Category Focus: SEAFOOD

Removal of some import tariffs triggered slight decreases in commodity shrimp costs over the past year, but costs of many other species continued to rise. This helped boost supermarket dollar sales of frozen seafood by 4.2% over the 12 weeks ended March 23 versus the same year-ago period, according to Chicago-based Information Resources, Inc. Units edged ahead by 0.5%.  “Seafood prices have gone up,” confirms Tim Redmond, president of Aptos, Calif.-based Blue Horizon Organic Seafood Co. “And a struggling economy sends consumers looking for less costly proteins such as pork and chicken.”

RAW SHRIMP UNITS UP 18%

It’s no surprise, then, that the big winner among frozen seafood subcategories was frozen raw shrimp, which posted a 15% dollar gain and an 18.5% rise in units, making it one of only a handful of categories anywhere in the store that actually saw a decrease in retail prices.

“Consumers continue to make the effort to include seafood in their diet,” says Bryan Jaynes, director of consumer brands marketing for St. Simon’s Island, Ga.-based Rich Products Corp. But in today’s uncertain economy, they’ve had to find ways to do it for less; for many, commodity shrimp was the answer. On the value-added side, both the frozen fish/seafood and frozen cooked shrimp subcategories saw units decline vs. the year-ago 12-week period, although dollars were up 2.4% and 1.6%, respectively.

Despite the slide, there were definitely some bright spots. Particularly among larger families with children, “We’re seeing strong performance from our core breaded and battered fish sticks and fillets,” reports Judson Reis, vp-marketing at Gloucester, Mass.-based Gorton’s. But at the other end of the spectrum, he notes, health-minded consumers over age 50 — the fastest growing demographic in the U.S. — are driving demand for ready-to-cook premium species like shrimp, salmon and tilapia. In fact, says Reis, Gorton’s prepared tilapia sales are up 108% year-to-date.

Of course, tilapia owes much of its success to its stellar nutritional profile, prompting many manufacturers to roll out better-for-you versions of existing products. For example, says Reis, Gorton’s recently reduced the amount of fat in its battered fillets by 30% and reformulated its grilled fillets to include all-natural ingredients. Other manufacturers are offering organic, sustainable frozen seafood.

‘MAKING A DIFFERENCE’

“Consumers want to know that they’re making a difference, that they’re not harming fish stocks by purchasing a particular product,” explains Redmond. “They want to purchase what’s good for them but also what’s good for the Earth. Knowing how the ingredients were produced and who’s certifying them is as important as the taste and nutritional aspects.” Add convenience to that list as well.

“We’re seeing a lot more microwaveable products in a category that was traditionally dominated by oven preparation only,” says Anne North, director of retail marketing for Baltimore-based Phillips Foods. The company recently introduced a line of frozen seafood products called Steamer Creations that can be steamed in-package in the microwave, similar to frozen vegetables.

Blue Horizon, on the other hand, is focusing on creating frozen seafood meals that can be prepared in a skillet in just one step in less than 10 minutes. But the growing popularity of home grilling has companies like SeaPak turning their attention to frozen seafood specially formulated for the barbecue grill.

The other significant trend in the frozen seafood category is the introduction of more exotic flavor profiles. “The explosion of ethnic restaurants and food television has created a more adventurous seafood consumer willing to try more exotic flavors,” says senior brand manager Jeff Tahnk of Portsmouth, N.H.-based High Liner Foods, which counts Tuscan-encrusted shrimp, tortilla-encrusted tilapia and Mediterranean Cod among its most recent new product launches.

Where are retailers supposed to find room for all of these new products? Surprisingly, many manufacturers oppose the idea of a second location for frozen seafood. “Fragmenting the category by merchandising similar products in multiple areas of the store — sometimes managed by two different departments — creates a very confused consumer as well as unnecessary duplication among products,” explains Reis, who favors a spot inside the traditional frozen food aisle next to either the frozen vegetables or frozen potatoes.

