« June 2009 Table of Contents
Staying on the shelf
Higher prices deter frugal consumers from choosing
seafood over other proteins
By John Snyder
June 01, 2009
In the midst of an economic downturn, consumers find
themselves in somewhat uncharted waters as they struggle to
prioritize spending and adopt a new frugality. In light of
lay-offs and cutbacks, discretionary spending seems to be at an
all-time low as the global recession affects every strata of
the economy. U.S. restaurant sales were down about 20 percent
for the first quarter of 2009 and foodservice seafood
distributors are feeling the pinch.
While many in the industry have assumed that consumers are
buying seafood at retail instead of dining out, experts who
sell to into retail channels say that's not necessarily the
As families work to trim their budget, many people agree
that dining out is one of the first places to economize and
higher-priced meals like seafood are usually the first to
The same seems to be true in the retail sector, where
consumers' discretionary spending is taking a back seat to
filling a household's basic needs. Supermarket seafood sales
enjoyed a 7 percent increase between 2007 and 2008. But
according to research by the Perishables Group, an independent
consulting firm serving retail clients in the fresh food
industry, fresh seafood sales fell in 2008 and even worse,
seafood was the only fresh department posting negative sales
numbers for the period. Fresh seafood sales declined 1.6
percent in the fourth quarter of 2008 while produce, meat,
bakery and deli grew anywhere from 2.3 percent to 5.4 percent
of store sales.
"There's an interesting psychological effect happening right
now. It's permeating every consumer segment. People think that
they have to hunker down, no matter what their socioeconomic
status," says Tom DeMott, managing partner and COO of Encore
Associates, a consumer-goods advisory firm in San Ramon,
Discretionary spending is taking the hit, whether it's
eating out or in retail purchases of high-ticket seafood
"A seafood meal lost at a white tablecloth restaurant does
not necessarily translate into a retail seafood sale -
unfortunately it is probably a lost seafood meal," says
Richard Enna, a sales executive with Eastern Fish Co. in
Teaneck, N.J., a global importer and supplier to foodservice
and retail sectors says, "People are eating out less, and when
they do they are opting for species like tilapia."
Enna, who specializes in retail accounts for Eastern, says
shrimp drives sales in retail as it does in foodservice. In
general, seafood is still perceived as a luxury food, even if
the price tag is reasonable.
"It is something that is saved for weekends, holidays and
special occasions," he says.
A year ago, largely due to the National Fisheries
Institute's "Eat Fish Twice a Week" campaign, according to
Enna, retail customers were buying shrimp on a more regular
basis despite higher prices. Since January 2009, they have not,
despite prices being down.
"Two years ago it was OK to eat shrimp twice a week, now
people think twice," adds Enna.
Shrimp represents 60 percent of all retail seafood sales,
and if shrimp is not selling, the margin has to be made up
somewhere in the display case or elsewhere in the store.
Shrimp sales also slowed as retailers began this year with
excessive inventories that had to be blown out because of the
pressure from banks to reduce inventory, says Enna. Add to that
the fact that overseas suppliers were not lowering their prices
due to unfavorable exchange rates, and shrimp, especially the
large sizes, did not move.
Many retailers make their money by "grabbing the shrimp
margin," which can run between 48 to 52 percent (example:
31/40-count cooked shrimp purchased at $4 per pound and
retailing at $9.99 per pound), says Enna. All the while, fresh
fish are being sold at a 28 to 32 percent margin, so $9.99 will
not translate into more sales.
Slow salmon sales due to the collapse of salmon farms in
Chile has also contributed to retail seafood department
problems, notes Enna.
"Salmon was a big seller, but when Chile collapsed, fish
went to $7 per pound for fresh fillets (a year ago), slowing
sales," says Enna, referring to the nation's salmon farms'
ongoing struggles with infectious salmon anemia.
Since October 2008, seafood priced between $4.99 and $7.99
will sell, but above that sales fall flat, says Enna.
Despite all of the bad news, Enna adds that Lent and Easter
were a bit of a turnaround for retail sales earlier this year.
However, retail sales spiraled downward once again with the
news of continued layoffs and reports of corporate
"Who wants to treat themselves to shrimp when they face
layoffs - again, perception and the psychological effect of the
downturn - even if they have the money," says Enna.
