BOSTON — The pace of change is quickening in supermarket seafood departments, and Steve Lutz, executive vice president of The Perishables Group, examined which products are growing and which ones are losing share here at the International Boston Seafood Show's Supermarket Seafood Trends seminar.
Citing proprietary data from ACNeilsen focused on fresh seafood sales in supermarket chains, Lutz showed that category growth is not evenly distributed. Regionally, there are vast market-to-market differences. And, among categories and species, there are new winners emerging, traditional favorites struggling and many new niche items driving significant gains. Examining these shifts, Lutz issued a call for suppliers to work with retailers to determine which merchandising tactics and promotions could help optimize seafood sales at their stores.
“When we look at the seafood industry, what we really see is significant opportunities for supply-side leadership,” Lutz said at the seminar.
Suppliers can work with retailers to identify category and product trends, document category drivers and understand product triggers and substitutes, and partner with retailers to develop fact-based category plans, Lutz added.
“Retailers are trying to understand [consumer trends] so they can maximize the performance of their seafood department. You'll also satisfy the consumer in a very competitive environment. The opportunity for suppliers is to participate in that and help retailers figure out how to drive profitable success,” Lutz said.
Overlying trends in the seafood department mirror developments in other parts of the store. Time-starved consumers want the convenience of more ready-to-eat options, and because U.S. households are shrinking in size, sales are growing for products that feature smaller or individual-sized portions. However, in the seafood department, there are still significant variations in the impulse and planned purchase rates, which many retailers are trying to understand better.
There is plenty of potential in the category, Lutz noted, because even the best-selling seafood items suffer from very low household penetration rates. For example, fresh salmon and shrimp were each purchased by about 2% of households in 2006. By comparison, hot dogs were purchased by 80% of households that year.
“The average traction size for most seafood items is midrange, but below many competitive products,” Lutz explained.
Many seafood items also suffer from long purchase cycles and fewer repeat buyers, according to Lutz.
“Not only does seafood overall have fairly low penetration levels, a lot of households just aren't buying it. We're below a lot of competitive proteins, so from a demand standpoint, there's a huge opportunity to begin to move these products into higher penetration, get into more households than we are now,” Lutz added.
Lutz also revealed that the average value of a consumer's basket with fresh seafood or fresh fish is about $65, while baskets without seafood items average about $34. And, consumers prefer to purchase seafood at supermarkets. Over 85% of consumers report that they buy fresh seafood or fish from supermarkets, compared with only 16% who say they shop for seafood at club or wholesale stores.
Yet seafood still represents only 1.3% of total store sales — significantly less than the other perishables such as meat, produce and deli. However, category growth remains in line with these other departments, except for meat, with seafood experiencing an average increase of about 3.3% in total dollar sales each year.
Prepared seafood is also showing a lot of promise, according to Lutz, with sales increasing significantly in all geographical regions. Notably, prepared crustaceans were up 77% in dollar sales, according to Perishables Group data.
Among species, tilapia came out on top, with a 23% increase in dollar sales per store per week, while salmon came in second, with a 14% increase. The niche winner appeared to be roughy, with a 43% increase in dollars and a 63% increase in volume. By contrast, catfish experienced a 2.1% decrease in dollar sales. Lutz noted that the catfish and tilapia markets appear to show some overlap, with customers possibly trading one for the other. But, he added that out of 15 species of fish examined in the data, 11 lost volume.
For shellfish, scallops were up 14% in dollar sales, followed by clams, which enjoyed a 7% increase in dollar sales. Fresh lobster experienced a 12% decrease in volume, while shrimp experienced slow growth, with volume up only 2%. Lutz told the crowd that another point of concern was crab, which was down 10% in volume.
Lutz concluded by saying that the good news is that overall, consumer demand does appear to be growing.
“We talked to enough consumers to know the positive attributes about how seafood is being recognized — plenty of growth opportunity,” he said. “What we also know, from working with a number of different retail accounts that we work with across the U.S., they are actively trying to understand what is the optimal mix of products, promotions and pricing that will deliver top category performance.”
The bad news is that there is extremely fierce competition, regardless of whether you're a retailer or supplier. There is competition for space, for the retail ad support and for the shopper. Many popular products, such as catfish and tilapia, are under pressure, Lutz said, because so many other items and species are pushing for limited space at the seafood counter.
“In a sea of choices, retailers are calling on suppliers to identify performance opportunity. Knowing what drives shelf success is critical,” Lutz said. Suppliers are in the best position to be able to work with retailers to identify what a category will look like, what items will be included, and details about promotions, pricing, merchandising, assortment and other factors, according to Lutz.
Suppliers should also be able to identify for a retailer what the categories are that are underperforming or overperforming, and why, and apply that analysis just as in other parts of the perishables department.
“There is a huge opportunity for some suppliers out there who are basically going to jump on that and say, ‘We have an opportunity to solidify retailer relationships, influence some of those supermarket decisions — as opposed to taking orders — and ensure our position in the seafood industry if we have information and knowledge to be able to participate and push those decisions forward,’” Lutz said.