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Full-speed ahead

Seafood buyers will be put to the test in 2008, but they're already prepared for the challenge

By Steven Hedlund
December 01, 2007

When the holiday hangover wears off and the reality of the new year sets in, chances are the challenges seafood buyers faced this year will continue to put them to the test in 2008: Seafood prices and energy costs are rising. The U.S. dollar is depreciating. The housing slump and escalating household bills are impeding consumer spending. And food-safety deficiencies overseas are damaging consumer confidence in seafood.

In this month's Top Story, four of the nation's leading seafood buyers, each representing a different industry - restaurant, supermarket, hospitality and cruise line - give their take on what lies ahead in the seafood trade in the coming months. Their outlook will help you chart a course for 2008 and weather the storms that may arise.

"Seafood is the most difficult thing we buy," says Gene Marino, director of purchasing for Princess Cruises in Santa Clarita, Calif.

Marino isn't alone. Whether you're a seasoned fishmonger or a rookie, sourcing seafood is an arduous task. And so is understanding the issues that influence consumers' seafood-purchasing decisions. This year, the safety of U.S. seafood imports took center stage when the U.S. Food and Drug Administration slapped an import alert on five farmed seafood species from China, creating a public-relations nightmare for seafood buyers.

"I've been doing this for 30 years, and every time something like this happens it goes away," says Joe D'Alessandro, senior director of seafood merchandising for The Great Atlantic & Pacific Tea Co. in Montvale, N.J. "But this is the first time it hasn't gone away. I have a feeling that this will continue to be one of the hot-button topics."

Despite the challenges they confronted this year and will likely continue to face, the seafood buyers interviewed for this story expect their seafood sales to increase in 2008.

Seafood sales set sail

In the cruise line business, food is the name of the game. The dining experience trails only the destination as the most important decision passengers make when selecting a cruise line, says Marino, of Princess Cruises, which is owned by Carnival Corp., the world's largest cruise line operator.

Seafo od plays a key role in Princess' dining experience, representing 30 to 40 percent of the cruise line's food purchases, in terms of value, notes Marino.

"We're big seafood users," he says, "and we're trying to use more and more."

Annually, Princess, with a total of 16 ships, uses more than 1 million pounds of shrimp, 600,000 pounds of Alaska salmon, 500,000 pounds each of lobster tails and king crab legs and 200,000 pounds of Alaska halibut.

"People are more adventurous about dining [when on a cruise ship], because it's not as if they have to pay for, say, orange roughy, if they didn't like it," says Marino. "They can order orange roughy, and if they don't like it they're more than welcome to order a steak instead. They can be adventurous without the commitment of a $35 or $40 entrée. But once they try it, they usually don't ask for the steak."

Consumers and businesses like Carnival are pinched by skyrocketing energy costs: Crude oil pushed the $100-a-barrel mark last month. On Dec. 1, the Miami company adopted a fuel surcharge of $5 per person, per day; several other cruise lines have done the same.

Despite climbing fuel costs, "the cruise line industry is doing very well and is growing," says Marino. "It's a very good value for vacation. The ship has to sail full, so if demand isn't there, prices come down. Luckily, demand has been there."

The weakening U.S. dollar is making it harder and more expensive for U.S. buyers to source seafood imports, which represent more than 80 percent of the U.S. seafood supply, as the strengthening euro prompts domestic and foreign suppliers to target the lucrative European market (see Top Story, November SFB ).

The ailing currency has been a double-edged sword for the cruise line. On one hand, Carnival passengers can pay for a European cruise with U.S. dollars, evading the exchange rate, explains Marino. On the other hand, the depreciating U.S. dollar is making it harder and more expensive for Carnival to source seafood imports, notes Marino.

"This has been a tough year," he says. "We had to ask for an increase in our budget. We advised senior management that we did the best that we could to mitigate [food] costs through the introduction of new products and trying to buy at the right time. There's upward pressure in the food market in general, [especially] in seafood. But we don't want to take items off the menu, and we can't pass higher [food] costs along to our guests."

Still, Marino expects Princess' seafood sales to increase in 2008. "Our seafood sales will grow [due to] organic growth and demand for seafood [overall]," he predicts. "Americans are eating more seafood than ever for health reasons."

Fast-casual phenomenon

Seth Salzman, senior VP of Boneheads Grilled Fish & Piri Piri Chicken in Atlanta, couldn't agree with Marino more.

"People recognize that if you batter and deep fry something, it's just not good for you no matter how you slice it," he says.

Founded by Raving Brands in 2005, Boneheads operates seven restaurants - five in the Atlanta area, one in Boca Raton, Fla., and one in Lake Forest, Calif. - and plans to open six units in 2008. The fast-casual chain targets time-pressed diners seeking a healthier alternative than conventional fast food.

And seafood is an ideal fit on fast-casual menus - it's high in omega-3 fatty acids, it's lean, it cooks quickly and it encourages menu creativity. Seafood, most of it grilled, accounts for 80 percent of Boneheads' menu, in terms of volume.

