Growing demand brings seafood supply issues to the forefront

On the surface it appears to be smooth sailing for the seafood sector with fresh and frozen product revenues up strongly over the last year.

Yet, potentially rough waters await merchandisers that are unable to keep pacing with the growing shopper demand for a wider array of seafood options. Indeed, greater awareness of seafood’s health benefits and changing consumer lifestyles — including a pandemic-spurred reduction in dining out — are helping to spur seafood sales activity, reports Portland, Ore.-based Allied Market Research, which forecasts a 2.5% compound annual growth rate from 2020 to 2027.

The greater interest by shoppers in preparing seafood at home in reaction to the COVID-19 pandemic also is putting pressure on supplies, said Chuck Anderson, vice president and partner with Certified Quality Foods, a Dallas-based analyzer of seafood quality, and the former vice president of seafood procurement for Ahold USA and the former category manager for seafood at H-E-B.

“Many Americans have more discretionary dollars to spend on food because they are spending less money on travel, concerts, movies, and eating out,” he said, adding that consumers also are “splurging on themselves” with higher-value seafood meals, such as crab, lobster and scallops, as they become more confident preparing such options.

“What is amazing is how well the seafood supply chain is holding up under tremendous demand, labor shortages and changing supply markets,” Anderson said, noting that seafood buyers “have always had to be flexible and learn to buy from new sources of supply with little or no notice due to weather and other factors that other retail buyers have not had to do.”

Nevertheless, supply chain restraints, such as declining quotas for some wild-caught seafood species, are causing out-of-stocks and increasing the demand for products that are in short supply, which is helping to drive inflation, he said. That includes most shellfish products, which because of fishing restrictions, were facing lower harvests in 2021 and lower quotas in 2022.

“North American production of snow crab, king crab, scallops, lobster, as well as halibut, are all down 10% or more since 2019,” he noted. “Global cod production also is down due to lower quotas for North Sea cod.”

Indeed, imported pasteurized crabmeat was one of the most difficult products to source in 2021, Anderson said, with many retailers experiencing out-of-stocks for all crabmeat varieties for a month or longer during the fourth quarter, which included the all-important holiday season.

Supply chain logistical issues, including a scarcity of truck drivers, are also causing product shortages and contributing to higher prices. “The inflation rate for seafood products has skyrocketed,” Anderson said, noting, for instance, that the cost of 6-ounce frozen tuna steaks rose 51% during 2021.

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Merchandising flexibility

Such supply matters are necessitating the need for merchandising flexibility by supermarkets, according to Anderson. “With fast-changing supply issues, and quickly rising prices, having excellent two-way communications with suppliers is more critical than ever,” he said. “Seafood is always highly dependent on timely logistics and good communications, but more so in today's retail environment.”

That flexibility includes being able to efficiently revise store planograms in accordance with seafood availability, Anderson said, along with a focus on ensuring there is always a supply of the higher-volume and critical products, which precludes ordering specific seafood varieties on a “just in time” basis.

The benefits from saving money by not tying up capital on inventories “is wiped out if you are out of stock on essential items and losing sales,” he said. “This is critical to understand and act upon. If a retailer is out of essential products for customers, they not only lose the immediate sale, but they may also lose that customer and their whole basket.”

That is particularly important as customers who eat seafood at least once a month spend an average of $190 a week on groceries, and frequent seafood shoppers who eat seafood two or more times a week spend $225 weekly, versus $137 a week for non-seafood consumers, according to FMI’s Power of Seafood 2021 report. In addition, the average household income among seafood shoppers is $84,000, versus $58,000 for non-seafood consumers, FMI noted.

Anderson added that it also is a competitive advantage for retailers to always have the most sought-after seafood items available. “Customers can and do change stores to get the products they want,” he said. “This is more than not losing customers; it is an opportunity to gain market share from retailers that have not adjusted their buying practices as well.”