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Top Story: Shrimp, private label, heat-and-eat fuel growth

Frozen products see significant rise in sales to foodservice, where labor costs and storage space are considerations

Lisa Duchene
September 01, 2005

What’s in your freezer? Odds are that even seafood-savvy folks who relish a meal of the freshest fish keep at least a few frozen seafood products in their home freezer: certainly some shrimp, probably salmon burgers and maybe even a heat-and-eat seafood soup.

Increasingly, frozen seafood is making its way into America’s home and restaurant kitchens and shrimp is leading the march.

For the last five years, the frozen-seafood category has enjoyed strong growth at both retail and at foodservice. Retail sales of frozen seafood, at least a $1.6 billion market, grew 18 percent from 2001 to 2004, an average annual growth rate of 4 to 7 percent. In the same period, retail sales of frozen shrimp grew 37.3 percent, while sales of frozen seafood excluding shrimp grew less than 1 percent.

But the growth spurt may have stalled. So far this year, frozen-seafood sales for the 52 weeks ended June 12 are ahead 1.6 percent from the same period last year, according to Information Resources Inc. (IRI), which tracks sales at supermarkets nationwide (excluding Wal-Mart).

At foodservice, frozen seafood sales grew an average of 3 percent, and frozen shrimp sales grew 5 to 6 percent annually for the last five years, says Westport Consulting in Lake Forest, Ill.

“Up until this year, I think [frozen seafood growth] has been really remarkable,” says Howard Johnson, a seafood industry consultant in Jacksonville, Ore.

The category could be leveling off, he says, “or perhaps it’s taking a breather.” One factor in the category’s future growth will be the combination of a strong brand like Gorton’s with the popularity of shrimp, America’s favorite seafood, now that Gorton’s has acquired King & Prince Seafood.

Only strong growth is ahead, predicts Mintel International Group, a Chicago firm that published a 2004 report on the seafood market.

Frozen-seafood sales will increase 53 percent from 2004 to 2009, about 8 to 9 percent annually, predicts Mintel, riding the same trends fueling the entire seafood market: a growing seafood-loving U.S. Hispanic population and U.S. consumers’ growing interest in health.

Frozen shrimp, private labels and heat-and-eat products have been the keys to growth in the frozen-seafood market.

Frozen-seafood sales to the foodservice segment have been strong across all product categories and across all segments of the foodservice market, says Diane Gray, director of marketing research for Westport Consulting.

“Most of these foodservice operations are set up so that the freezer is the center of protein storage, and they just don’t have the refrigerated capacity,” says Gray.

As in the retail segment, prepared frozen seafood — whether a pre-marinated fish fillet or sauce-enrobed shrimp — dominates foodservice sales growth, because it saves restaurants labor and space, says Gray.

“Manufacturers have come a long way in the different processes they use. [Prepared frozen seafood] enables an operator to deliver a product to the end-user that is standardized in terms of size and portion and how it’s presented,” she says. “It just eliminates a lot of variables in the preparation process.”

Shrimp, crab cakes and catfish fillets, nuggets and fingers have all grown at least 6 percent annually over the past five years at foodservice.

“We’ve been seeing growth for several years,” says John Waters, director of marketing for King & Prince Seafood in Brunswick, Ga., which produces shrimp for the foodservice market. “The shrimp category has become increasingly popular as more and more chains want to expand their menus and get into seafood. comShrimp is the most popular seafood and the easiest way to do that.”

U.S. tariffs placed early this year on imported shrimp from six Asian and South American countries did little to disrupt the shrimp supply or market, says Waters. The only effect was fewer spring shrimp promotions among restaurant chains due to market uncertainty during the planning stages, he says. Nonetheless, “I would be surprised if shrimp had lost share,” says Waters.

Pre-cooked, heat-and-eat shrimp — whether pre-seasoned, pre-sauced, pre-grilled or pre-marinated — leads the pack in the frozen-shrimp category, says Jamie McKeon, VP of marketing for Rich-SeaPak in St. Simons Island, Ga., which sells to the foodservice and retail channels. With a 5.1 percent share of the frozen retail shrimp market, according to IRI, SeaPak is the top frozen-shrimp brand and leading vendor behind private-label frozen-shrimp products. In the retail value-added shrimp segment, the company has a 57 percent market share, she says.

“Unbreaded value-added is a new market that’s emerging,” says McKeon. “There has been a lot of innovation in that category.”

In 1999, the company entered the “non-breaded, value-added” niche with a grilled and marinated shrimp launched first in club stores. Sales took off, more than tripling in five years, she says, but declined to give figures.

The company is testing a citrus-chipotle-flavored “Shrimp and Sauce” product at about 600 Wal-Mart stores, primarily in the western United States. Each 31/35 vannemei is enrobed in a butter-based sauce that melts off the shrimp as it heats and becomes the sauce for the dish.

