Private Label Buyer

Chumming the Waters

September 19, 2011
Environmental disasters aside, seafood sales are a rising tide, lifting PL boats along with others. Only canned PL tuna sales are floundering.
Although buffeted somewhat by the BP Gulf Coast oil spill in 2010 and the Japanese earthquake and tsunami earlier this year, the fish and seafood market continues to grow, hitting a new record total U.S. sales of $15.8 billion in 2010.

Environmental disasters aside, seafood sales are a rising tide, lifting PL boats along with others. Only canned PL tuna sales are floundering.
Although buffeted somewhat by the BP Gulf Coast oil spill in 2010 and the Japanese earthquake and tsunami earlier this year, the fish and seafood market continues to grow, hitting a new record total U.S. sales of $15.8 billion in 2010.

The market should enjoy a compound annual growth rate of 4.7 percent from 2011 through 2015, reaching $20 billion in sales by 2015,  according to a December 2010 report from Mintel International, Chicago, That’s compared with 2010 totals for red meat of $71.9 billion, and poultry at $41.4 billion, the market research company says.

The growth in seafood can be attributed at least partly to Americans’ evolving attitudes about healthy eating. A May 2009 Mintel report showed 86 percent of survey respondents saying healthy eating is very or somewhat important to them, and 37 percent saying their diet had become healthier in recent years.
Fresh fish and seafood, the largest subcategory, saw dollar sales of $8.3 billion in 2010, or about 53 percent of sales, Mintel reported. Frozen fish and seafood hit $5.4 billion last year, about 34 percent of sales, while shelf-stable fish and seafood, at $2.1 billion, had market share of 13 percent but grew most quickly in the post-recession period, about 11 percent from 2008 through 2010, compared with 7.2 percent for fresh and 6.6 percent for frozen.

Among supermarkets, drugstores and mass merchandisers excluding Walmart, frozen seafood generated $2.3 billion for the 52 weeks ending May 15, 2011, 45 percent of which was private label, reported Symphony IRI Group, Chicago. Shelf-stable seafood sold $1.6 billion, about 10.7 percent private label; and refrigerated seafood sold $369 million, 18.5 percent private label.

Mintel reported that, overall, private label fish and seafood generated a significant 30 percent of market share.

“Name brand sales development has been challenging in this category as evidenced by private label being the only manufacturer to post a notable share gain,” the research company notes. “Along with the challenging economy, fish and seafood buyers are already used to buying non-branded fresh fish and seafood, which may have made them more receptive to the idea of buying non-name brand products in other segments, as well.”

That jibes with the observations of Tom Sunderland, vice president of marketing communications for Ocean Beauty Seafoods, Seattle. “We’re seeing the same thing you’re seeing across most private label: a definite upscaling in what people are looking for,” he says. “The buyers are much more interested in keeping ahead of the trends and in us [manufacturers] presenting items that seem definitely with consumer trends, rather than merely filling up the center of their section with safe, fast-moving items.”

Jack Rhodes, vice president of sales for Sonoma Seafoods, Sparks, Nev., agrees there has been significant growth in private label in the past five years, although he does not see any hot new products that have taken off in that time.

“We believe the seafood category will continue to see growth in private label offerings because the consumer seems to have reached a critical mass in terms of their acceptance of the quality and value that well-managed private label items can offer,” he says. “Taste, quality and convenience are always constants.”

The most important factors in private label growth for fish and seafood have been retailer interest and the resulting modernization of packaging design, Sunderland says. “It’s their brands, after all,” he says. “The extent to which they stand behind it and they drive it, that impact will dwarf anything the suppliers might want to do. They want more contemporary, best-in-class packaging. That’s one of the changes over the last 10, 15 years.”

Rhodes has seen and would recommend that retailers expand their promotional and advertising mix and be creative about their approach rather than just copying what the major brands do.

“It is now quite common to hear radio ads in which retailers are touting their own store-specific brands and product lines; this was not the case until quite recently,” he says. “Simply trying to knock off the national brands, while a tried and true method for trying to capture the consumer’s value buy, is not likely to lead to major growth in the category. Growth is likely going to come from segmenting private label and developing a label that can communicate uniqueness and value to the customer.”

