{"id":165200,"date":"2023-08-05T08:00:00","date_gmt":"2023-08-05T00:00:00","guid":{"rendered":"https:\/\/www.mediaintel.asia\/?p=922408"},"modified":"2023-08-05T08:00:00","modified_gmt":"2023-08-05T00:00:00","slug":"what-japanese-potato-chip-maker-calbee-learned-from-a-potato-shortage","status":"publish","type":"post","link":"https:\/\/www.chinalegalblog.com\/en\/2023\/08\/05\/what-japanese-potato-chip-maker-calbee-learned-from-a-potato-shortage\/","title":{"rendered":"What Japanese potato chip maker Calbee learned from a potato shortage"},"content":{"rendered":"
\"MediaIntel.Asia\"<\/a><\/div>\n

Hong Kong CNN \u2014
\nWhat happens when Asia\u2019s biggest potato chip maker runs out of potatoes? Japanese snack brand Calbee had to learn the hard way.
\nExtreme weather disruptions and supply chain snags forced the company to hike prices three times last year and rethink how it sources its most important ingredient.
\n\u201cThat is our headache,\u201d Calbee CEO Makoto Ehara told CNN in an interview.
\nThe issue is critical to the company as it embarks on an ambitious $1 billion turnaround and overseas expansion plan that will see it plow deeper into the world\u2019s top two economies.
\nThe humble potato is serious business for the 74-year-old snack maker. The Tokyo-based firm uses hundreds of thousands of tons of the vegetable annually to make chips in a variety of flavors, from pizza to soy sauce.
\nBags of Calbee chips at a supermarket in Tokyo in July 2021. Noriko Hayashi\/Bloomberg\/Getty Images
\nThese products rake in hundreds of millions of dollars in sales a year for the company, which posted a profit of 22.2 billion yen ($156 million) in the last fiscal year.
\nIn Asia Pacific, Calbee sells more chips than anyone else besides Pepsi (PEP)Co, its longtime partner that owns about 20% of the company via a subsidiary. Pepsi (PEP) controls about 24% of the region\u2019s potato chip market, while Calbee has about 12%, according to data from Euromonitor International.
\nBoth have been hit over the past two years by ruptures in commodity supplies that led to a record surge in food prices in 2022, affecting virtually everything from tomatoes to rice to peaches.
\nExperts have called it the worst food crisis in modern history and warned of continued instability ahead, even as the high prices have largely receded.
\nSupply chain nightmare
\nCalbee faced a major crisis when it was confronted with a shortage of potatoes from the summer of 2021 to the fall of 2022.
\nIt came against a global backdrop of historically high food prices, as producers grappled with pandemic-related supply chain issues, a historic drought in Brazil and increased global use of vegetable oils, sugar and cereals.
\nThen the war in Ukraine broke out in February 2022, cutting off access to a critical global grain and vegetable oil exporter.
\nThe crisis contributed to another record jump for food prices last year, with a benchmark index compiled by the United Nations\u2019 Food and Agriculture Organization (FAO) reaching its highest annual level since 2005.
\nCalbee typically sources as much as 90% of its potatoes in Japan, with 80% of that supply coming from Hokkaido, a northern island.
\nBut the area was ravaged by drought in 2021, and the firm\u2019s domestic potato supply fell by 8% and 14% in the 2021 and 2022 fiscal years, respectively.
\nCalbee tried to make up for the shortfall by importing more from the United States, which normally accounts for the remaining 10% of its potato supply. But it didn\u2019t have much luck.
\nA global shortage of shipping containers caused delays and higher prices.
\nTo make matters worse, in late 2021, floods in the US Pacific Northwest stopped ports from operating as usual, making it harder for Calbee to get both potatoes and potato flakes: small, white chunks of dried mashed potatoes used to make Jagarico, its popular line of crispy biscuit sticks.
\nAs a result, the company had to suspend sales promotions and new product launches, while accepting higher procurement and shipping costs. The challenges contributed to a 7% decline in operating profit in the financial year that ended in March 2022.
