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What's in Store: Penny wise

Dollar stores find success with small portions of frozen seafood

Seafood for a buck? Quick-grab items like IQF fish fillets fit the dollar-store price tag. - Photo by Christine Blank
By Christine Blank
September 01, 2012

The typical consumer heading out to the store for their weekly grocery-shopping trip may not think of the local dollar store for seafood, but that is changing rapidly. Over the past three years or so, most dollar-store chains have added refrigerated and frozen sections to their stores, featuring a variety of packaged seafood items.

Take the 10,000-store Dollar General chain based in Goodlettsville, Tenn. A recent visit to one of its larger stores turned up several frozen seafood items, including Gorton’s 18-count fish sticks for $4.15 per box, 12-ounce SeaPak Popcorn Shrimp for $4.50 each and 10-ounce SeaBest cooked shrimp (from Beaver Street Fisheries) for $6.35 each.

Shoppers are finding similar frozen seafood options at the 4,400-store Dollar Tree chain, presented in a different way. Since Chesapeake, Va.-based Dollar Tree primarily sells items for $1 each, its frozen seafood portions are small. At a central Florida Dollar Tree, Ocean Market’s 4-ounce pollock and wild flounder fillets were priced at $1 each. Small bags of breaded fish sticks and popcorn shrimp were also offered for $1, along with Great American Seafood’s individually packed 4-ounce tilapia fillets, Tastee Choice’s 4-ounce cooked salad shrimp and 4-ounce packs of LaMonica breaded clam strips.

The dollar-store chains have found a formula that seems to be working. They have benefitted not only from growing consumer interest in saving money, but also from consumers who live in “food deserts” and need to pick up a few grocery items quickly. 

In fact, Dollar General executives attributed the company’s strong third-quarter earnings to sales of “consumables,” along with seasonal and electronic products. Consolidated net sales for the quarter ending May 17 soared 11.5 percent to $1.72 billion and comparable store sales grew 5.6 percent. In fiscal year 2011, consumables (cleaning products, beverages, health and beauty products) accounted for 73.2 percent of the chain’s total sales.

Late last year, Dollar General also announced plans to open 40 stores that feature fresh meat and produce in 2012 based on the performance of 25 Dollar General Markets that opened in 2011. 

“Because the product mix includes more consumables, the margin percentage is somewhat lower, but the raw dollars from the high volume are very impressive,” said David Tehle, executive VP and CFO of Dollar General on an investor conference call. Dollar General Markets generate average sales of $4 million to $5 million per unit, versus $1.4 million at traditional Dollar General stores. 

Similarly, the 7,200-store Family Dollar chain is expanding its consumables selection and reported a total net sales increase of 9.6 percent to $2.36 billion in its third fiscal quarter. Comparable store sales jumped 5 percent in that time period. 

Despite the growth of frozen seafood in dollar stores, many seafood manufacturers are missing out on a potentially lucrative market, according to a food industry consultant. 

“There is a stigma around dollar stores. Many manufacturers think that you have to have that one big sale,” says Steve Johnson, founder of Foodservice Solutions. However, with many dollar-store chains consisting of 7,000 or more stores each, the retail concept outnumbers grocery stores in the United States. 

Manufacturers need to be willing to change their product sizes to fit the format. “The U.S. Census shows that 50 percent of all Americans over the age of 18 are single. Trident Seafoods, National Fish, Margaritaville Foods, P.F. Chang’s, and other manufacturers need to re-merchandise their $10 box of individual portions sold in grocery stores and sell single portions into dollar stores,” says Johnson. 

Twelve-ounce Popcorn Shrimp and 8-ounce Butterfly Shrimp from SeaPak Shrimp & Seafood Co. are also available at Dollar General.  “The dollar channel provides products at a reasonable price, which has helped drive traffic,” says Daryl Miller, senior marketing manager at SeaPak. 

In the supermarket channel, Trader Joe’s is already successful with IQF fish portions geared at individuals, according to Johnson. “Dollar stores need to remember the family size today and that everyone in the family doesn’t eat the same thing” says Johnson.

Tastee Choice has sold its wild salad shrimp in Dollar Tree stores since early 2011, but President Jose Thomas is unsure whether the company will continue selling to the chain. “The price of shrimp worldwide has gone up, and Dollar Tree may not be able to sustain that increase,” he says.

Tastee Choice’s plant is in south India, and producers there are having a difficult time getting the small salad shrimp because it is more profitable to go after larger shrimp. “We requested a slight price increase to Dollar Tree to combat increasing fuel prices worldwide. They will let us know if they can keep the product on their shelves for $1,” says Thomas. 

Contributing Editor Christine Blank lives in Lake Mary, Fla.

August 2012 - SeaFood Business 

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