NEWSLINE:

FOOD SERVICE

Shells’ financial woes continue Midwest expansion abandoned to focus on core Florida operations
At a time when most casual-dining seafood restaurants are thriving, Shells is seeing sales decline.

Shells lost $3 million, or 68 cents a share, in the first quarter of 2001. Revenues fell 16 percent, to $21.6 million, from the first quarter of last year, and same-store sales plunged 5.4 percent.

The Tampa-based chain blames its financial woes on the collapse of its Midwest operations. The company has closed 16 units since April 1, 2000 – 14 in the Midwest and two in Florida. Shells’ store count is down to 30 units in the Sunshine State, and negotiations with an unaffiliated company to license the remaining three in the Midwest are pending.

The company is downsizing its administrative support staff and has replaced its VP of operations and allocated the duties of its VP of marketing among existing personnel.

David Head, former president and COO of Red Robin International franchisee Le Carnassier LLC, took over as president and CEO in April. William Hattaway vacated the job last year.

Shells’ troubles became evident in 1999 when it lost $2.7 million. Last year, Shells lost $9.3 million and was delisted from the

Nasdaq stock exchange.

While Shells is faltering, most players in the casual-dining segment are doing well, noted restaurant analyst Mark Kalinowski of Salomon Smith Barney in an April 9 report: "Casual dining as a whole continues to post favorable same-store sales growth – the best of any sector in the restaurant industry."

Kalinowski tied the segment’s success to demographics. The number of people in their 50s, who

frequent casual-dining restaurants most often, is projected to rise 39 percent over the next decade.

Shells opened its first restaurant in 1985 and went public in 1996. The company expanded outside Florida in 1997, with six units in Ohio and one in Kentucky. But labor shortages prevented the chain from growing beyond 17 units in the Midwest.

"I believe that we have an excellent opportunity to position the company for more predictable and sustainable long-term growth," Head proclaimed in an April 20 statement.

"Historically, [Shells] has done well in Florida," affirms restaurant analyst Michael Smith of Fahnestock & Co. "I think [Shells] has some deep pockets behind them. Maybe not as deep as other restaurant chains, but the people who are investing in the company are sticking with it." – Steven Hedlund

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ENVIRONMENT

Commercializing transgenic fish meets resistance on several fronts
Environmental, fishing groups ask federal agencies to delay approval

A coalition of more than 60 environmental and consumer groups and commercial fishing advocates filed petitions with five federal agencies last month to stall the commercialization of genetically modified fish.

Petitioners asked the Food and Drug Administration on May 9 for a moratorium on approval of any genetically modified fish. If the FDA rejects or does not address the moratorium within the required 180 days, the petitioners will take the agency to court, says Joseph Men-delson, legal director for the Center for Food Safety, the Washington group leading the action.

In 1995, A/F Protein of Waltham, Mass., applied to the FDA for approval of its genetically modified sal-mon, which grows faster than other fish. Since then, the FDA has been assessing whether the AquAdvantage salmon strain is safe for humans or the environment.

"We do not feel the proper government oversight is taking place," says Mendelson. "The FDA is not an agency that is conducive to looking at the environmental impacts of genetically modified fish."

The escape of transgenic salmon from aquaculture facilities will have devastating ecological effects on wild stocks, he says.

"This is just a series of unsupported claims to grab headlines," counters Joseph McGonigle, A/F Protein’s VP of business development.

AquAdvantage will be available only as sterile females, he says, adding that the National Marine Fisheries Service and Fish and Wildlife Service are weighing environmental impacts of transgenic salmon.

The petitioners, who have also filed with the departments of Commerce, Agriculture, Defense and Inter- ior, include the Atlantic Salmon Federation, Pacific Coast Federation of Fishermen’s Associations, Nat-ional Environmental Trust, Sierra Club and Greenpeace. – S.H.

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CHARITY

Industry contributes to hunger relief
Community Catch celebrates distribution of 2001’s seafood donations 2001

Members of the At-Sea Processors Association, Northwest Food Strategies and Food Lifeline, a member of America’s Second Harvest, and their families served a pollock and cod lunch to more than 200 Seattle homeless people in April. The fish was donated through the efforts of the Community Catch program.

Seattle’s Millionair Club Charity was the setting for the luncheon to recognize this year’s first distribution of Community Catch sea- food donations and to highlight hunger-relief efforts in the community.

The Community Catch Program, established last year by seven members of the At-Sea Processors Association, pledged 250,000 pounds of product, or approximately 1 million meals, to local and national food banks this year. The products include fish sticks, portions, frozen blocks and fillets. This donation is especially significant, says Tuck Donnelly, executive director of NFS, because the seafood is manufactured specifically for food banks.

He adds, "It’s a giant puzzle establishing who can provide product, processing, transportation and storage."

