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Top Story: Independents help drive demand for seafood
Specialty retailers can be nimble in both sourcing and merchandising
By Lisa Duchene
July 01, 2005
Where is the best place to buy a spectacular piece of fish to serve dinner guests? Most often it’s at the local specialty foods store.
About one-third of consumers buy their fish from a specialty retailer, according to Mintel International Group, a Chicago market research firm.
Specialty retailers set the bar when it comes to selling seafood, particularly high-end, top-quality products, and play a critical role in the seafood marketplace. Rarely the cheapest source, they instead compete on quality, variety, consumer education and customer service.
For our annual salute to seafood buyers, in this issue, SeaFood Business magazine honors specialty retailers by examining their role in the seafood marketplace and profiling two up-and-coming businesses (See profiles page 22 and 24)
Specialty retailers are often independently owned, but companies like Wild Oats and Whole Foods have grown into large, publicly held chains. Typically, perishables are the strength of specialty retailers, but not always. Trader Joe’s, a 200-store retailer with headquarters in Monrovia, Calif., has built its seafood reputation on selling all-natural seafood frozen immediately after harvest.
A specialty retailer is defined by its niche in the market: Natural and organic food at Whole Foods and Wild Oats; Asian foods at 99 Ranch Market in California; high-end, gourmet ingredients and high-quality perishables in the case of hundreds of other specialty food stores around the country. And the retailers can also be a bit eccentric.
“There’s always a story, and there’s always a pedigree,” says Marcia Mogelonsky, senior research analyst with Mintel, who recently wrote Mintel’s report about the specialty food market and contributed to its seafood market report.
The segment is thriving as many specialty retail companies expand. Kowalski’s Market, a family-held company in Minneapolis, on June 8 opened its ninth store and will open its 10th in mid-August, all in the greater St. Paul-Minneapolis area. Kowalski’s bills itself as the source of hard-to-find products and offers an enjoyable shopping experience.
Seafood is a major focus of ours," says Boyd Oase, Kowalski's director of perishables. "[Seafood] can be a big point of difference between you and your competition. At the end of the day, it's [about] determining what your customer base is and what your customers are looking for."
Kowalski's, which has opened two to three stores annually the last three years, invests in staff development and emphasizes high-quality seafood, says Oase. All stores have a 4- to 6-foot self-service case. Six stores have full-service seafood departments. Top-sellers include Copper River salmon for $19.99 per pound in late May, Norwegian farm-raised salmon, 2+ grade yellowfin tuna, catfish, walleye and specialized items like Australian cockles.
The cases often hold four to six different varieties of clams, and each store can special order products for a customer within 24 hours, says Oase.
The staff is trained to educate customers about cooking seafood and answer questions about issues like methylmercury and environmental impact.
"There are so many issues out there that directly affect seafood," says Oase. "I don't know how you could sell seafood without considering yourself a specialty retailer."
Jungle Jim's International Market in Fairfield, Ohio, operates a large seafood department, including a "live harvest" section of tanks full of bass, trout and tilapia. The company is opening a second, 75,000-square-foot store in Oakley, near Cincinnati. The charismatic owner, "Jungle" Jim Bonaminio an eccentric known as the "Wizard of Odd," announced the news April 1 dressed in a full-length blue wizards robe while wearing an iguana on his head.
Citarella, a New York retailer with a reputation for top-quality fish, in early June opened its sixth store, occupying 5,000 square feet in Harlem, a block from the historic Apollo Theater.
Whole Foods Market in March opened a new landmark, 80,000 square-foot store and corporate headquarters in Austin, Texas. Its seafood department features 150 items and on-the-spot shucking, smoking and frying. Clerks toss whole fresh fish to each other, just like the fishmongers at Seattle's Pike Place Market.
Whole Foods reported an 11.5 percent increase in same-store sales for the 28-week period ending April 10, compared to the same period in 2004. Last year, Whole Foods' sales grew 23 percent to just below $4 billion. Same- store sales increased 14.9 percent in 2004. The company now operates 168 stores representing about 5.4 million square feet and has in its development pipeline 59 stores representing 3 million square feet.
A Whole Foods store in Metairie, La., opened in mid-May featuring a 34-foot seafood case, in-house smoker and full-service, sit-down seafood restaurant.
