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« September 2006 Table of Contents

Species Focus - Surimi seafood

Suppliers see opportunity to win consumers over with higher-quality product and education

After years of relatively stagnant sales, the surimi-seafood category may be on the verge of a jumpstart. Segment leaders are striving to educate U.S. consumers about the merits of simulated shellfish, as well as introducing health-oriented products and emphasizing higher-grade formulations than the cheaper varieties that could turn off customers.

Further, Louis Kemp, one of the sector's best-known players, is now owned by industry giant Trident Seafoods, which intends to bolster a brand that's lost luster of late.

The need to give surimi seafood a boost is apparent from U.S. consumption figures, which haven't changed much in more than a decade despite the versatility of faux crab, lobster, scallops and shrimp for use in everything from salads and sandwiches to soups, dips and casseroles.

(Surimi seafood, made from the paste of cooked, mild-flavored whitefish, simulates shellfish with the addition of starches, red colorings, flavorings, binders and stabilizers.)

"I've been in this industry for 
14 years, and the same numbers are being tossed around of how much surimi seafood Americans consume annually: somewhere between 170 million and 185 millions pounds," says Michael Faris, president of Shining Ocean in Sumner, Wash., maker of the Kanimi® and Kanimi Deluxe® brands, among others.

"There's only one in 10 households, if that, that even bothers to use [imitation shellfish], so we've got a long, long way to go," Faris adds.

"But there's a lot of opportunity."

In the meantime, there's been plenty of jockeying for position in the marketplace, in large part due to Louis Kemp's woes. Sales of refrigerated or frozen Louis Kemp branded surimi seafood plummeted more than 20 percent for the 26 weeks ending July 8, according to ACNielsen retail tracking. That drop is indicative of Louis Kemp's freefall over the past few years.

Conversely, competitors such as Shining Ocean and Trans-Ocean Products picked up business, with jumps of 24.6 percent and 21.3 percent, respectively, for the same period.

Trans-Ocean, in fact, achieved a milestone by surpassing Louis Kemp for the first time as the nation's No. 1 retail surimi-seafood brand , with sales during the 26 weeks of $11.54 million, compared with $10.86 million for Louis Kemp. That translates to a dollar share of 27.6 percent for Trans-Ocean and 26 percent for Louis Kemp.

"It's a big deal for us," says Louis Sha­heen, VP of sales and marketing for Trans-Ocean in Bellingham, Wash., maker of the Crab Classic line. "At one time Louis Kemp had a 60 percent market share."

For 2006, Trans-Ocean will process more than 23 million pounds of imitation shellfish for retail outlets - the popular flake style goes for $2.99 for an 8-ounce package - plus another 3 million pounds for the U.S. units of the Subway sandwich chain.

Shining Ocean, meanwhile, is on pace for sales growth of 11 percent this year.

"We do a lot of promotions and countertop sampling," Faris says. "If consumers have had a bad experience [with an inferior item], we try to bring them back into the fold."

Moreover, the company provides surimi seafood in bulk to Japanese sushi bars, as well as to seafood processors that make salads.

"Over the last 10 years, retail supermarkets have gone the way of outsourcing to salad-makers," says Faris.

Some retailers still do things themselves, of course. Ken's SuperFair Foods, with six stores in South Dakota, uses bulk surimi seafood to make an imitation-crab spread that sells for $4.29 a pound. The company makes faux crab salad as well, and offers three sizes of seafood platters, priced from $26.99 to $49.99, that include simulated crabmeat.

"We usually use a 25-pound box of the crab flakes once a month," says Brad Scoular, Ken's meat manager.

Platters are also part of the lineup at A&P stores in the Long Island, N.Y., area. Among A&P's deli offerings is the Deep Sea Duet, comprising 3 pounds of imitation crabmeat and 2 pounds of shrimp, plus cock­tail sauce, for $34.99, according to the company's Web site.

Trident steps in

Trident, long a force in foodservice with its SeaLegs® surimi seafood, bolstered its retail stake with the March purchase of Louis Kemp and its production facility in Motley, Minn., from packaged-food goliath ConAgra of Omaha, Neb.

(ConAgra acquired Louis Kemp in 2000 from International Home Foods but is has shed its seafood, refrigerated meats and cheese business.)

Trident now intends to reinvigorate the brand, known for its Seafood Delights™ crab, lobster and scallop blends, by upgrading the surimi formula to include 100 percent Alaska pollock and no Pacific whiting, combined with a higher percentage of real shellfish.

"The idea is nothing really new, but the decision to make or re-make 
a high-quality, all-pollock surimi-seafood product is a bold step," Trident spokesperson John van Amerongen wrote in an e-mail.

