Calbee's President and CEO Makoto Ehara talks about climate change, the supply of potatoes and why the company still mostly depend on local producers.

Calbee, a leading Japanese snack manufacturer, is facing challenges in securing a stable potato supply due to the effects of climate change. The company's CEO noted that rising temperatures, even in traditionally cooler regions like Hokkaido, are impacting potato crops, which are essential for their products. To address these risks, Calbee is developing new potato varieties that can withstand higher temperatures.

The company currently relies on domestic potatoes for 90% of its supply, with a small portion imported from the United States. However, the weak yen has made imports more expensive, complicating efforts to diversify sources. Additionally, potential tariffs and economic factors may lead Calbee to increase prices and accelerate local manufacturing in the US market.

Climate change could impact supply of potatoes: Calbee's CEO

Before the rice crisis which we've been covering in the last 12 months or so for the potato chip aficionado, they might remember that back in around 2017, so about seven years ago, there was the great potato chip shortage. At that time, Calbee had to temporarily suspend the sale of about a dozen of its potato chip varieties. There were posts that were going viral at that time of empty shelves and secondary online markets selling packets of potato chips at five or six times the price. The point here of course is that Japan is pretty insecure when it comes to its energy needs and its food needs. It needs to import about 90% of its energy needs and about half of its food demands as well. In that 2017 shortage, we know that it was because of a bad crop of potatoes, most of which was made and produced in the Hokkaido prefecture. At that time, it was because of a record run of typhoons. Now as we speak, over the last few days or so, Japan has been experiencing another pretty brutal heatwave. Even Hokkaido, which is known for its, you know, pretty cool climate there, is also experiencing these high temperatures. Last week, one area there also logging a record of about 39 degrees Celsius. So I asked Calbee's CEO about how the company prepares for potential shortages when it comes to their supply chains. Let's watch. I think the main reason is from the climate change recently. So this is very critical for our business because we are 90% rely on domestic potatoes. But potatoes, as you know, potatoes are basically the product of not so hot areas products. But recently, even in Hokkaido, temperature is going up. That is a big problem for us. So our subsidiary company, Calbee Potato, is now developing a new type of potato for resisting some kind of hot temperature. So that is very important for us. So that kind of initiative. I wanted to just pick up on that point in terms of also the trade deal, right? We know that there is a bit of an agriculture component to it. When you look at the details, there's no mention of potatoes. But I know that the US, some of the major potato sort of cooperatives there, they have said recently that they hope to import more US potatoes into Japan. Is that something that you guys are also looking at in terms of diversifying as well? Yes. And as far as potato import, there is no official announcement regarding potatoes currently. So we are now importing the potato from the US and 10% of our total consumption. Not so big. But because, as you know, regarding exchange ratio, it's a very, very weak yen. So as a result, import potato price is much higher than Japanese potato. That is a problem for us. So if the US pushes the Japanese government to import potato more, but considering the economic situation, it's very difficult to do that kind of thing. It's been, of course, a really big 10 days or so in terms of news coming out of Japan. I also asked the CEO about how the domestic political situation is impacting the company. He says that that uncertainty does not have a major impact. What the company is certainly more concerned about is still in relation to the tariffs, even though there has been a deal that has been announced with the United States. He says that in terms of that looming 15% tariff, that that will mean two things for the business going forward. One is that they will look to accelerate localization of their manufacturing processes in the US. And two, that in the short term, they will have to look at price increases as well in that market. Sherry. Yeah, thank you for reminding me of that potato crisis. I almost forgot about that. I'm looking at a 2017 article. Calbee's pizza flavor chips were going for about 1,250 yen. If you do the conversion, of course, the conversion rate back then, 11 US dollars. I'm not paying that kind of money for a bag of chips, Lynn.

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