growth in the snacks industry. As potatoes can be processed into a variety of convenient snacks like potato chips, potato sticks, and many more, this is contributing considerably to the rising demand for processed potato items. According to data from the Food and Agriculture Organization, average potato consumption per capita has increased from 46.7 kg in 2000 to 54.2 kg in 2020 across different countries.

Rising consumption of fast food products

The fast food industry has been growing significantly across the world over the past few decades. As populations and disposable incomes rise, especially in developing economies, consumption of fast food has skyrocketed. Convenience and affordability are the major factors attracting more customers. With its versatility and low cost of production, potatoes have emerged as a popular ingredient for fast food products like French fries, patties, and snack foods. As fast food chains expand their footprint globally, the demand for processed potato products is increasing steadily.

According to data from the UN Food and Agriculture Organization (FAO), per capita potato consumption increased by over 10% in Asia and Africa between 2018 and 2020. Countries like India, China and Nigeria posted some of the highest gains in potato demand, reflecting their rising young populations and growing appetite for Western fast foods.

Rising disposable income

Rising disposable incomes across many developing and emerging economies are providing strong tailwinds for the growth of the market. As people's incomes increase, their dietary patterns shift away from staple grains toward more resource-intensive livestock and dairy foods as well as vegetables, fruits, and snacks. Potato is increasingly becoming an important ingredient as well as standalone food item in daily diets globally.

As living standards improve, people have more discretionary funds to spend on processed and convenient food items. This allows them to save time on cooking and devote more time to other activities. Therefore, demand for ready-to-eat as well as ready-to-cook potato products is surging rapidly. Changing work dynamics with more people joining the professional workforce also means less time is available for elaborate at-home food preparation. This makes potato snacks, frozen potato items, and other such lightly processed categories very appealing options.

Market Opportunities:

Innovation of new potato varieties

The innovation of new potato varieties offers immense potential for growth in the market. Developing potatoes with improved traits such as higher yields, pest and disease resistance, longevity, and processing characteristics can help address various challenges and needs of the processing industry.

For instance, potato varieties that are ideal for chipping, frying, or dehydration can help companies scale up and diversify their product portfolio. Chips, snacks, and other convenience foods made from potatoes have been in high demand globally. However, available varieties may not consistently provide optimal processing qualities. New varieties tailored to specific processing methods could, therefore, help companies boost productivity and product quality. This in turn allows them to cater to the evolving taste preferences of health-conscious consumers who prefer natural, minimally processed snacks.

Expansion in emerging markets

Emerging markets in developing economies present a huge growth opportunity for the global market. Countries like India, China, Brazil, Indonesia, and others are witnessing rising incomes and urbanization, which is driving the demand for processed potato products. As people's lifestyles become more fast-paced and nuclear families become more commonplace, there is a huge shift towards convenient, packaged and branded foods.

Potato processing companies are well poised to cater to this demand. Products like potato chips, fries, dehydrated potatoes, potato starch, and flour have immense potential in these emerging economies. Potato is already a widely consumed vegetable in daily diets of people. However, processed and value-added potato items are still in the nascent stage compared to other crop varieties. With appropriate marketing, competitive pricing, and variety in product offerings, players can penetrate these untapped emerging markets at scale.

Increasing export opportunities

Export opportunities can open promising avenues for growth in the market. As per data from the United Nations Food and Agriculture Organization (FAO), global potato production reached 381.7 million tons in 2020, with exports of processed potato items relatively lower at around 15 million tons. This indicates significant headroom for expansion in potato exports, provided suitable strategies are undertaken.

Market Trends:

Increasing demand for gluten free and vegan food products

The growing demand for gluten-free and vegan food products is having a significant influence on the market. More and more consumers are opting for plant-based diets that avoid gluten and other common allergens like dairy for health, ethical, or environmental reasons. This increasing sensitivity towards food ingredients is driving potato processors to innovate and offer alternative product options. Potatoes are naturally gluten-free and vegan friendly, making them a popular substitute for wheat flour and other grain-based ingredients in many food applications. Potato processors are leveraging this to develop an extensive range of gluten-free baked goods, snacks, and convenience meals using potato starch, flour and other value-added potato ingredients. For example, potato processors in North America have launched gluten-free pasta, breads, and pizza crusts made from potato starch that closely mimic the texture and taste of traditional wheat-based versions. This is catering to the huge demand from the growing coeliac disease population as well as general health-conscious consumers cutting down on gluten.