‘KEEP IT IN THE AISLE’

According to North, merchandising frozen seafood outside the main frozen food department limits the number of consumers who peruse the frozen seafood offerings to only those specifically interested in frozen seafood — hurting consumer awareness and impulse sales.

“Consumers don’t recognize the difference between the frozen seafood department and the frozen food department,” she continues. “By combining both of those into just one frozen foods department, all of the products in the planogram could be better managed to best utilize freezer shelf space.”

According to manufacturers, the real key is finding the right mix of products. Says Jaynes, “We find that successful retailers are keeping the ‘classic’ products with a good value proposition front and center where consumers can easily find them, but also offering a nice integration of new products to stay ahead of current trends and consumer tastes.”

Although manufacturers would like to see it expand, “The frozen seafood selling space isn’t growing in square footage,” adds Redmond. “But the SKU mix is. And it’s working. Retailers (should) go broader where they can’t go deeper.”

One way to do that, says Gorton’s Reis, is to eliminate duplicate products offered under different brands. Retaining only the best-selling brands will “not only create space for innovative new items but also allow for multiple facings of proven category best sellers, thereby eliminating out of stocks and growing category volume.”

Seriously, asks High Liner’s director of strategic planning Eric Albert, “How many shrimp scampi or beer battered fillets does one store really need?”

SCHEMATIC SUGGESTIONS

Once the proper mix has been determined, Reis suggests setting the shelf vertically by brand, with larger items on lower shelves, smaller items higher up and new SKUs at eye level. But, he adds, a good shelf set alone won’t sell the category. In fact, a whopping 60.4% of all frozen seafood sales over the past 12 weeks were driven by some kind of merchandising support — a 2.9% percentage point increase over the previous year, according to IRI.

“The frozen seafood segment is characterized by a high number of impulse purchases,” says Reis, citing a particular need for programs that tie frozen seafood to complementary products both inside and outside of the frozen food department.

“The best promotional strategies we (support) revolve around providing meal solutions for families,” says Tahnk. “Meal deals where an entire dinner, including seafood, starch and vegetables, is merchandised in one display case have been particularly successful.” But meal components don’t always have to be merchandised together; sometimes just promoting them together in an ad or store flyer can be enough.

Even easier is placing information about frozen seafood in areas of the store where potential customers are most likely to shop. “Studies have shown that consumers who shop the seafood department are the same ones who shop wine, dairy and deli,” reports Phillips’ North, who adds that “Cross-merchandising in these departments would reach those consumers most receptive to suggestive selling.” And don’t forget the fresh seafood counter, where shoppers would likely be very interested in learning about new alternatives in frozen.

Demos are also effective ways to prove just how good today’s frozen seafood tastes. Pair it with another product or two from around the store to create an entire meal and you’ve got a win-win, says High Liner’s Tahnk. But the best demos can be used to achieve yet a third objective: Giving consumers confidence in their ability to cook seafood for themselves. “Preparing seafood at home is still a mystery to many consumers,” Tahnk explains. “Our objective is to give them new ideas and preparation methods” that they can easily reproduce in their own kitchens.

PROMOTE OFTEN

Manufacturers’ final piece of advice to retailers is to promote frozen seafood frequently rather than deeply, particularly outside of key selling seasons. “Some retailers look at seafood as something they really only need to promote during Lent,” says Gorton’s Reis. “But there are huge opportunities to grow frozen seafood all 12 months of the year. Maintaining strong merchandising support year-round is critical to taking advantage of category growth opportunities.”

He adds, “Frozen seafood is a great category to participate in given its close match with consumer trends.” From better-for-you to improved convenience, “Those trends are only accelerating, as is the growth of demographic groups particularly inclined to eat seafood.” As a result, “Category growth should accelerate in the future. However, only the most forward-thinking retailers and manufacturers will be able to take advantage.”