"On the restaurant side, everything still seems to be on
hold until consumers regain their confidence in the
Easter sales rebound
Lenten retail sales were also good for Bristol Seafood, a
primary processor of haddock, pollock, cod and scallops in
Portland, Maine. Larry Lindgren, the newest member of Bristol's
sales and marketing team and a veteran retail account manager,
says sales flattened after Easter. Pollock prices shot up 50
cents to 60 cents a pound, to around $1.50 per pound, says
In another example of retail seafood buyers switching to
lower-cost product, chain supermarkets that were regular buyers
of 10/20-count sea scallops between $7 and $9 per pound are now
buying far less expensive bay scallops at between $3 and $4 per
pound. Lindgren says retailers are still buying cod, but the
variety of the overall mix has changed to include less
expensive species like pangasius.
The outlook for the summer? Lindgren predicts plentiful
haddock (a result of effective fisheries management) at
attractive prices will bring news-weary consumers back to the
strong in Europe
Cozy Harbor Seafoods, another primary processor in Portland,
is also finding retail sales soft. The company is a major
exporter of coldwater shrimp and lobster and finds the
situation in the European marketplace not much different than
"The plant has been down, idle and waiting for the start of
the lobster season," says Spencer Fuller, manager of Cozy
Harbor's export sales. Foodservice sales are "dead" overseas,
but European buyers are turning toward retail to satisfy their
seafood needs, he says.
"In Europe, retail sales are up in a big way. Most of it is
sold prepackaged and frozen. Retail customers think that there
is value in buying frozen rather than fresh where the added
cost of modified atmosphere packaging (MAP) adds to the cost .
They are buying larger packages of frozen product much like
they do in the club stores [in the United States]," says
The economic slowdown has not just affected the larger
chains and club stores. Specialty retailers like My Organic
Markets (MOM's), a five-unit chain with stores in Maryland and
Virginia, are also feeling the pain. MOM's Lisa DeLima says the
chain's seafood sales were down 10 percent for the first
quarter. Despite the lag in seafood sales, the economic
downturn is less visible at MOM's overall since most of its
customers are upscale and work for the government.
"Folks are still buying seafood on a regular basis and even
requesting products that are harvested from sustainable
fisheries," says DeLima, VP of grocery and marketing.
Things are a bit more challenging for large grocery and
perishable distributors like C&S Wholesale grocers of
Keene, N.H., the nation's second largest food distributor.
"In general, trading is down and seafood sales are not at
the top of the [consumer's] list," according to Jim Wallace, VP
of procurement. "For a long time, salmon has been the driving
force in supermarket seafood sales, but if you can buy sirloin
steak at $4 a pound, well retail customers will go for that
instead of fish."
Retail seafood sales are down as a result of the economy,
notes Wallace, but perishable sales at C&S are up,
especially for fresh fish. The company's frozen seafood sales
are hard to judge at this point because of their fiscal year.
Wallace contends that so many seafood buys are impulsive; even
in Wallace's own home, his family is less likely to make
impulse purchases of
Quality, service build sales
Phil Walsh of Alfa Gamma Group in Miami sees uncompromising
quality as the key to retail success in this challenging
economic climate. Although some consumers are migrating over to
club stores, traditional retail sales seem to be holding albeit
with compressed margins, says Walsh.
"If it's on sale it sells, if not, it doesn't. Given the
choice between a split chicken breast for $1.69 and catfish
fillets for $4.69, customers will always go with the poultry,"
On the bright side, he predicts sales growth for retailers
that lead with high quality. Chains such as Kings Supermarkets,
Fresh Market, Harris Teeter, Giant Eagle and others are
actually showing growth, he notes, but things are not going so
well for chains that are simply trying to "buy on the
For any retailer to succeed in seafood the customer's
experience has got to be a "win" every time, and that means
zero product returns, says Walsh. If chains build their seafood
departments on consistent quality and service they will be able
to survive and grow in tough economic times, he adds.
More good news comes from Giant Eagle Markets, a privately
owned, 230-store supermarket chain with stores in Pennsylvania,
Ohio, northwestern Virginia and western Maryland. The retail
chain began bucking the negative seafood sales trend in
January, when its seafood sales began an uptick, according to
Richard Castle, Giant Eagle's seafood buyer.
With the arrival of summer and the grilling season, things
should be looking up and the overall outlook for retail seafood
is promising. A new report from PriceWaterhouse Coopers LLC and
Retail Forward predicts that certain types of retail outlets
will experience modest growth in 2009 and this will
especially true for supercenters and club stores. The two
groups expect conventional supermarkets to be the weakest
The supermarket landscape has changed and buyers must adjust
their strategies if they are going to compete for the
consumer's protein dollars. Today, as people dine out less and
opt for less expensive retail items, seafood retailers are
presented with an opportunity, but also a challenge as meat and
poultry compete for sales within the store. An informed
consumer, moderate pricing, a wide variety of choices and
exceptional quality will be the keys to success, fresh or
John Snyder is a writer and
photographer in Fryeburg, Maine