"It reverses the trend to cheapen the product, and we think the market is ready for [one] that works just like crab and lobster in many, many applications."

To promote the changes, Trident is upping the advertising for Louis Kemp with a new retail brochure and an on-package coupon.

"Our goal is to get surimi buyers to increase the frequency of their purchases," van Amerongen wrote. "Our broader intention and opportunity are to invigorate Louis Kemp and invigorate the surimi-seafood category as 
a whole."

Surimi seafood 101

Trident isn't the only big gun that wants to extend outreach and educate U.S. consumers about the merits of surimi seafood.

"There are so many people who don't know about this product that we know we have to invest money in getting more consumers to try it," says Trans-Ocean's Shaheen.

Trans-Ocean is working with an advertising agency and conducting research to develop a consumer-focused marketing campaign that likely will launch next year. The campaign may include magazine ads and free-standing inserts, plus some regional testing of radio and perhaps TV spots.

"Our research is [showing that] the health aspect of surimi seafood is not being told," Shaheen says. "It's low-fat or no-fat, it's omega 3-fortified, it's low-calorie, it's fully cooked and it's easy to use. It's simple seafood."

In addition, Trans-Ocean is test-marketing "new packaging concepts" for its items sold in Wal-Mart stores, says Shaheen, declining to be more specific.

Shining Ocean, too, is applying more promotional muscle. It recently introduced the Crab Smart™ and Lobster Smart™ lines - the 12-ounce packages sell for around $3 - touted on the packaging as "a smart, low-fat way to add omega 3 oils and calcium to your diet."

"It's heart-healthy because the omega-3s are in it - we're the first company to do that - and then we lowered the sodium and raised the calcium," Faris says.

Shining Ocean also is testing a crab-flavored, heart-healthy snack item in a few markets but isn't ready to announce it. That effort comes on the heels of the success of the company's Shrimp Combo™, made with a formula that includes real crab and shrimp and is fortified with omega 3 and calcium.

A related issue that's been top-of-mind with industry representatives for the past decade is the federal requirement to use "imitation" as a product descriptor.

"The word 'imitation' has a negative connotation that we hope to be able to modify," wrote Tri­dent's van Amer­ongen, noting that a National Fish­eries Institute committee has made a recommendation to the U.S. Food and Drug Administra­tion to eliminate the need for the word.

"We'll see how far that gets," he continued. "But it would be great to get to the point where we could simply call it 'crab surimi' or 'shrimp surimi' and let it go at that."

All surimi isn't equal

Industry stakeholders stress that surimi seafood is an excellent product - when it's done right. But leading players are concerned that the price of whitefish, which rose by double digits last year and has stayed high, has led some companies to seek cheaper formulations that contain more water, use less fish or incorporate other species.

That, in tandem with a flood of imports from countries such as China, has resulted in inconsistent product.

"All surimi isn't created equal," says Christian Limberg, national sales manager at Harbor Seafood in New Hyde Park, N.Y. The supplier sold 11 million pounds of simulated shellfish in 2005 under the Oyster Bay brand and another 2 million pounds in private label .

"My concern is, with some [packers] focusing strictly on price, they're sacrificing quality and, ultimately, their own customer base," says Limberg. "It will literally put a bad taste in someone's mouth, and that has an effect on all of us.

"I'm not one of those guys that would say all imports are bad and all U.S. product is good," adds Limberg, noting the vast majority of Harbor Seafood product is made with domestic whitefish. "Regardless of where it comes from, you have to maintain the integrity."

Van Amerongen takes a similar stance for Trident, which has a fleet of fishing vessels in the North Pacific and makes its own surimi.

A "major factor keeping pollock surimi flat on the world market is the continued availability of relatively low-grade surimi made from itoyori and other tropical-fish species," van Amerongen explained.

Despite these challenges, industry representatives contend that higher-grade surimi seafood has a staunch customer base.

The formula used by Subway in Milford, Conn., for its Seafood Sensation sandwich is made with Alaska-sourced pollock processed by Trans-Ocean - and supplied to Subway by Jana Worldwide in Natick, Mass. - and contains 10 percent real crabmeat. The sandwich is priced around $3.69 for the 6-inch and $5.69 for the foot-long.

"I heard one of our franchisees say, 'It's the Cadillac of sandwiches,'" says Les Winograd, Subway spokesperson. "And there are loyal fans; my mother is one of them."

All told, processors say there's a promising opportunity to grow the surimi-seafood category, buttressed by marketing, innovative products and higher-quality formulas.

"We want those who have lost faith in surimi seafood to have a chance to try it for the first time again," van Amerongen concluded. "And for those who haven't ever tried surimi, we want to say, 'Try this - you'll like it.'"

Contributing Editor Rick Ramseyer lives in Cumberland, Maine