« October 2012 Table of Contents
What's in Store: Parallel proteins
Rising commodity costs help seafood compete with beef and poultry on health and price
By Christine Blank
October 01, 2012
Seafood retailers have become experts at adapting their business to the changing economy. Over the past three years, they have slashed costs, increased the value of what they are offering and focused on purchasing fresh, quality seafood.
These traits should help supermarket seafood departments and fish markets compete as commodity and fuel prices rise again this fall. The U.S. drought this year significantly impacted crops such as corn and soybeans, so beef and poultry prices are expected to rise as a result. Higher fuel and transportation costs are also expected to wreak havoc on wholesale seafood prices. Overall wholesale food prices have risen 1.4 percent in the past 12 months, according to the Bureau of Labor Statistics, and are expected to increase 2.5 to 3.5 percent through the end of the year, according to U.S. Department of Agriculture estimates.
Fortunately, seafood retailers that have remained competitive on price and offerings will be able to show shoppers that seafood is a better value than meat in some cases — and is also a healthier option.
“With beef prices going up, seafood becomes a more cost-effective alternative. We have all kinds of options that are less expensive,” says Dan Humphrey, seafood director for Highland Park, Ill.-based Sunset Foods, which operates five stores. However, instead of competing with chains such as Walmart on price, the upscale retailer has found success with sourcing quality seafood and training its employees on how to talk to shoppers about seafood.
“We need to be like the old-time fish market. We are selling quality and knowledge and we have a very educated clientele,” says Humphrey. Sunset sources directly from family fisheries and recently started a Gulf seafood program. “After the BP oil spill, we backed off from anything from the Gulf because of people’s perceptions. Now we are getting back into it with snapper, grouper, swordfish and tuna,” says Humphrey.
Lawrence Duplantis, the meat, seafood and deli director for New Orleans-based Robert Fresh Market, which operates three stores, agrees that shoppers may look to seafood as meat prices rise this year. “With the rising beef prices, people will come looking for a better value, so they may look at species like catfish and tilapia,” says Duplantis.
Still, Robert Fresh Market has faced rising wholesale seafood costs and pressure on margins, like most other seafood retailers. “There has been some softening on our margins because of the crazy market where we are at,” says Duplantis. For example, farmed crawfish is priced around 40 percent higher this season than last, but Robert Fresh Market had to keep its prices low to compete with several supermarkets and supercenters in New Orleans.
More shoppers are moving to seafood away from meat but not because of higher meat prices, according to Scott Nettles, director of meat and seafood for United Supermarkets in Lubbock, Texas. “I think the shift will be due to health concerns more than pricing,” says Nettles. In fact, United Texas’ seafood department sales have risen around 7 percent this year, compared to last year, while volume has climbed 12 percent.
To appeal to shoppers looking for value, United has added more private-label frozen seafood, bulk bags and frozen fish portions over the past year. This summer, the chain that operates the United, Amigos and Market Street brands also introduced private-label “Zero Latitudes,” 12-ounce 91/110 cooked shrimp and 61/70 raw shrimp. “We are seeing Walmart come in at a cheaper price point for shrimp, so we added the 12-ounce bag that retails at $4.99 each,” says Nettles.
Despite a 3 or 4 percent increase in overall wholesale seafood costs, United has also been able to increase sales with circular advertising and educational opportunities at its seafood counters.
“We suggestive sell, and offer guests solutions. That’s where the value-added seafood has really grown: If you realize that it takes only 6 minutes to cook salmon and it is easy to do with these types of condiments [it helps grow our sales],” says Nettles.
While many chains are feeling price pressure, some Winn-Dixie stores are not worried about price increases in the fall. “The price is what it is, and everybody is in the same situation. Also, many of our stores are in a lot of tourist spots, where people are not as concerned with the pricing [as in non-tourism cities],” says Tom Waltimire, seafood-sourcing specialist for Winn-Dixie, based in Jacksonville, Fla.
While Winn-Dixie has experienced the same price increases as other retailers, Waltimire says that smart purchasing and promotions have helped boost sales.
“We recently ran a steelhead trout promotion, and the price we ran was better than what you would see fresh [wild] salmon at,” says Waltimire.
Winn-Dixie has also not reduced the number of seafood species in its case as a result of price increases.
Instead of consumers buying less seafood at retail outlets, Waltimire believes they will be eating less seafood at restaurants this fall. “Restaurants are going to have to raise their prices as well, and people will be dining out less,” says Waltimire. Contributing Editor Christine Blank lives in Lake Mary, Fla.
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