While analysts expect fresh seafood sales to continue to be challenged in 2024 due to shoppers’ economic concerns, sales of prepared seafood items should continue to grow.
“Seafood volumes have been down for two years in a row after the huge increases from the early pandemic times,” said Chuck Anderson, vice president of operations/partner for Dallas, Texas-based Certified Quality Foods, which helps retailers and distributors measure quality seafood.
“The concern is that seafood has given back most or all of the new shoppers and sales gains from 2020 and 2021.”
Fresh seafood sales declined 5.7% and volume dropped 7% for the month ending Nov. 26, compared to the same month in 2022, per research firm Circana. However, the category still generated $417 million in sales in November and $6.3 billion for the year ending Nov. 26.
Seafood sales have been challenged and the occasional buyers have moved away, acknowledged Chris DuBois, executive vice president – Fresh/Protein practice leader for Chicago-based research firm Circana. However, the core and heavy buyers are still in the category, he noted.
“I think refrigerated seafood is bottoming and salmon is a big part of that. A big part of re-energizing seafood sales is bringing new people into the category. Winning those shoppers is the future for the seafood case,” DuBois said.
Anderson and others attribute the decline to two years of high grocery inflation — even though the overall food and beverage Consumer Price Index consistently declined in the second half of 2023.
Circana found that 45% of shoppers are cutting back on non-essentials — and many group seafood in that category, according to Anderson.
“Customers have cut back on shellfish in recent months, despite lower prices on crab and near record low shrimp prices. Shrimp, crab and lobster are primarily impulse purchases and considered non-essential,” Anderson said.
“Because of crab, shellfish had a very strong first half of the year, but in the second half, volume and dollars were down,” confirmed Anne-Marie Roerink, principal at 210 Analytics, during the Elanco-sponsored webinar, “U.S. Retail Seafood Sales Q3 2023.”
Roerink was surprised by the drop in crab and shellfish sales because overall seafood inflation has “subsided considerably,” over the past year, particularly compared to total food and beverage inflation, which jumped 7.5% in the third quarter of 2023.
However, at an average price per pound of $9.19 for fresh seafood, prices are “significantly higher” than those of the three biggest animal proteins — chicken at $2.99 per pound on average, pork at $3.21 per pound and beef $6.44 per pound on average in November, Roerink said.
Additionally, monthly tracker research by Kansas State University found a decreased Willingness-to-pay (WTP) for all five beef, pork and chicken items, according to Roerink. That hesitancy will undoubtedly impact demand for seafood, she said.
Only 15% of those surveyed by KSU indicated their household finances are better than last year, “leading to an ongoing emphasis on price in the purchase decision,” she said.
Inflation’s impact
Overall inflation — including higher housing and energy costs — remains a concern among Americans. The Consumer Price Index for All Urban Consumers (CPI-U) increased only a slight 0.1% in November on a seasonally adjusted basis, but rose 3.1% for the year, according to recent data from the U.S. Bureau of Labor Statistics.
Overall food costs increased 2.9% in November, compared to November 2022. Food at home realized the larger increase at 5.3% compared to 1.7% at home.
“The November CPI demonstrates that the inflation rate for food-at-home continues to head in the right direction for American consumers, dropping to 1.7 percent on a year-over-year basis,” said Andy Harig, vice president of tax, trade, sustainability and policy development for FMI - The Food Industry Association. “But even as inflation gets back on par with historical averages, consumers must remain flexible and tactical with their purchasing decisions to get the greatest value as we head into the holiday season.”
The U.S. Department of Agriculture is predicting that overall food inflation should slow to about 3% in 2024. The agency expects grocery food prices to rise about 1.6% and restaurant food prices should increase 4.3%.
However, the “resiliency of the consumer is being tested” by a number of factors beyond inflation and interest rates, wrote Jack Kleinhenz, chief economist for the National Retail Federation, in the organization’s December Monthly Economic Review.
Excess liquidity built up during the pandemic is shrinking and access to credit has become more expensive as banks have become more cautious, with both curbing the purchasing power fueled by job and wage gains, he wrote.
Gross domestic income – which goes beyond the value of products produced to include wages, rent, interest and corporate profits earned during production – rose only 1.5% in the third quarter, adjusted for inflation, following 0.5% in the second quarter, which shows the economy is slowing but not halted, according to Kleinhenz.
However, the US economy is on track to end 2023 with vigorous growth for the year, Kleinhenz said.
“A strong labor market, rising wages and access to excess savings have helped spending continue despite inflation and higher interest rates.”
No one can accurately predict how the overall economy will perform in 2024, Anderson said, but it “certainly won’t be booming.” Consumer confidence is low, so discretionary spending — especially on shellfish — will likely remain lackluster, according to Anderson.
Value-added seafood will continue to grow
Despite concerning sales numbers in fresh and frozen seafood, prepared seafood items — including sushi, seafood salads and many other value-added items — performed better than many items in the fresh seafood case in the latter months of 2023. That trend is expected to continue into this year.
Sales of seafood appetizers, for example, surged nearly 210% in November, according to Circana. Sales of most other prepared seafood items sold via delis dropped in November, but analysts expect strong growth in the near future.
“I expect deli prepared foods [including sushi] to continue to increase for seafood in 2024,” DuBois said. “I don’t have an economic crystal ball, but unemployment is low, people are spending money and the economy is reasonably strong.”
Likewise, Anderson expects prepared, value-added seafood volume and sales to continue to increase next year and beyond. “Prepared seafood sales have been growing in seafood and deli for the retailers that put in the effort. Ready-to-cook and ready-to-eat seafood appeals to busy shoppers and restaurant customers afraid to prepare seafood at home,” Anderson agreed. “The less it looks like a fish, the more appealing it is for many customers.”
Plus, with high per pound commodity seafood pricing “scaring away customers, offering prepared items where customers look at the price per meal is the way to go,” Anderson said.
Millennials and Generation Z individuals who are more focused on convenience and taste exploration than Baby Boomers and Generation X consumers will continue to drive sales of convenience prepared seafood items, according to DuBois.
“Sushi is a great example. It can be a great weekday meal for someone making a quick trip and it fits right into the younger generation taste preference and mindset,” he noted. In urban or suburban stores that cater to younger shoppers, it’s not surprising to see sushi displays move from behind cases to upfront grab-and-go bunkers.
And the trend is similar for poke and seafood trays, “where younger generations want to try new foods and may not always want Doordash or want to go out,” DuBois said. “More and more, it’s becoming less about buying whole muscle meats and fish fillets, and more about buying dishes that are closer to ready to consume.”
The most successful retailers are expanding self-service fresh and frozen merchandising space for prepared seafood products, Anderson agreed.
Anderson recommends focusing on value-added salmon and shrimp meals, in particular.
“Look at the hundreds of products in the meat department: the vast majority come from chicken, cattle, and pigs. As aquaculture grows and wild seafood gets more expensive, seafood is headed the same way as meat, with most products coming from well-known farmed salmon and shrimp.”
Promotional discounts and coupons are a good way to initiate trial for value-added seafood, Anderson said. Circana found that 55% of shoppers are looking for deals, “so give it to them with ready-to-cook and ready-to-eat seafood discounts.”
In-store sampling is also a great way to drive value-added/prepared seafood trials and sales, he added.
This article is an excerpt from the January 2024 issue of Supermarket Perimeter. You can read the entire 2024 Seafood Forecast and more in the digital edition here.