But making donations to hunger-relief efforts is now easier for seafood companies, thanks to The Seafood Industry Hunger Relief Initiative, supported by Kraft Foods. The Seafood Initiative, a nationwide seafood-industry effort to expand product-donation programs, is funded by a Kraft Foods grant and managed by Northwest Food Strategies.

The Initiative is a two-step process that involves connecting with seafood processors to establish initial donations, and then determining what the companies need to do internally to establish a sustainable donation program.

Seafood donations could also get a boost with passage of the Good Samaritan Hunger Relief Tax Incentive Act, introduced to Congress by Sen. Richard Lugar (R-IN) and Patrick Leahy (D-VT) and Rep. Tony Hall (D-OH) and Richard Baker (R-LA).

The legislation would increase the tax deduction for donated food to the full fair market value of the product. – Jenn Marrone

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PROCESSING

Blast kills one as plant is destroyed
Accident will not affect shellfish production

An explosion in a maintenance building owned by Atlantic Shellfish and P.E.I. Mussel King killed one worker, injured another and destroyed the building.

Brian Campbell, 35, died in the explosion. Campbell worked for 16 years at the sister companies that produce and process mussels, oysters and clams.

On Thursday, May 3, Campbell and two other workers were servicing boats in the 9,000-square-foot building. On one side of the building, a dozen workers were grading oysters and bagging them for market.

There was a fuel leak in one of the boats, says John Bil, general manager for Atlantic Shellfish. A spark ignited vapors built up between the hull and the deck and set off the explosion. The origin of the spark is still unclear.

Thirteen workers were able to get out of the building safely. One employee close to the explosion suffered serious burns and sustained a fractured pelvis when he was thrown by the blast.

The uninsured building, filled with flammable materials like Styrofoam buoys, bags and freezer storage tubs, was destroyed. The loss exceeds $1 million, says Bil.

The processing facilities were not affected, and the company is shipping as usual.

"The customers won’t notice any difference," says Bil. "There will just be a lot more paddling below the surface of the water."

Neighboring P.E.I. aquaculture operations have offered equipment on loan, he says.

A trust fund in Campbell’s name was set up for his family at the Bank of Nova Scotia in Morel, Prince Edward Island. – L.D.

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MARKETING

Eco-label debuts with Royal Caribbean, Whole Foods Market
Alaska salmon is first market test of sustainable-seafood labels

The first test of the Marine Stewardship Council eco-label begins this month as Alaska salmon hits the market.

Since the MSC certified the state’s salmon fishery last fall, 18 processors, one national distributor, one national retailer and two cruise lines have been approved by the MSC to use the label.

Whole Foods Market will be the first nationwide retailer to carry eco-labeled Alaska salmon early this month. The Royal Carib- bean cruise line and Lindblad Expeditions, an eco-tour provider, are also approved to use the label.

Lindblad is creating a CD-Rom to educate guests about sustainable seafood and encourage them to take the message back to local restaurants and grocers.

Eco-Fish, a distributor in Portsmouth, N.H., that sells sustainable seafood exclusively, is the first national distributor approved to use the label.

For the eco-label to appear in the marketplace, the fishery must be certified sustainable, and the MSC must certify all the distribution points between the fishery and the consumer. A "chain of custody" certification is the organization’s way to ensure certified product is not mixed with non-certified product, says Karen Tarica, U.S. communications director for the MSC.

"For the United States, salmon is going to be the first test of the label," says Tarica. "Salmon is really the first time consumers will see that label and have the option of making that choice."

Three other fisheries are certified, New Zealand hoki, Australian rock lobster and Thames River herring, but none carries the significance to the U.S. market that Alaska salmon does.

Some believe the labels will carry a premium price, although eco-labeled product is not yet traded in the U.S. market, so that theory has yet to be tested.

EcoFish’s prices typically run 10 to 20 percent higher than average seafood prices, says Eco-Fish founder Henry Lovejoy. – L.D.

Massachusetts clam shack dubbed ‘best seafood’ by Forbes magazine
Woodman’s earns a place on list of America’s 50 "best"

Woodman’s seafood restaurant in Essex, Mass., has the "best seafood," proclaims a supplement to Forbes, a biweekly business magazine with a paid circulation of 765,000.

In the summer 2001 issue of Forbes FYI, Woodman’s is included in "50 of America’s Best," which profiles everything from the best coffee in the country to the best saltwater fly-fishing guide to the best place to hike.

"We’re very pleased. It was a great honor," says owner Steve Woodman, whose grandfather, Lawrence "Chubby" Woodman, opened a fish market/bait shop in 1914 along the Essex River where the restaurant now stands.

Woodman’s was the first commercial establishment in New England to sell fried clams, claims Woodman.

In 1916, "Chubby" Woodman, who sold clams as bait to fishermen, started frying clams and made $35 selling them during the town’s Fourth of July parade.