Wild Oats Markets in Boulder, Colo., is opening 10 to 12 new stores this year and remodeling nine. The company predicts same-store sales of 3 to 4 percent for the year. In 2004, Wild Oats opened 10 new stores and boasted annual sales topping $1 billion.
All the things that specialty retailers use to keep up with and even surpass their competitors quality, service and customer education are effective strategies for selling seafood.
"If you've got someone behind the counter who knows what they're talking about and is comfortable discussing different species of seafood and is able to convey that to the customer, the customer walks away more confident," says Mark Jones, retail marketing representative for the Alaska Seafood Marketing Institute.
Larry Andrews, ASMI's retail marketing director, points out that specialty retailers are often more strict about how their seafood departments are set up and broken down and typically have tighter product specifications than conventional supermarkets.
"[Specialty retailers] gain a reputation as being the source for quality seafood," he notes.
Since most specialty retailers are small, they can be selective about their fish and nimble in their merchandising, says Laura Foley Ramsden, co-owner of M.F. Foley Fish in Boston and New Bedford, Mass.
"The specialty retailers that we interact with have a very high bar when it comes to quality," says Ramsden. "They have a very loyal customer base that relies on them for a consistent seafood product 52 weeks a year."
Specialty retailers are well-positioned to overcome the top challenge to selling fish: consumer confusion.
Mintel analyzed data from two surveys, a 2004 survey of 1,000 adult consumers and a 2003 survey of 25,398 adult consumers. More than one-third of respondents said they wish they were more adept at selecting seafood, and more than one-quarter said they would buy more if they knew how to prepare it properly.
"These numbers show that there is a great deal of consumer hesitancy over the quality and type of fish they are buying," says Mintel's report.
When asked where they purchase their fish, 60 percent said a supermarket; 4 percent said a warehouse club; 14 percent said a fish market; 19 percent said other; and 14 percent said they were unsure. Mintel's Mogelonsky says "other" is probably a specialty store; therefore a combined 33 percent of consumers probably buy their seafood at a specialty retailer.
As specialty stores grow, traditional supermarkets are losing market share, mostly to club stores and superstores like Wal-Mart that have the purchasing power to beat them on price.
In its Competitive Edge Newsletter, Bishop Consulting in June 2004 estimated sales at traditional grocery stores account for only 56 percent of the total grocery and consumables market.
Such market dynamics force traditional grocers to specialize in order to compete, often putting greater emphasis on their perishables.
"Unless you're one of the top five [supermarket companies] in this country, you'd better find another angle for the customer," says Kevin Coupe, who covers food retailing as the "content guy" for Web site MorningNewsBeat.com. "Whatever it happens to be, you'd better find that one thing, because you cant be the lowest price. Wal-Mart has that nailed. They've got it."
In April, Safeway announced it was repositioning its brand as the source of superior perishables and service. Its strategy includes a $100 million ad campaign called "Ingredients for Life." New and remodeled stores follow a "Lifestyle" format with a warm decor, large selection of natural and organic foods and sushi bars.
There were 142 Lifestyle stores at the end of 2004. This year, Safeway plans to add 300 more.
Plitt Seafood, a Chicago specialty seafood distributor, has helped regional grocers make over their seafood departments. Bob Sullivan, company president, observes, "Some stuck with it. Some said, 'We have to go back to the old ways because its too expensive. People won't pay that much for good fish. Yet, they do every day at all the specialty places"
As conventional grocery stores look to specialize to compete with Wal-Mart and club stores, specialty retailers face greater pressure to stay in peak form.
Mohammed Jeddy, seafood buyer for Fiesta Mart, a 50-store chain specializing in ethnic foods that carries 150 seafood SKUs, constantly checks in on Fiesta's stores, the competition and, most importantly, on his customers.
"It's not just in the office, it's in the field, in the neighborhood and seeing what the customer buys," says Jeddy.
At one Fiesta Mart, the neighborhood shifted from predominantly low-income to higher-income, says Jeddy. In response, he added a large lobster tank and products like Dungeness crab, tuna, swordfish and halibut to the store's product mix.
"Specialty stores have to carry what the customer needs and wants, when the customer wants it" Senior Editor Lisa Duchene can be e-mailed at email@example.com