After seven months of struggling to keep businesses going during the pandemic, it seems we are in a bit of a lull.
No end is in sight, but things are not getting dramatically better either. The bounce back we experienced both in terms of sales demand and restaurant demand in June and July appears to be fading.
In mid-September, we were simply facing a huge number of uncertainties. They included the election in seven weeks, a potential stall in job creation and employment this fall with possible increases in layoffs, a widely predicted resurgence of the virus as more people try and move indoors and congregate in schools and colleges and of course the volatility on Wall Street.
We know that foodservice is not going to snap back. The latest OpenTable data for the U.S. vs. other countries is striking.
In Germany, OpenTable reports seated diner numbers are 20 per cent higher the first week in September vs. last year.
In Canada, seated diners are 20 per cent down from last year (on a linear regression) in the first week in September.
In the U.S., that number in the first week in September was down 40 per cent on a national average, although there is considerable variation among major cities, with Tampa and Las Vegas reporting the best numbers, while New York and San Francisco have some of the worst.
Restaurants that have adapted to lower capacity, limitations on indoor dining, new staff training and procedures, now have reached the end of what little support they had gotten and this fall many will make the decision to close or struggle on.
Prospects are for 20 to 30 per cent of units to close permanently.
The airline and travel industries are also not going to snap back.
A number of major airlines have announced layoffs and reductions in routes for the fall once their government aid programs have expired. The same thing is happening with hotels and resorts.
This summer has seen strong sales in tourist-focused locations, as foreign travel was taken off the table. We have also seen a trend where many people are staying in these areas longer, either with rentals or second homes, so long as they can work or their kids can attend school remotely.
This helps support foodservice businesses in these areas, but at a lower level than during the height of summer. At the same time, the dispersal hurts spending in metropolitan areas. Boston has notorious traffic and even now, rush hour is virtually non-existent. Very few people in office jobs are working downtown.
October is traditionally a slow time for seafood sales as summer consumption winds down. Nevertheless, despite all the uncertainties, I think there are important signs that seafood is uniquely positioned for strong sales during the holidays and Lent.
There are three major consumer trends that have accelerated during the pandemic and are likely to endure to the benefit of seafood consumption. In short, these trends are making seafood more valuable relative to other proteins.
The trends are the huge increase in home cooking as fewer people eat in restaurants, the big increase in usage of frozen food, which is especially advantageous for the seafood industry and continued emphasis on health and diet during the pandemic.
We conducted an informal survey among Urner Barry/Seafood.com employees, friends and neighbors in Boston and some colleagues in the seafood industry to try and get some anecdotal information about seafood consumption.
First, the survey of around 70 people showed a heavy preference for eating seafood.
Nearly 30 per cent ate seafood twice a week or more and another 30 per cent ate seafood at least once a week. This shows our sample consists of heavy seafood eaters, which is important.
The Food Marketing Institute’s (FMI) Power of Seafood Report in 2019 found that just 20 per cent of Americans ate seafood twice a week, so our sample in this survey is overweighted with regular seafood eaters.
FMI reported that 56 per cent of Americans ate seafood only once or twice a month. In our sample, that number was less than 20 per cent.
In many instances, there is a statistical phenomenon where 20 per cent of the heavy users account for 80 per cent of the usage of a particular product.
I think this is likely true in seafood as well. It is why it is more cost effective to try and increase consumption among regular and heavy users rather than trying to entice light users to become heavy users. I think the increase we are seeing in seafood consumption is likely tied to regular or heavy users eating more seafood.
The first finding is that among our respondents, seafood consumption has definitely increased.
About 35 per cent reported increasing usage, while 15 per cent reported decreased usage, for a net gain of 20 per cent of respondents buying more seafood.
Our next question involved changes in where people purchase or get their seafood. In particular I was interested in whether online direct sales of frozen seafood were getting a boost, as that is something I have personally made extensive use of during the pandemic.
In 2019, 44 per cent reported getting most of their seafood at restaurants. But purchasing has changed in 2020.
