Seafood vendors drop anchor in Boston to fish for profit-generating ideas: Most agree current economic models won't stay afloat - International Boston Seafood Show - Brief Article

DSN Retailing Today, March 25, 2002 by Mike Duff

BOSTON -- The International Boston Seafood Show, held March 12 to 14, demonstrated that seafood retailing in the United States is undergoing significant change and may well be in store for farther metamorphosis. For now, this change is driven by the consolidation of major supermarket chains, spurred on in large measure by the growth of supercenters and warehouse clubs, but the next potential transformation is derived from legislation that's designed to fight bioterrorism in the wake of 9/11.

In a seminar entitled "Can Retail Seafood Be Profitable," three panelists--one current retailer, one former retailer and one wholesale grocer--agreed that gross margin pressures, driven by the costs associated with mergers and price cutting, are driving supermarket operators to change the economic model for seafood operations.

Larry Daerr, meat and seafood buyer/merchandising for Supervalu's Pittsburgh division, said he now develops seafood operations with 8-foot service cases, as opposed to the 24-foot cases that anchored such operations 10 or 15 years ago. He said, however, that the scaling back of laborintensive, margin-busting manned counters didn't spell the end of the service element. "Certain stores demand it," he said.

He agrees with the other panelists, Richard Cavanaugh, seafood manager of Admiral Thriftway, and Philip Walsh, managing director of Enaca International and former director of seafood at Stop & Shop and Harris Teeter, that the pressure for better returns are pressing seafood department gross margins upward past 30% and 40%. The wider margins would bring seafood in line with meat and deli and up to the point where the department returns enough profit to satisfy today's headquarter requirements. Seafood, they agreed, isn't going to be carried as an image builder anymore, and it must pull its own weight as it concerns bottom-line contributions.

Right now, retailers can build their gross margins and still offer good day-to-day and promotional prices because costs associated with their two primary seafood sellers, shrimp and salmon, are historically low right now. When this situation changes, margin pressure will return.

Innovative products and practices can have a long-term beneficial impact, however. The expansion of case-ready and processed value-added items from local and national producers is contributing to retailer efforts at profit boosting by reducing labor and shrink.

As evinced by new products at the show, vendors are doing their part to help. The expansion of case-ready and value-added products was a major trend. Among the nine items picked as finalists for the show's new product award was Salmon in Bourbon Marinade from Slade Gorton, a favorite among the judges. This valueadded product comes in a retail package that includes two 6.5-ounce portions in a microwavable tray with a suggested retail price of $6.99.

Judge Jim Wallace, director of seafood procurement for C&S Wholesale Grocers, said the product not only succeeded as an entree, but as an aid in helping consumers overcome their discomfort with trying to prepare fish at home. "They try to get consumers to make seafood the way it should be made," he said.

Any number of innovative value-added items were introduced at the show, including refrigerated and frozen products. On the frozen side was a line of new seafood and pasta entrees from Bantry Bay Seafood, which were prepared with a process that coated each element with sauce to improve flavor by keeping components integrated during microwave cooking. The price point is $4.99.

In the best new product competition, Cold Smoked Sea Bass from MacNight, set to retail at $7.99 for 4 ounces, was perhaps the entry most effusively praised by the judges."

New kinds of smoked products constituted another trend at the show. After all, not everyone likes salmon. Sunburst Trout Farm, in another example of the trend, introduced smoked rainbow trout.

In some cases, new initiatives were marketing based. Empress, for instance, has developed a marketing program that seeks to compare grades in meat with shrimp.

The next major change for the retail seafood industry was discussed in the show seminar, "The New Bioterorrism Law: What It Means to Seafood." Panelists David Durkin, a principal at the law firm Olsson, Frank and Weeda; Robert Collette, vp of science and technology for the National Fisheries Institute; and Caroline Smith DeWaal, food safety director for the Center for Science in the Public Interest, said new bioterrorism legislation that is making its way through Congress almost certainly will be passed in the general form in which it currently exists in similar House and Senate bills.

The legislation may well contain necessary reforms that the seafood industry will support, given that regulation is made with an eye on satisfying narrowly defined needs.

Still, Durkin pointed out that the bill would give the U.S. Food and Drug Administration broad new powers and greatly increase the number of inspectors looking at imports and processing facilities. The result may be short-term regulatory instability and some disruption to markets as the FDA begins enforcement.