SEAFOODNEWS.COM (Analysis) by John Sackton –
October 30, 2018
Snow crab supplies are likely down again significantly in Newfoundland next year, but do the markets care?
For many years snow crab has been a staple of the retail seafood counter. In fact, excluding shrimp, all varieties of crab are the next largest shellfish category sold at retail. According to Nielsen data, crab accounts for about 46% of the value, and 44% of unit sales of shellfish excluding shrimp.
But with the prospect of another significant reduction in crab catches from Newfoundland, likely not really offset by increases in Alaska; combined with the lack of red king crab this fall, we wondered what retailers may be doing to limit their exposure to falling crab supplies.
In terms of promotion, it is clear that retailers are seriously backing away from snow crab. Promotions are down about 50% over the past 24 months.
If we look at the number of retail features per year devoted to snow crab, there is a clear trend downward as pricing has increased, and availability has decreased. Our 2018 figures are estimated for the 4th quarter.
Next year, promotional activity will likely drop further, so the reductions are unlikely to push prices higher, at least for US retail contracts.
Whether Japanese demand for snow crab in a declining supply situation may have a price impact is too early to know.
So given the reduction in snow crab, what are retailers putting in their shellfish case to attract customers?
Two species stand out. One is scallops. There is increased US domestic supply, and for the first ten months of 2018, scallop promotions are up 40% over the prior year. Adding in the projected 4th quarter promotions, for the year scallop promotions could be up 60%.
Dungeness crab clusters are also being featured. Although the volume is only about 10% that of snow crab retail volume, cluster promotions are up 124% over last year through October.
Another shellfish product line gaining some traction is mussels with promotional sales up over 40%, although this is not a high volume item.
Shrimp is the primary go to shellfish seafood item at retail. Yet after three good promotional years, 2018 retail shrimp promotion shows signs of slowing. Part of this is that retailers saw prices increase from 2016 to 2017, and the drop in pricing did not kick in until 2018. It is not yet clear whether the lower pricing will lead to higher promotions in December of this year, as it takes time for price reductions to work through into retail.
Although the drop in our promotional estimate in the shrimp chart looks dramatic, it is only around 4%. Compare this to snow crab, that has dropped nearly 50% in promotional activity since 2016.
The other change is in finfish promtions. Historically, shellfish values including shrimp have represented about 50% to 52% of retail seafood sales. This had been increasing through 2017. It likely reversed in 2018, with finfish sales gaining more promotional attention and product movement than in 2017. Our projection is for about a 3% increase in overall finfish promotional activity, if the current trends hold through the rest of the 4th quarter.
The conclusion of this analysis is that retailers are moving on to other items beyond snow crab, and the upcoming supply volatility is therefore less likely to affect them in a negative way, as they are already building alternatives in their seafood sales.