The Pre-Feasibility Study of Potato Chips Industry in Canada

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1.Summary

The potato chips industry is a long-lasting business in Canada as Canada is a leader of potatoes in the world. With such a favorable condition,
continuous raw material, it is beneficial to a new player. Potato chips are in high demand in Canada as a snack food that is an important part of
their daily life. This paper is mainly about the current potato chips market, the favorable investment of the potato chips industry, and the
opportunities for the potato chips industry. Therefore, a new player stands a good chance to enter the Canadian potato chips market.

2. Introduction to Potato Chips Industry

production_lineThe potato chips industry is one of the fast-developing industries among snack food manufacturing. It is always equipped with automatic potato chips machines which help improve the efficiency of the whole production and can save labor.
With globalization and the western eating style influence, the potato chips industry is tending to expand all over the world. High-quality potato chips are in demand in every country as people pay more attention to the health issue. Even though the demand and consumption of potato chips do not decrease because of that. The potato chips industry presents great potential.

3. Crucial Factors & Steps in Decision Making for Investment

3.1 SWOT Analysis

STRENGTHS

  • The continuous supply of raw material
  • Stable price of raw material
  • Affordable prices of potato chips for most people
  •  Favorable investment environment
  •  Increasing people’s income

WEAKNESS

  • Inexperienced staff compared with the already established companies
  • The expected waste at the beginning stage

OPPORTUNITIES

  • More confident of Canadians about spending for products with economic growth and income rising
  • Financial stability
  • Increasing income
  • High demand for potato chips in Canada

THREATS

  • Canadians pay more attention to health issues with the increase of income
  • Competition from the already established industries

3.2 Key Success Factors

When a new brand enters a market, some key success factors are always quite important for its development. One of them is to carefully and
technically monitor the whole potato chips production process in order to improve the efficiency and reduce material waste and energy waste.
Marketing and promotion are other important factors as it is a way to attract people and influence the purchasing act. Only through advertisements,
promotion activities and marketing strategies can a new brand of potato chips successfully known by most people.
In nowadays, with Canadians paying more attention to the health issue, as a potato chips producer, some factors that influence the purchasing behavior are:

  • Healthy
  • Taste
  • Brand
  • Hygeian

4. Potatoes Production in Canada

Canadian_potato_storage

 Canada is a well-known global leader in potatoes production. Potato production is an important part of Canada’s agriculture industry. Canadian potato production reached a record crop of 5.3 million tonnes worth $882.6 million in 2003.
As Canada’s potato production is beyond the domestic market demand, Canadian growers opened up an export market for certain processed potato products such as french fries, frozen potatoes. As the market research shows, in 2004, the export market was worth $ 902 million.

As time goes on, potatoes are in high demand, to meet the demand, Canadian potato growers increase their potato acreage to more than 400,000 acres. In 2004, almost 1.9 million tonnes of raw potatoes were needed to meet the export demand of frozen potato products which is the equivalent of 37% of the production. For the first time, 51% of Canada’s total potato crop was exported. As market research suggests, the majority of exports head to the United States. In 2003, about 85% of the product is exported to North America.
Monthly Fresh Potato Exports, Value (Cdn$) (August to Dec)

2006/07
2007/08
2008/09
2009/10
Aug
6,180,357
4,462,130
10,503,067
5,282,230
Sep
8,018,090
7,844,233
11,998,251
6,123,690
Otc
10,400,951
9,727,652
18,069,585
9,894,004
Nov
15,891,895
13,164,942
24,383,724
14,933,145
Dec
12,557,466
15,342,871
21,945,260
13,209,789

5.Potato Chips Market in Canada

5.1 Canada & Snack Food Industry

Canadians like snack foods very much and eat them almost every day. In recent years, snack foods have been one of the fastest-growing product categories in the domestic market. They are widely available in all retail channels across the country. The Canadian snack food manufacturing industry is expanding with the demand increases and it serves mostly the domestic market.

Snack Foods Manufacturing Growth Stabilizes

snack_food_industry_development

 Besides meeting the domestic demand for snacks, Canadian snack food products also are exported to foreign countries. Canada’s exports of snack food products have increased 4.6% from a value of $ 150.8 million to $157.8 million from 2000 to 2010.
Among the export snack food products, the export of potato chips in 2010 accounted for the largest portion of total snack food exports at 47.4%. Followed are corn chips, pretzels, and extruded snacks which accounted for 23.5% of exports.

5.2 Potato Chips Market

Potato chips enjoy a great market share with the special crispy and flavor and taste. The Canadian potato chips market consists of retail sales of bagged snack products and is valued according to the retail selling price. In 2011, the Canadian potato chips market had total revenues of $1.2 billion, representing a compound annual growth rate of 6.7% between 2007 and 2011 according to the market report.
The Best Selling Brands of Potato Chips in Canada

No.1
No.2
No.3
No.4
No.5
Lay’s
Ruffles
Pringles
Utz
Kettle Brand
No.6
No.7
No.8
No.9
No.10
Cape Code Potato Chips
Herr’s
Wise
Popchips
Golden Flake

Holding 84.0% of Canadian production despite an increase in exports, the domestic market of potato chips is still the industry’s most important market. The demand for convenience foods and “eat on the run” have driven potato chips sales in Canada and foreign countries which have generated significant increases in the Canadian domestic market and in the export market.
Monthly Processed Potato Exports, Value (Cdn$) (August to February)

2006/07
2007/08
2008/09
2009/10
Aug
75,636,538
74,371,262
80,117,201
84,119,365
Sep
74,727,691
68,694,613
81,648,553
83,670,641
Oct
77,365,220
79,136,593
89,102,120
81,544,561
Nov
78,319,859
73,073,950
94,108,030
79,191,084
Dec
74,308,931
68,459,925
87,666,858
75,498,080
Jan
86,697,483
75,103,179
95,511,086
74,553,045
Feb
75,182,628
72,648,506
92,287,787
72,399,580

snacks_consumption5.3 Target Customers

Potato chips, potato crisps, and french fries appear to be the most popular snacks in people’s life. They exist in chain groceries, large format outlets, corner stores, gas stations, and vending machines as well as at movie theaters and sporting events. Therefore, people can buy them easily. The main customers can be known. As the taste and crispy are liked by most people, the target customers can be children, young people, working people, and housewives.

6. Potato Chips Production Process

6.1 Potato Chips Machines

As for the industry, automatic potato chips machines should be equipped with. The plant is as follows:

6.2 Potato Chips Production

Within the potato chips manufacturing industry, continual improvements in process efficiency have occurred through improvements in some technologies
for washing, peeling, slicing, blanching, drying, frying, de-oiling, seasoning, and packaging. To improve these process parameters can produce high-quality
potato chips as water content, oil content, color, and flavor of products are all factors that influence the quality of the final products.

7. Conclusion

Canadian potato chips market is full of potential for a new player who can provide premium quality potato chips. Besides that the environment for investment
is favorable. With market strategy and promotion and high-quality potato chips, a new player can win customers in the competitive potato chips market and
gain market share through the endeavor.

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