« October 2007 Table of Contents
Processing Survey: Challenges abound
Sourcing, safety, shipping costs remain top obstacles in biennial processor survey
By April Forristall and James Wright
October 01, 2007
Seafood processors face numerous challenges, but despite the
hurdles sales are showing an increase for the second year in a
row. However, rising business costs are keeping profits
Regardless of company size or location, keeping on top of
government regulations is the top challenge for today's seafood
processors. More than half (53.7 percent) of respondents to
SeaFood Business' biennial processor survey listed compliance
as one of their company's top three challenges.
"[Regulations] are necessary and work out very well on some
things and not so well on others," says Stephen Connolly,
chairman and CEO of Steve Connolly Seafood Co. in Boston. "It's
a nuisance to have all these [fishery management] regulations,
but it works."
Government regulations heavily influence seafood sourcing
and product availability, which was mentioned by 42 percent of
respondents as one of their greatest concerns. Numerous
domestic fisheries are in decline, such as cod in the North
Atlantic and red snapper in the Gulf of Mexico, and there are
many new fishery regulations in place, with the renewal of the
Magnuson-Stevens Fishery Conservation and Management Act this
Even some farmed species are in short supply. U.S. catfish
supplies hit a 10-year low this year. A little more than 39
million pounds of catfish were processed in July, down 14
percent from the same period in 2006, according to the U.S.
Department of Agriculture's National Agricultural Statistics
With erratic domestic supplies, processors are turning to
imports to meet their customers' demands.
"With closings and openings [on fisheries], it's pretty hard
to know what is going to happen with availability," Connolly
says, adding that, "farm-raised fish are very handy, especially
in the winter."
"Wild-caught product is being eclipsed by farm-raised in
many respects, causing socioeconomic effects throughout the
U.S. industry and internationally," says Dana Staples, a North
American sales representative for the Barry Group of Corner
Brook, Newfoundland. "Farm-raised product is much more
economical [than wild seafood] to produce and process, given
the control conditions." Staples adds that farmed seafood will
be a growth vehicle for the Barry Group in the future.
Sourcing a global task
Imported seafood represents nearly 80 percent of the U.S.
seafood supply. While that number continues to grow, almost
three-quarters of respondents said that North America remains a
primary seafood supply source, with South America and China
following at 32 and 25 percent, respectively.
The Barry Group is sourcing from fewer countries than in
previous years, notes Staples.
"We did try bringing in product out of China, but we have
decided that at this point we will put that on hold a bit given
the events of past months," he says.
Connolly only buys from overseas suppliers when it's
something "extra fancy" that isn't available in North America
like Dover sole, turbot and branzini.
American Mussel Harvesters of North Kingstown, R.I., sources
only from North America, according to sales representative Greg
Silkes, whose father, Bill, founded the company more than 20
"We source from Canada and the United States," says Silkes.
"The majority of the oysters are farmed."
Sourcing is not the only challenge mentioned by survey
respondents. Processors also have to contend with the safety of
imported seafood and the consumer's inexperience with preparing
fish. Despite the fact that the Food and Drug Administration
and National Marine Fisheries Service promote seafood as a
healthy option, processors say consumers continue to mention
methylmercury as a hurdle to purchasing fish.
American Mussel sells at retail, wholesale and direct to the
"We like to communicate directly with the end-user and tell
them what they can do with seafood. People just don't know how
to cook it and eat it," says Silkes.
AMH is also challenged with educating its customers on the
freshness of its shellfish.
"We have a seawater system to store live seafood. One of our
biggest issues is selling people on the idea of the seawater
system. Chefs look at the shellfish tags and might say seven
days out of the water is old. But it's fresh, it's beautiful.
It's as fresh as when it was harvested."
Getting it there
Shipping costs rounds out the top three challenges that
seafood processers continue to face.
"Shipping costs have pretty much flattened out in terms of
dealing with increases this year," says Dave Plese, director of
private label at Highliner Foods based in Lunenburg, Nova
Scotia. "Although this latest week doesn't give me much
confidence," he says, referring to the $7 per-barrel increase
in oil prices during the first two weeks of September.