Three areas saw a significant increase: purchases at retail stores, obtaining seafood from friends and family and personal use, and buying seafood using a retail delivery service such as Hello Fresh, Amazon Fresh or Instacart. Restaurant usage fell sharply, as could be expected.
At retail, 35 per cent reported increases, while 22 per cent reported decreases, for a net increase of 13 per cent.
Among seafood eaters, especially those in the seafood industry, obtaining seafood from friends and family, or by personal use, is widespread. This type of usage increased 33 per cent during the pandemic, with only 12 per cent reporting a decrease.
The most significant change in terms of percentages was those who were using a retail home delivery service to buy seafood. This had a 21 per cent increase, vs. a six per cent decrease, for a net change of 15 per cent.
Buying seafood online direct from a wholesale vendor surprisingly did not show significant changes. Eight per cent said their use of this type of purchasing increased and nine per cent said it decreased.
We also asked about species, specifically which species were mostly consumed in restaurants and which were cooked at home.
Shrimp, salmon, whitefish and flounder either had the same frequency of consumption at home as in restaurants, while crab, lobster and clams and oysters had significantly lower home consumption.
Looking forward to the holidays, this suggests excellent sales of shrimp and salmon, but it also suggests that sellers will have to work to convince more consumers to take home items like crab and lobster. The fact that crab and crabmeat is pre-cooked is a big advantage, which less frequent users of crab may not be fully aware of.
Finally, another focus of the survey was on use of frozen seafood.
We have seen many reports of the increase in the frozen retail category. In the survey we wanted to see how this might apply to seafood.
Our respondents indicated that 31 per cent used mostly fresh seafood, while 57 per cent either used mostly frozen, or a mixture of fresh and frozen. About 25 per cent reported increased purchases of frozen seafood, while 13 per cent reported increased buying of fresh.
In terms of species, shrimp was by far the product most frequently bought frozen.
Shrimp was purchased by 77 per cent of those using frozen seafood, followed by salmon and whitefish, which was purchased by 32 per cent and 30 per cent of those using frozen.
Given the changes in seafood usage we asked if respondents had purchased from a new seafood vendor this year. Of those surveyed, 30 per cent said they had. This suggests that there is substantial movement or opportunity for new vendors to establish themselves as heavy seafood users experiment with different ways of getting products.
Finally, 40 per cent of all respondents were specifically not in the seafood industry, while the remaining respondents were in the industry, including those working for Urner Barry/Seafood.com.
Why does this survey reflect optimism about holiday sales? The main reason is that it shows seafood consumption has increased over last year for many users, despite the lack of opportunities to eat seafood at restaurants.
Conventional thinking in the industry was that the consumer’s fear of cooking seafood was a limiting factor that meant the industry was highly dependent on away from home meals where people got seafood.
The expansion of retail sales of seafood shows that this perception may be outdated, as it appears that when restaurant usage declined, it spurred people who liked seafood to purchase more of it from other channels.
The trends for both frozen and for fresh seafood continue to be more positive than any other category.
The continued strength of seafood consumption suggests that the strong performance of seafood at home will continue through the holidays and into the Lent season next year.
This trend will likely remain regardless of the uncertainties of the next few months. Although businesses could be hurt by a failing recovery and a subsequent drop in consumer incomes, this is not enough to change the positive trends in seafood consumption.
The reason is that looking back at the financial crash of 2008–09, foodservice seafood sales suffered immensely, while retail seafood departments had some of their most profitable years from 2009 to 2012. The reason was that retail selections gave consumers a greater range of options to trade down to products that fit their current income.
Trading down at the foodservice level often involved cutting back on total restaurant visits. This type of lost business cannot be made up and is in my view the reason that retail seafood sales were more favourable than foodservice during the last economic recession.
Retail sales are also more opportunistic if there is a glut or shortage of product, meaning they have a greater ability to expand or contract sales based on promotion.
So, with the pandemic hopefully at perhaps the halfway point, seafood businesses that have survived so far can look forward to making it through to the other side.
We are fortunate to be selling a product that has such great intrinsic food qualities and health benefits and that is harvested in a manner that most consumers wholeheartedly endorse.
This article was republished with permission of John Sackton and seafood.com.