“Enrobing,” a processing innovation that allows a sauce or glaze to cover individual pieces, represents one less preparation step for consumers by eliminating sauce packets.

“Consumers see [shrimp] as a convenient, versatile protein that’s really easy to prepare,” says McKeon, referring to results of the company’s quarterly consumer focus groups. “They don’t have the fear with shrimp that they do with the other fish products.”

The strength of the shrimp market has not been lost on Gorton’s Seafood of Gloucester, Mass., the top-selling brand and vendor in the $717.4-million frozen, non-shrimp seafood category. Gorton’s is bringing its powerful brand to the frozen shrimp market with its July 1 acquisition of King & Prince, which is looking to expand its retail business.

The two companies developed “Shrimp Temptations,” Gorton’s first entry into the non-breaded, value-added shrimp category. Gorton’s is testing the product at retail stores in the southern and western United States. About 20 peeled, raw 31/50 tail-off vannemei are enrobed in either a scampi or lemon-butter sauce and sell for a suggested retail price of $6.99. The product, prepared in the microwave or on the stovetop in less than 10 minutes, is designed to stand alone or atop rice, pasta or salad.

“We think this is the first step in transitioning shrimp to an ‘everyday indulgence,’” says Judson Reis, Gorton’s VP of marketing. “Shrimp has been on a tremendous growth curve, particularly in the unprepared segment, and we think the next phase of that is broadening the user base, taking what is now still a special-occasion food and making it a great Tuesday-night dinner,” says Reis.

Gorton’s is the only frozen-seafood company in recent years to have carved out of the frozen seafood market a greater share than private label. In 2004, Gorton’s held a 25.9 percent market share, topping private label’s 18.9 percent share.

Private-label products have posted the most consistent and strongest gains in the last few years, with a 27.6 percent sales gain in frozen shrimp and 22.7 percent gain in non-shrimp frozen seafood.

Last year, private-label growth slowed to 10.2 percent in the non-shrimp category and 6.3 percent in frozen shrimp.

The frozen-shrimp category may be ripe for a powerhouse brand. In 2004, private label held a 54.9 percent share of the frozen shrimp market. The next four top-selling frozen-shrimp vendors and brands — Aqua Star, SeaPak, Singleton and Contessa — have all traded spots in the last few years. None of the companies has seen a market share greater than 6 percent.

In the first six months of 2005, Tastee Choice Shrimp, a brand of the Choice Trading Co. in India distributed by Choice Canning in Edison, N.J., climbed into the No. 4 spot in the frozen-shrimp retail market with 115 percent growth in sales over 2004.

Frozen seafood is an expensive category to crack, observes industry consultant Howard Johnson. Companies must buy their way into the case and, once there, fight to hang onto their spot.

“It’s very hard to stand out in the frozen-seafood case. You’ve got nanoseconds to get the consumer’s attention. It’s hard and it’s not cheap,” says Johnson.

Besides prepared shrimp, Gorton’s sees mainstays like breaded and battered fish in the future of frozen seafood.

“We continue to believe there is a lot of opportunity for smart innovation in [breaded and battered] and a lot of growth ahead for us in that segment,” says Reis.

In summer 2004, Gorton’s introduced beer-battered fillets that sold better out of the gate than any single-SKU Gorton’s introduction in the last five to six years, says Reis. The fillets are priced at $5.49 for an 18-ounce family-size package.

By this fall, Gorton’s new beer-battered tenders are expected to appear in grocery stores at $5.49 for a family-size package. Breaded and battered seafood, newly reformulated to remove trans fats, is a popular mainstay, says Reis.

Another strong trend, says Westport Consulting’s Gray, is ethnic flavor profiles like Asian, Latin and fusion — a Mexican-seasoned, shrimp-filled egg roll, for example.

Phillips Foods is jumping on both that trend and the huge appeal of shrimp with the recent launch of its Asian Rhythms brand at foodservice and retail. The line is hand-made in Asia with authentic Asian recipes and ingredients. Foodservice products include steamed and fried dim sum, spicy coconut-shrimp soup and hot–and-spicy shrimp soup. The steamed dim sum include different shapes of filled dough, like a beggar’s purse stuffed with shrimp and one stuffed with a seafood mix of cuttlefish, crab, whitefish and shrimp.

Several products hit retail in late summer: hot-and-spicy shrimp soup, spicy coconut-shrimp soup, red and green curries with shrimp and rice, fried rice with crab and shrimp and shrimp pad Thai. They retail for $4.99 for two servings.

Consumers seem to be getting more comfortable with seafood in a variety of frozen product forms, says Reis. It’s up to the industry to continue to offer more convenient options, he adds.
 

September 2005 - SeaFood Business 

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