Increasing demand for clean label and organic products

The increasing demand for clean label and organic products is having a significant influence on the market. Consumers are becoming more health conscious and are actively looking to make better food choices. They want transparency in ingredients and are skeptical about long, chemical-sounding ingredient lists. As a result, there is a rising popularity of products with clean, understandable labels that only contain ingredients a consumer can recognize and pronounce. Potato processors are responding to this demand by removing artificial colors, flavors, and preservatives from their products and focusing on simple, natural formulations.

This transition to cleaner labels requires changes in the way potatoes are processed. Processors have to find alternatives to artificial ingredients and ensure their supply chains are organic compliant. Potato varieties grown for processing may need to be change to ones suitable for organic cultivation. Additional steps, like separate processing lines, may be needed for organic and conventional products. These changes involve new equipment, training of staff and revisions to standard operating procedures. All of these factors increase production costs for processors. However, they feel compelled to make these investments to meet consumer expectations and remain competitive in the market.

Market Restraints:

Price volatility of raw materials

The volatility in the prices of raw materials has emerged as one of the key factors hampering the growth of the market in recent years. Potato is one of the major raw materials required in large volumes for manufacturing various processed potato products. However, prices of potato tubers have witnessed significant fluctuations depending on various factors like weather conditions, demand-supply dynamics, etc. For instance, according to data from the United Nations Food and Agriculture Organization, potato production in Europe decreased by around 12% in 2021 compared to the previous year mainly due to unfavorable weather. This led to a substantial increase in potato prices across major producing countries. Higher input costs squeeze profit margins of companies and impact their ability to scale up operations and cater to rising demand.

Counter Balance: The potato industry can explore the possibilities of demand creation and develop higher value products to shift the demand curve and maximize income.

Stringent food safety regulations

Stringent food safety regulations have been posing challenges for the market's growth globally. More rigorous norms and compliance requirements related to pesticide residue limits, hygiene, packaging, and labeling have increased operational costs substantially for processors. Potato is a staple crop consumed worldwide, but its processing helps reduce post-harvest losses and adds value. However, processors have had to invest heavily in upgrading facilities, ensuring traceability systems, recall management processes, worker safety protocols and more to meet the evolving regulatory standards.

Ensuring compliance has also become complicated due to the varied limits set by different countries. For instance, the maximum limit of the residue of chlorpropham, a sprout suppressant, was reduced from 0.1 mg/kg to 0.05 mg/kg in the U.K. and EU, effective 2021. This left little time for processors sourcing from these regions to make arrangements. Similarly, new packaging rules in North America require easy identification of genetically modified content on labels, if any. Adapting supply and production chains at short notice to satisfy multiple sets of divergent norms increases overhead costs.

Counterbalance: Companies can mitigate the impact of price fluctuations by diversifying their sources of raw materials. This can help reduce dependency on a single source and provide more stability in procurement. And entering into long-term supply agreements with raw material suppliers can provide stability in prices and supply, reducing the impact of short-term price fluctuations.

Recent Developments:

• In January 2023, the Dutch potato processor Aviko launched "Potato Cheezz," a plant-based product made from potatoes that looks like cheese, tastes like cheese, and has a texture similar to cheese. This innovative plant-based cheese is salt-free, fat-free, and lactose-free, making it a healthier alternative to traditional cheese.

Figure 2. Potato Processing Market Market Share (%), By Product Type, 2024

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Top Companies in This Market

• Mcccain Foods Limited
• Agrana Beteiligungs-AG
• Agristo NV
• Aviko B.V
• Farm Frites International
• Idahoan Foods
• Intersnack Group GmbH & Co. Kg
• Lamb Weston Holdings
• R. Simplot Company
• Leng-D'or

*Definition: Potato processing refers to the various activities involved in transforming potatoes into different food products and ingredients. These activities include cleaning, peeling, cutting, blanching, frying, freezing, and packaging. Potatoes are used for a variety of purposes, and less than 50% of potatoes grown worldwide are consumed fresh. The rest are processed into potato food products and food ingredients, fed to livestock, processed into starch for industry, and re-used as seed tubers for growing the next season's potato crop. The industry plays a crucial role in meeting the global demand for potato-based foods, such as potato chips, french fries, mashed potatoes, and dehydrated potato products.