Operational costs in the fresh seafood department are extraordinary — from seafood shrink to cases and ice to labor. Supermarkets will benefit from shifting more focus from fresh seafood cases to offering more deli prepared seafood items and frozen selections, according to consultants.

Seafood has one of the highest levels of shrink — 6.1% on average in 2023, according to FMI’s Food Retailing Speaks report — across frozen and fresh categories. However, 14% of retailers plan to expand space for fresh seafood over the next two year, while 6% plan to decrease space in the department, FMI found.

“Supermarkets are under increased competitive pressure from many formats, including dollar stores, mass merchants, and especially club stores. All are gaining market share at the expense of traditional grocery retailers,” said Chuck Anderson, vice president of operations and partner at Certified Quality Foods, which helps retailers and distributors measure quality seafood.

Many grocery stores have fresh seafood programs that break even or lose money based on a fully loaded profit and loss, he noted.

The problem is that many retailers believed the days of larger ice cases as theater would continue, said Joseph Sabbagh, president of Sax Maritime Associates.

“They failed to promote frozen seafood properly, they did not fully maximize seafood merchandising through the store, and they continue to merchandise cooked and raw seafood in the same case,” Sabbagh said. “All this necessitates higher labor and hinders sales from day one. Then, inflation adds to slower sales and increased labor, energy and carrying costs.”

Turning around fresh seafood department sales requires a corporate commitment to the department, providing training and production labor hours to support the growth of deli-prepared food, Anderson suggested.

“This can be offset somewhat by heavier promotion of frozen commodity shrimp, crab, and value-added, which require less labor and have less shrink.”

Additionally, replacing service seafood counters with self-service seafood is a good option for some retailers and some stores as lower volume stores may not have enough traffic to support a service seafood operation, according to Anderson. Self-service seafood departments can be very profitable, but typically have a lower sales base.

Focus on boosting frozen, fresh skin pack offerings

Sabbagh believes the days of large “fresh” seafood cases are over for 90% of the 65,000-plus grocery stores across the US. A large portion of those stores can increase their frozen, pre-packed and skin pack programs, similar to Aldi and Trader Joe’s merchandising, Sabbagh said.

Anderson recommends buying and selling seafood products in extended shelf-life packaging such as 10K OTR, MAP, and others.

The space for fresh or refreshed seafood items should be cut in half and replaced with coffin cases devoted to frozen seafood in order to significantly reduce labor and resources such as ice, according to Sabbagh. Then, grocers can advertise the advantages of frozen food such as a “natural way to enhance the shelf life” and “frozen is fresher than fresh.”

Retailers can increase frozen seafood sales by addition more and better value-added varieties, according to Sabbagh.

“More customers are looking for easy to prepare meals and less raw commodity fish.”

And the shift may not always require more freezer space.

”During the pandemic, most retailers were forced to reduce SKUs and did not lose sales. Effective SKU rationalization can free up space for frozen value-added seafood,” Sabbagh said.

Moving to more frozen sales will reduce drip loss and shrink, Anderson agreed.

“Most retailers can increase frozen commodity shellfish sales with stronger and deeper promotions.”

Instead of focusing as much on frozen finfish, offer lower margin, deep discounts on frozen crab, lobster, and other shellfish to drive incremental sales and gross profit dollars, Anderson suggested.

“A limited time, hot special on snow crab will drive impulse sales, steal market share from foodservice, and may even create sales from restaurants stocking up when retail sales prices are lower than clubs and food service distributor price.”

Costco has been very effective in driving impulse shellfish sales with its weekend roadshow events, Anderson added, and other retailers can hold similar events with either fresh or frozen shellfish.

Additionally, oven-ready raw seafood displayed bulk in the fresh seafood case should be sold packaged in a case close to or shared with the meat department’s oven-ready raw items, Sabbagh suggested.

Boost prepared seafood offerings

To reduce ice displays, grocers should transfer all ready-to-eat items to the prepared food department, Sabbagh said.