In addition to making graphics more contemporary, private label fish and seafood partners have done more to open the window on the package to “show more of the fish,” Sunderland says. “You’re trying to make the package stylish, but also show as much of the product as possible…You’d never buy bacon you couldn’t see. Yet we have a tendency to put fish in a package where you can’t see it very well. These things can co-exist: upscaling packaging, but also showing as much of the product as possible.”

Other findings from Mintel’s research showed that grocery and specialty food chains generated 2010 sales of more than $12 billion, making them by far the most popular channels, about quadruple in sales to supercenters and warehouse clubs. From 2005 to 2010, frozen fish and seafood introduced two-thirds of product launches in the category, particularly during the recessionary period at the end of the decade, as shelf-stable product introductions doubled from 2008 to 2010.

Although it’s not easy to measure precisely, the BP Gulf Coast oil spill might have negatively affected the consumption of fresh fish and seafood while at the same time creating an opportunity for the frozen segment, Mintel says. The company’s research found that a higher percentage of women than men have grown more concerned about food safety, which “is important for the industry to address as women do the bulk of household grocery shopping.”

One area of private label that has not fared well is the canned tuna market, which has been significantly washed away since the Japanese earthquake and tsunami of last spring, says Hope Schoeffling, vice president of retail sales for Camerican International, Paramus, N.J. That’s because most private label tuna comes from Asia, while brand names like Starkist and Chicken of the Sea typically use domestic tuna.

“Nothing’s favorable right now,” she says, and it won’t be until Japanese fishermen are back at full strength. “We’re beyond highest prices on albacore and yellow fin, and skipjack’s almost at that highest level…We’re watching the brands take care of most of it. Business had been very good for awhile. I’ve been doing this for 30-some years, and I’ve never seen this kind of market - and I hope I never do again. Normally, when the economy is not great, private label does well. Tuna is not seeing that opportunity.”
Challenges that Sunderland sees for the category more generally include high commodity prices and a weak dollar, both of which he notes affect branded products as well as private label. “You’re seeing definite impacts there in terms of the interaction between price and availability,” he says. “That moves a lot of the market.”

Similarly, Rhodes cites commodity prices for both seafood raw materials and common ingredients. “One of the most painful issues continues to be freight costs, due to the high price of fuel,” he says.
Eye On National Brands
How are major seafood brands working to bait the hook for customers so they don’t swim away toward more value-conscious private label?

Gorton’s, Gloucester, Mass., is touting its new re-sealable bags for frozen products like fish fillets, fish sticks and grilled shrimp. The brand has forged a connection with the NBC weight-loss show The Biggest Loser that helps position its grilled offerings including tilapia and salmon.

And Gorton’s branding efforts include ties to the historic seaport in Gloucester, which dates to the 1620s, as well as 21st century green efforts that range from “purchasing from environmentally sustainable fisheries, farms and suppliers” to installing energy efficient lighting and reducing water usage.

Bumble Bee Foods, LLC, San Diego, provides a glossary of different types of tuna, the story of a tuna’s life, and information on the various methods of catching and processing tuna. The company also gives consumers featured recipes for different eating occasions, tips on healthy eating, and Bumble Bee’s environmentally sustainable practices such as a 2009 initiative to establish baseline metrics on water, energy and landfill use that the firm is attempting to improve upon.

Van de Kamp’s, Peoria, Ill., provides nutritional facts online for each of its frozen SKUs with a graduation-cap-clad cartoon fish exclaiming “Nutrition Matters!” The Web site provides a variety of recipes from author, nutritionist and mother Rallie McAllister along with seasonal Halloween recipes like “Severed Mummy Toes” and “Lizard Face Tortillas.”

Van de Kamp’s also touts its “freshness pouch” and emphasizes that it uses whole fish fillets rather than minced for its fish sticks.

Chicken of the Sea, San Diego, unveiled a healthier line of products three years ago as the recession deepened and people’s budgets could not stretch as far when it came to buying fresh fish. The Healthy Selections tuna pouches come in 3- and 7.1-ounce sizes. The company also touts that it can supply private label offerings, such as cans or pouches of tuna, salmon, oysters, crab, clams, shrimp, sardines and mackerel.