Compared to the last SFB Processor Survey in 2005, shipping
and the environment remained chief concerns. Foreign
competition became a more crucial challenge, mentioned by 38
percent of processors in this year's survey, more than labor
costs at 34 percent.
Profitability also remains a challenge for processors.
Simply put, it's getting harder and harder to make money on
Nearly 40 percent of survey respondents said their profit
margins remained the same from 2005 to 2006, and only 33
percent reported an increase, and almost 20 percent had a lower
"[Our biggest challenge] is profitability throughout the
supply chain: harvesting, production, sales, distribution and
final sale," says Staples of the Barry Group. "The overall cost
of doing business has increased many times faster than the
actual sale price of the product in most instances."
While profits have hit a plateau, U.S. seafood consumption
increased from 14.8 in 1996 to 16.5 pounds per capita in 2006,
nearing the record 16.6 pounds set in 2004. Sales have risen
accordingly in the same 10-year period, yet the cost of doing
business has also increased.
In 2005, a majority of seafood processors reported a sales
increase for the first time since 1998, with 62 percent of
survey respondents reporting higher sales in 2004 over 2003.
That hike continued this year, with 67 percent of processors
saying sales rose from 2005 to 2006, while sales remained the
same for 23 percent. The greatest gains among companies
reporting increased sales were those with more than $50 million
in revenues. Of the 9 percent of processors reporting reduced
sales from 2005 to 2006 sales, 8.8 percent were companies with
sales under $1 million.
This year, in addition to asking processors if requests for
sustainable seafood products increased, SeaFood Business also
asked processors whether they've had increased requests for
organic products. Only 36 percent of respondents had increased
requests for organic seafood, while 61 percent experienced
heightened demand for sustainable products.
While Highliner's customers are asking for organic product,
"It's more on higher-end restaurant-quality product," says
Plese. Sustainability is an issue that "everyone is dealing
with now," he adds. Everyone is aware of sustainability, "but
it is somewhat of a back-burner issue" adds Plese.
"I am asked about it, but no one seeks proof, per se,"
explains Staples of the Barry Group. "It's sort of a
Sourcing sustainable U.S. supplies isn't an issue, says
Connolly, but more important is finding reliable sources
outside North America.
"I read about sustainability all the time, and it is
important, but we don't get a lot of requests for that, because
most of the stuff we sell is sustainable," Connolly says. "The
rest of the world we can't control. Unilaterally, it's almost
impossible to control international waters. In New England it's
easy. We set a season and when it's over that's it."
With farmed-seafood supplies commonplace, and with the
Marine Stewardship Council certifying new fisheries as
sustainable, processors are better able to source stable
seafood supplies and at the same time meet consumers' requests
for sustainable products.
However, processors are constantly searching for ways to
keep their product around in the future.
"Aquaculture is helping sustain the natural resource,"
American Mussel's Silkes says. "Our company is based on
sustainability. We constantly look for numerous supplies of a
product instead of focusing on one supplier."
Another request from customers is harvest information.
Country-of-origin labeling at retail is required for all
seafood products, and while restaurants are under no such
obligation, many restaurants are opting to plug their seafood's
origins to ramp up the romance factor for their guests.
"That's becoming more popular. Folks want to know where
their food is from, especially now with COOL, and the
government going after people putting the wrong names and
origins on the product," Silkes says. "The more information you
can give your customer, the end user, the better. They want to
know about what they're eating."
Almost 60 percent of survey respondents said that the
harvest region of the product is highlighted on their product
packaging or in other marketing efforts, 10 percent more than
Diversified Business Communications' Market Research
Department conducted the SFB 2007 seafood processor industry
survey. The survey was mailed or faxed in mid-June to a random
sample of 1,323 of the magazine's processor readers, targeting
buyers or those who influence their companies' seafood buying
decisions. A total of 225 surveys were returned, for a response
rate of 17 percent.
Editorial Assistant April Forristall can be e-mailed at
aforristall@divcom. com; Assistant Editor James Wright can be
e-mailed at email@example.com