“I think 60% of the stores in the country could sell more seafood in prepared foods, food service concepts and grab and go with more relevant merchandising that match today’s seafood consumer. Major investments in department design and merchandising will be rewarded. Increasing SKUs and space allocation to fresh deli-prepared seafood is a way to drive sales at the expense of food service restaurants.”

To reduce shrink, raw commodity products can be re-merchandised as prepared, ready to eat items. For instance, tuna can become tuna salad and cod can become fish and chips, Sabbagh suggested.

How to lower labor and operational expenses

Despite the recommended shift to frozen and deli prepared seafood, Anderson is not recommending forgoing fresh seafood departments altogether.

A well-run service seafood program is one of the most impactful competitive advantages a food retailer can have against alternative retail formats, Anderson believes.

“Nothing beats a well-run service seafood department to win in competitive, affluent neighborhoods. A winning service seafood program requires commitment in the form of space, equipment, labor, and training.”

Retailers that want to succeed must have a corporate commitment to the seafood department — with training and production labor hours to support the growth of deli prepared food, according to Anderson.

“This can be offset somewhat by heavier promotion of frozen commodity shrimp, crab, and value added, which require less labor and have less shrink.”

Carefully examining hourly seafood sales is critical to setting department hours and creating efficient schedules, Anderson noted.

Reducing turnover is also key to reducing labor expenses in seafood.

“Seafood is a service department that requires specialized knowledge and skills. Pay your seafood managers and secondaries well. The most trusted people in the retail supermarket need to be the store manager, the pharmacist, and the seafood manager. Retail seafood is a great career, but wages must be career-type salaries, not ‘just a job’ pay.”

To that end, retailers should pay and train seafood managers to be managers of their departments.

“Provide seafood managers with the tools to succeed and hold them accountable for sales and bottom line profits,” Anderson said.

Grocers should also provide incentives to managers for beating sales and profit projections.

“Incentives can be pay, bonuses, extra personal days off, along with trips to visit suppliers, other retail markets, and distribution centers,” he added.

To help reduce shrink, train seafood department staff in proper case setup, breakdown, storage, and product handling techniques.

“Good sanitation practices are critical for product quality and minimizing shrink,” Anderson said.

Another way to improve seafood employee recruitment and retention is cross training between departments.

“Cross training is more than knowing how to weigh, wrap, and price products in another department to cover lunches and breaks. Cross-training provides growth opportunities for employees by allowing them to see how other departments are organized and run. This improves efficiency and encourages innovative sales and merchandising,” Anderson said.

Cross training should be more than just the seafood and meat department helping each other out, according to Anderson.

“Letting a seafood manager or second person work in produce for a week or two per year helps foster growth with new experiences,” he said. Ordering, handling, stocking, culling, seasonality, and rotation are similar in seafood and produce. We can learn a lot from each other.”

Provide training and certification opportunities for employees, Anderson recommended. Retailers can create training and certification programs for food handling, merchandising, ordering and inventory management, product knowledge, and customer service.

Training and development is more than nonproductive payroll, it is an investment in the seafood department and employee careers.

“Keep employees growing and engaged. Disengaged employees cost lower sales, higher shrink, lower productivity, lower customer satisfaction,” Anderson said.

Efficient inventory management is also key to reducing shrink, Anderson said. Track historical sales and create sales projections for each week and each day, which aids in ordering and inventory management, as well as labor scheduling.

“Order just enough to meet or exceed sales projections,” he said.

Additionally, track shrink so you are aware of what you are throwing away and when you can adjust the order to reduce shrinkage.

Another tip for reducing shrink is sourcing the right display cases.

“An energy-efficient case with natural lighting, gravity coil refrigeration, and humidity will bring out bright colors, keep fish cold and moist, and reduce drip loss,” Anderson said. Giant Eagle is one of many supermarket chains utilizing better full- and self-service cases, according to Anderson.

Open-air and refrigerated ice cases can be more attractively merchandised and drive sales, but they will require more attention and labor and can compromise quality and create shrink if not appropriately maintained, Anderson added.

This article is an excerpt from the August 2024 issue of Supermarket Perimeter. You can read the entire Seafood feature and more in the digital edition here.