« September 2011 Table of Contents
Special Feature: Processing equipment
Equipment manufacturers keep on top of worldwide challenges, trends
By Melissa Wood
September 05, 2011
Even before the Great Recession came along, U.S. seafood processors weathered tough times. For many years, the main story in processing was the shift of big operations from the United States to Asia, particularly China. It was a shift caused, in part, by a labor force so inexpensive that companies saved money by shipping fish caught in domestic waters halfway around the world for processing and back again to be sold in the United States.
Recently there has been another shift in the seafood processing industries overseas. Rising prosperity has brought with it growing labor costs in Asia and an emerging middle class not as eager to stand in a cold fish factory, performing the same monotonous task all day, like peeling shrimp. Consequently, those increased labor costs have created an overnight demand for equipment.
“Our business is booming, and there’s a greatly increased demand for our equipment in Asia and South and Central America,” says Frank Heurich, president of Gregor Jonsson, a manufacturer of shrimp-peeling equipment in Lake Forest, Ill.
In India, demand for equipment is also being fueled by higher production forecasts, says Heurich. In the past year, aquaculture facilities have been importing broodstock for vannamei, which grows faster than black tiger shrimp.
“Asia’s particularly interesting because labor costs have traditionally been pretty low,” says Heurich. To comply with that demand, Gregor Jonsson doubled its production this year, and will double it again next year.
Two of the company’s recent innovations respond to an industry demand for more value-added products, including a new model that peels the shrimp but leaves the tail and vein intact, and another that will peel the shrimp and make several different styles of butterfly cuts. This equipment is not all going abroad, either.
“We have people waiting for equipment in the United States, but the big processors are elsewhere,” says Heurich. “We still have processors in the United States who are expanding, but it’s small compared to our markets in other countries.”
Business may not yet be booming for U.S. processors, but it is at least getting better. In the biennial SeaFood Business processing survey (see results here), 62 percent reported higher sales in 2010 compared to 2009. Most likely those numbers would have been higher if it had not been for the Deepwater Horizon oil spill, which shut down the Gulf of Mexico and its seafood processing industry for most of last year.
Nobody’s breathing a sigh of relief yet, however. Only 35 percent reported that they felt the economy is in the recovery process, while 65 percent felt that it is still struggling.
“I think that people are in survival mode right now,” says Denny Smith, general sales manager-North America for Marel, a manufacturer of fish processing equipment and systems that is headquartered in Gardabaer, Iceland. “There are very finite parts of the (U.S.) industry that are growing. Obviously if you’re not being a little bit innovative you’re going to go out of business regardless.”
While their counterparts in Asia grapple with increased labor costs, U.S. processors cite rising food prices as the biggest challenge facing their industry. Almost 50 percent of respondents said it was one of the three biggest challenges facing the seafood industry, followed by complying with government regulations and sourcing/product availability.
Smith says most of the processors he talks to are looking for ways to cut costs internally. “Our customers for the last couple of years have been heavily focusing on cost reduction in terms of raw material costs and labor costs — those being the two real factors that are determining whether or not these businesses are profitable and whether or not they stay in business, especially the smaller processors out there,” says Smith.
With margins tight, Smith says one of his company’s top-selling products has been the Innova software program, which monitors production in real time. So, for example, if an employee on a trimming line isn’t keeping up a normal pace one day, his or her manager can speak to them immediately about it before a dip in production costs the company.
“[The manager] can see that in real time and he can make adjustments during the day,” says Smith. “Maybe it saves him 500 or 600 pounds a day in terms of yield. That finished product might be worth $4, $5, $6, $7, $8 a pound. It’s quite substantial on a day-to-day basis.”
With a territory that includes the United States and Canada, Smith has a front-row seat to current trends in the domestic processing industry. Larger companies, he says, have been focusing on more value-added, high-volume products, such as fillets and breaded or battered product lines. The smaller to mid-size companies are surviving by finding a niche in the retail market where they become very good at one thing, such as smoked salmon.
He sees growth primarily in Alaska, where for the last 10 years there have been efforts to shift production from that of a commodity product to more value-added.
“There is a giant marketing potential for saying the seafood is 100 percent produced in Alaska,” he says.
Two years ago, none of the respondents to SeaFood Business’ processing survey mentioned traceability, but now it tops the list of product innovations that customers are asking for. Following the product chain is easy for Copper River Seafood. The company has 14 tenders that buy wild Alaska salmon right off the boats in Prince William Sound.
“It’s coming right out of the water for us,” says Pip Fillingham, one of the company’s founders, the manager for its Cordova plant and a permit-holding fisherman. “We not only have tenders, we have fishermen come right straight to our dock. You can’t trace it much further than that, shorter than having a tag on a fish.”
Once you go beyond the water, he explains, that traceable label requires an electronic trail with UPC codes and documentation of lot numbers and production dates. Retailers like Costco, he says, will visit their facilities not only to check for traceability, but also to make sure that workers are being treated fairly.
Fillingham says the company also has a directed effort toward new product development. Since the salmon season lasts only four months of the year, from May 15 to Sept. 15, they can’t depend on the fresh product to sustain the company and its workforce.
“We’re doing a lot more freezing with the intent of turning that product into specific forms,” says Fillingham. “Frozen wild salmon is better than a fresh farm salmon.”
New products have also helped Tonka Seafoods in St. Petersburg, Alaska. Wendel Gilbert, who started the custom processing company in 1985, says that the company took on surimi production for a California company last year. He’s also found a niche in the cruise-ship market, selling to them sides of king salmon with the skin removed and 5-pound bags of rockfish and halibut.
As a small processor, the company can respond to specialty markets, but it can be a challenge to compete against the larger companies. Gilbert says he is one of the last independently owned custom-processors, as most have been bought up by bigger Seattle-based companies like Trident Seafoods and Ocean Beauty.
“You’re trying to market at the same price and your expenses are higher and your cost of operations are higher because you’re a small operator,” says Gilbert. “It’s an everyday struggle.”
By taking on some bigger projects this year, Gilbert was able to double his summer workforce to a dozen. However, Gilbert says it is unlikely he’ll be able to expand his plant because of the lack of available financing for construction.
“It’s tough for us because we’re small, we’re using every available inch of space,” says Gilbert. “The banks aren’t lending any money for construction at all.”
Ironically, the weak dollar has helped some domestic processors. Gulf shrimp processor Richard Gollett says decreased buying power for imports may have given his business a boost this year.
“I think things are better. The production in the Gulf seems to be up right now,” says Gollett.
As the fourth generation of his family in the seafood-processing business, Gollett chuckles when asked about recent trends in an industry he knows so well. Change is a way of life, he points out, when your business depends on a wild animal.
“Our industry changes every year, it’s never the same,” says Gollett, who employs about 75 people at the Golden Gulf Seafood shrimp-processing facility in Biloxi, Miss. Unlike processors of pond-raised shrimp, he says, “we have to harvest what’s there. That’s one of the biggest challenges of our industry. Every day is different in our business so we have to stay on our toes.”
Last year, of course, was much different for Gollett and other Gulf seafood processors when the Deepwater Horizon oil spill closed shrimping and other fisheries. Gollett says that those shrimpers who were still in the business — he buys direct from about 50 boats — made it through to this year by working on the oil spill cleanup (though that was a fleet already reduced by about 75 percent before the spill because of economic woes). So 2011 is at least better than 2010.
“That’s a no-brainer,” says Gollett.
Email Assistant Editor Melissa Wood at email@example.com