February 20, 2002

U.S. Consumption of French Fries Is Sliding as Diners Opt for Healthy

By Jill Carroll and Shirley Leung

There is more fizzle and less sizzle in the french fry industry these days.

For most of the 1990s, Americans scarfed down more french fries every year. The appetite of foreign french fry fans grew even faster. Fry makers built a new plant almost every year just to keep up with demand.

No more. After a decade of skyrocketing growth, consumption of fries is expected to drop almost 1% in the fiscal year ending this June 30, according to the U.S. Agriculture Department, which keeps track of such things. The result is an all-American french fry glut.

Americans still eat a lot of fries: about 28 pounds per person every year. But consumption has "grown so much for so long it's getting to the point where [one has to ask] how much more can each person eat?" said Charles Plummer, the USDA's potato specialist.

The french fry folks' biggest problem is the slowing expansion of the fast-food industry, which sells about 90% of the fries consumed in the U.S. The top 100 companies added only 1% more outlets in 2000 compared with 6.1% in 1996, according to Technomic Inc., a Chicago food-consulting firm.

What's more, McDonald's Corp., well-known for its fries, no longer has the most fast-food outlets. Subway Restaurants dethroned it this year, and Subway doesn't sell french fries. Subway is run by closely held Doctor's Associates Inc. based in Milford, Conn.

This reflects, at least in part, health-conscious Americans' fear of fat. "I don't even eat McDonald's anymore. I'm trying to get away from fatty food," says Chandra Brooks, a Washington, D.C., office worker who recently dined on a Subway sandwich in a downtown food court. "I'm tired of just the burgers and stuff."

At other restaurants of all sorts, fries face more competition these days. Menus dangle alternatives such as stuffed Jalapeno peppers or fried mozzarella sticks. The world's biggest french fry maker, McCain Foods Ltd. of Canada, is diversifying; last year, it bought the food-service division of Anchor Food Products Inc., which makes items such as sourdough breaded mushrooms and olives stuffed with Asiago cheese. According to the National Restaurant Association, sales of french fries at all restaurants, including fast-food outlets, were down in 2001 by 1%.

The french fry folks are fighting back, hoping to repeat the success they had in boosting sales in the 1990s with super-sized combo meals that include fries. McCain is selling what it calls "X-Treme" fries with pungent flavors like "Sassy Salt and Vinegar" and "Jalapeno Fire Fries." Ore-Ida, a unit of H.J. Heinz Co., this month said it will expand its frozen fry product line in spring to include blue french fries, chocolate fries, and cinnamon-and-sugar potatoes for the breakfast crowd.

Exports of American french fries are slowing just as the domestic market does. Japan, the largest importer, is saturated, french fry sellers say. And the promising Chinese market is proving hard to break into. If all that weren't trouble enough, the U.S. industry is plagued by cheaper imports. McCain has positioned plants on the Canadian side of the border, poised to profit from the weakening Canadian dollar. Canadians supply 13% of the french fries that Americans eat every year.

In response, U.S. french fry makers are paring production. U.S. output of french fries, which grew by almost 5% last year, is expected to drop by about 3% in the fiscal year ending June 30, according to the USDA.

To reduce its bulging stocks of unsold frozen fries, Idaho-based J.R. Simplot Co. extended its annual seasonal shutdown by an extra week this winter at its eight U.S. plants. Others are scaling back expansion plans. McCain has indefinitely delayed plans for a second plant in Maine. U.S. rival Lamb Weston Inc., a unit of ConAgra Foods Inc., last month gave up an option to buy 165 acres on the site of an old Air Force base in Maine at which it had planned an $80 million plant.

For people in the potato business, the consequences of this fry glut are severe. The two new Maine french fry plants that have been canceled or put on hold would have consumed about 25,000 acres worth of potatoes. "It would have been a tremendous boost for our industry," said Don Flannery, assistant executive director of the Maine Potato Board.

French fry makers hope demand will pick up as the U.S. economy does, fast-food chains resume their expansion and U.S. firms build a stronger presence in China. Simplot says it is planning a new $80 million plant, but in Manitoba, Canada, not in the U.S. And McCain has a new plant in the works, too -- in England.

Still, the future of fries may not even be the potato. A USDA scientist developed a fry made from a rice flour mixture that absorbs about 30% less oil when it is cooked. The USDA recently patented the "rice fries" and is talking with rice processors about marketing them as a healthy alternative for fry addicts.