\nLooking for solutions
\nTo shore up its supply of potatoes, Calbee is working with farmers across Japan, seeking to boost its domestic supply from 320,000 tons to 400,000 tons a year by the end of the decade.
\n\u201cWeather is very, very important for us,\u201d said Ehara. \u201cSo in order to avoid that kind of thing, we are now trying to increase the fields in Japan, other than [in] Hokkaido.\u201d
\nIt also estimates it may cut the proportion of potato imports it gets from America, its sole overseas supplier, in half.
\nThe move is \u201ca countermeasure towards the disruption we experienced during the pandemic,\u201d said a spokesperson.
\nTo diversify even further, the firm is also considering importing from other markets, such as Europe, according to Ehara.
\nIn May, the FAO index declined to the lowest level in more than a year, with significant price drops \u201cfor most cereals, vegetable oils and dairy products,\u201d according to the organization. The trend continued in June, before food commodity prices ticked up again in July, highlighting a continued choppiness.
\nEhara said prices of potatoes and palm oil had also stabilized.
\nSteady supplies are vital to the company\u2019s ambitious turnaround plan.
\nCalbee\u2019s sales have plateaued in recent years. To address that, the company announced in February it would invest about $1 billion over three years into areas such as automation and overseas expansion.
\nThe company is particularly bullish on prospects in the United States, where it\u2019s made inroads with its popular plant-based snack line, Harvest Snaps, which is sold at major chains such as Walmart (WMT) and Whole Foods.
\nAnd in China, it wants to build on traction gained with products like its South Korean-inspired honey butter chips, according to Keiei Sho, managing executive officer for Calbee\u2019s overseas businesses.
\nThe company is also bullish on Indonesia, which has a huge young population that could turn into lifelong customers, Sho added.
\nEmil Fazira, food insights manager in Asia Pacific for Euromonitor, said a \u201cstrong supply\u201d of potatoes is especially crucial for the US market.
\n\u201cThe USA alone has a massive market with retail sales volume five [times] larger than the Japanese market,\u201d she said, adding the snack business was fiercely competitive, with tight margins and new flavors or brands launched frequently.
\n\u201cStaying available on shelves is essential, not just to compete with other potato chip brands but also with other types of snacks.\u201d<\/p>\n

This data comes from MediaIntel.Asia's Media Intelligence and Media Monitoring Platform<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Hong Kong CNN \u2014
\nWhat happens when Asia\u2019s biggest potato chip maker runs out of potatoes? Japanese snack brand Calbee had to learn the hard way.
\nExtreme weather disruptions and supply chain snags forced the company to hike prices three times last year …<\/p>\n","protected":false},"author":253,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[934,144,586,671,339,693,1607,194,698,1002,615],"tags":[2210,2636,7501,3942,7010,2127,2214,10315,7539,7571,10327,10328,7004,10412,10343,2189],"class_list":["post-165200","post","type-post","status-publish","format-standard","hentry","category-agriculture","category-china","category-economy","category-finance","category-hong-kong","category-japan","category-manufacturing","category-news-chinese-law","category-procurement","category-retail","category-south-korea","tag-america","tag-brazil","tag-dairy","tag-europe","tag-expansion","tag-import","tag-indonesia","tag-media-intelligence","tag-milk","tag-oil","tag-pacific","tag-pandemic","tag-shipping","tag-soybean","tag-supermarket","tag-supplier"],"_links":{"self":[{"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/posts\/165200"}],"collection":[{"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/users\/253"}],"replies":[{"embeddable":true,"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/comments?post=165200"}],"version-history":[{"count":1,"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/posts\/165200\/revisions"}],"predecessor-version":[{"id":165202,"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/posts\/165200\/revisions\/165202"}],"wp:attachment":[{"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/media?parent=165200"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/categories?post=165200"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.chinalegalblog.com\/en\/wp-json\/wp\/v2\/tags?post=165200"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}