Menuing a mix of seafood species is key to managing rising seafood prices, advises Scott Vogel, culinary director for Boneheads, which offers shrimp, salmon, mahimahi, grouper and tilapia, among other species.

Tilapia, the only product Boneheads sources from China, "has the most growth potential on our menu," he says. "It's become very popular. It's light and sweet in flavor. At the grocery store it's inexpensive. People recognize that, and then they see it on our menu.

"But we're always looking for new products," adds Vogel. "Actually, we're testing barramundi, and we're excited about it."

When menuing new seafood species, "you take a bit of a gamble," acknowledges Salzman. "Do we bring in a product that people aren't familiar with? Or do we stay with what's safe and comfortable, with what people know? Because of our price point, we can take that chance. Our customers will spend only $8 or $9 or maybe $10 on their meal. So even if they try it and say, 'It's $10. I eat here twice a week. If I don't like it, no big deal. I just won't get it again.'"

In addition to controlling increasing seafood prices, ensuring the safety of the seafood Boneheads menus is paramount, notes Vogel.

"Food safety was the hot button issue in 2007, and I'd like to say that it probably won't be in 2008, but it will likely remain so," he says. "The most common question we get is, 'What portion of your seafood comes from China?' People are worried if the seafood is coming from a reputable company. We deal with big companies that are all very reputable."

Boomers travel, 
fish sales benefit

For Avendra, the hospitality industry's largest procurement-services company, dealing with economic fraud in the seafood industry is its No. 1 obstacle.

"Clarification on industry standards and truth in labeling seem to be my biggest challenges," says Christa Ingalls, seafood commodity manager for Avendra. "Many seafood products don't have industry standards, and comparing between different manufacturers can often be a challenge. Our customers are also very concerned about mislabeling."

Despite the need to crack down on seafood fraud, Avendra - formed in 2001 by Fairmont Hotels & Resorts, Marriott International, Hyatt Hotels Corp., ClubCorp USA and Intercontinental Hotels Group - projects its seafood sales to increase in 2008. The Rockville, Md., company purchases 26 million pounds of shrimp, 22 million pounds each of lobster and salmon and 18 million pounds of crab annually.

The growing U.S. lodging industry will be partly responsible for bolstering Avendra's seafood sales next year, says Ingalls. The $133 billion industry expanded by 8 percent each in 2004 and 2005 and 7 percent in 2006. Continued growth is anticipated, she notes, as many of the 77 million baby boomers are now in their peak earning years and will have more money - and more time once they retire - to spend on travel.

Keeping the seafood it serves affordable for baby boomers and other guests won't be easy, admits Ingalls, but Avendra's $2.5 billion in purchasing power helps it manage increasing seafood prices.

"We have long-term contracts that allow for a steady flow of pricing through our system," she says. "I have also developed numerous contracts that allow for locked-in pricing for longer periods of time using best buy/time practices and large-volume acquisitions."

Retailers highlight 
safety, service

D'Alessandro, of The Great Atlantic & Pacific Tea Co., has been in the retail seafood business for three decades, and he can't remember the last time a seafood-related issue garnered as much attention as China has in the mainstream press.

"One of the things we're looking at in 2008 is renewing consumer confidence in seafood because of what's happened with food safety," he says. "We're going to continue to drive that message.

"As soon as we found out about [the increased presence of banned drug residues in Chinese seafood], we felt the right thing to do was to send lots of all of our seafood to be tested to ensure there was nothing in there," continues D'Alessandro. "We've had no issues, thank God."

The Montvale, N.J., company operates about 300 grocery stores under five banners: A&P, Super Fresh, Waldbaum's, Food Emporium and Food Basics. Conventional supermarket chains such as A&P are being squeezed by big-box and club-store retailers like Wal-Mart and Costco on the low end and specialty and natural-food retailers like Whole Foods on the high end.

Since late last year, A&P has adopted a perishables-focused fresh format in about 80 stores and upgraded its seafood departments, auditing every seafood product, switching many suppliers and product specifications and revamping its shrimp program.

"Some companies have decided to take their seafood managers out and go with pre-packaged product, but we're doing quite the opposite," says D'Alessandro. "We're [emphasizing] service, and we realize how important that person is behind the counter."

Providing value is equally important, notes D'Alessandro. "I don't care if you make $20,000 a year or $120,000 a year," he says. "There isn't a person I know that doesn't want a value."

Ken Engasser, seafood category manager for A&P, says training seafood-counter staff will be his No. 1 hurdle in 2008.

"That's the biggest challenge - making them a fish expert or a mini-category manager. So much of our success is how they interact with consumers and how they merchandise the products," says Engasser. "Consumers are becoming more educated. Part of our struggle is the ongoing education of consumers [through] our store associates, who interact with them."

And that's a struggle Engasser and D'Alessandro are confident A&P can overcome.

"We definitely expect our seafood sales to increase in 2008," says D'Alessandro. "We see our customers moving toward healthier eating, and we know seafood can provide that. Also, it's a convenience. It's the fastest protein to cook. It's our job to market those key points to help drive our business."

Associate Editor Steven Hedlund can be e-mailed at shedlund@divcom.com

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