Now Woodman’s is open year-round and seats more than 300 diners. The restaurant has catered clambakes ever since the 1920s and hosted 1,100 just last year.

In addition to fried clams, steamers and boiled lobster are the most popular menu items, says Woodman.

Ocean Crest Seafoods in nearby Gloucester supplies Woodman’s with its whitefish, and local diggers and lobstermen provide its shellfish.

Being included in "50 of America’s Best" should give business a boost. Regardless, "it looks like it’s going to be another good year," projects Woodman.

Forbes FYI staff compiled "50 of America’s Best" using no particular procedure or analysis. The cover story can also be found on the Internet at www.forbes.com. – S.H.

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SUPPLY

Seafood trade deficit jumps again
Imports top exports by $7.1 billion last year, for 16 percent greater gap

The U.S. seafood trade deficit reached a record-setting $7.1 billion in 2000, rising 16 percent over 1999’s $6.1 billion deficit, according to Seafood Market Analyst (at www.seafoodre- port.com).

The value of U.S. imports rose 12 percent, to $9.9 billion. U.S. exports increased slightly, to $2.83 billion.

The latest trade figures reveal a continued trend of record-breaking seafood trade deficits. The gap between imports and ex- ports has doubled since 1995.

The greatest import increase was in shrimp and prawns, up 20 percent, and farmed salmon and trout, which rose 16 percent.

The import figures reflected the white-spot-virus’ decimation of shrimp farms in Ecuador, one of the biggest supply problems of 2000. Ecuadoran shrimp imports dropped 62 percent, but added imports from other countries, especially Vietnam (up 95 percent), China (up 104 percent) and Guyana (up 51 percent), made up the difference.

Canada continues to be the leading exporter to the United States, dominating in the lobster, crab and finfish categories. Thailand is second, leading the shrimp category, and China is third, with groundfish. Chile claims fourth place with salmon and trout exports.

U.S. seafood exports rose 1.5 percent from 1999. Exports to China grew by 89 percent, and exports to South Korea increased 25 percent. Japan and Canada are also among the countries importing the greatest amounts of U.S. seafood products. – L.D.

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OFF THE SHELF
Dungeness crab gets its due

Good things really do come in small packages. Nancy Brannon’s pocket-sized book "All About Crab: The Crab-Lover’s Guide to Dungeness" contains everything you’d ever want to know about the celebrated West Coast crustacean – from catching to eating. The 111-page book has much to offer both aficionados of the sweet-tasting Dungeness crab and those looking to jump on the bandwagon.

Brannon, who operates the Crabby Gourmet Culinary School in Florence, Ore., is a well-shelled author. The collection of recipes in the "Crab Lover’s Guide" is impressive and covers all courses, from soup to nuts. Many recipes offer ethnic twists on familiar favorites like chowders, melts, cakes and salads. Nutritional data are given for every recipe.

While the book’s focus is recipes, Brannon in- cludes preparation information – proper storage, how to clean cooked Dungeness and general nutritional facts.

Those who prefer to take a more active role in obtaining their food can learn how to catch, sex and size their own Dungeness crabs.

"All About Crab" is available for $6.95 (not including shipping and handling) through Con-Amore Publishing at (541) 997-4050 or by e-mail at crabby@harborside.com.

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AQUACULTURE

Wisconsin is looking to augment perch and trout farming with tilapia
Industry, academia join forces to operate $3 million aquaculture facility

Tilapia from "America’s Dairyland"? A state-funded aquaculture facility slated for completion in 2003 may catapult Wisconsin’s $15 million fish-farming industry beyond rainbow trout and perch.

Raising St. Peter’s fish for commercial use is just one of the many possibilities fish farmers and scientists plan to examine at the Red Cliff Aquaculture Demonstration Facility.

Its main purpose is to help new fish farmers get off the ground and veteran fish farmers overcome challenges they may face, says Ron Johnson, vice president of the Wisconsin Aquaculture Association and chairman of the ad hoc committee overseeing the $3 million project.

"The focus is on increasing production and doing better with the species we already raise," says Johnson, who owns a trout farm in Iron River. "But we’ll certainly leave the door open to other possibilities."

Today, Wisconsin fish farmers raise primarily rainbow trout and perch for human consumption. But the state’s aquaculture industry is projected to grow 10 percent annually over the next several years, according to the state Department of Agriculture, Trade and Consumer Protection.

The new facility, which will be jointly operated by the University of Wisconsin-Superior and the Red Cliff Band of Lake Superior Chippew, will boost the industry’s growth, says Johnson.

Construction of the 40-acre facility is scheduled to kick off next year. When finished, it will include a library, classrooms, laboratories, raceways, recirculation systems, rearing ponds and wastewater-settling ponds.

The steering committee is asking the state for another $2.2 million for 2002-03 to get the facility up and running and hire staff. – S.H.

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