Despite boasting flat inflation in the third quarter of this year, fresh seafood sales plummeted in the third quarter. While that could be a harbinger of bad news for the fourth quarter and the holiday season, retail organizations and analysts have a fairly positive outlook for sales this holiday season.
Fresh seafood sales dropped 6% to $1.5 billion for the 13 weeks ending Oct. 1, according to Circana and 210 Analytics. Finfish sales dropped 3.7%, while shellfish sales plummeted 9.6%.
Meanwhile, overall fresh seafood volume declined 4.6% to 164 million pounds. Shellfish volume decreased 4.4%, while finfish volume dropped 4.4%.
“Because of crab, shellfish had a very strong first half of the year, but in the second half, volume and dollars were down,” said Anne-Marie Roerink, principal at 210 Analytics, during the Elanco-sponsored webinar, “U.S. Retail Seafood Sales Q3 2023.”
The sales drop is somewhat surprising, since most fresh seafood species’ prices dropped in the third quarter of 2023. Overall seafood inflation has “subsided considerably,” over the past year, Roerink noted, particularly compared to total food and beverage inflation, which spiked up 7.5% in the third quarter.
Crab is the most notable example of price deflation, which led to much higher sales and volume throughout 2023. Retail sales volume of snow crab soared 222% for the first six months of 2023 compared with the first six months of 2022, according to the “Wells Fargo Agri-Food Institute’s Industry Update - Q2.”
While the price deflation was not a significant as earlier this year, fresh crab prices dropped 10.9% in the third quarter to $8.19 per unit on average, according to Circana.
Many grocers have been aggressive with crab promotions, boosting sales. For example, Downers Grove, Ill.-based Fresh Thyme Market has been consistently promoting snow crab clusters for between $6.99 and $7.99 a pound, along with king crab arm and claw sections for $17.99 per pound.
As a result, the retailer’s crab sales surged 672% for first 10 months of 2023, while overall fresh seafood sales jumped nearly 37%, according to Jason Resner, meat and seafood sales, merchandising, marketing, and procurement lead for Fresh Thyme.
“Consistent promotional frequencies, constant assortment and variety execution at store level, and strategic supplier partnerships have helped Fresh Thyme buck the industry sales trends this year,” he said.
The exceptions in price deflation in the third quarter were shrimp and lobster, Roerink said, which are “coming back to the level they were last year.” Lobster prices hiked up 4.8% in the quarter to $15.14 per unit on average, while shrimp inclined slightly by 0.9% to $7.34 per unit.
Salmon — still the top fresh seafood seller — remains price competitive with other premium proteins, according to Roerink. Fresh salmon prices fell 1.3% in the quarter to $10.52 per unit on average.
Comparatively, beef ribeye prices soared a whopping 11% to $18.31 per unit on average in the third quarter, while pork loin price inclined 1.8% to $6.49 per unit on average. Chicken breast prices, on the other hand, dropped 7.3% to $6.86 per unit on average.
“More than anything, consumers are moving to ground beef and turkey — lower priced animal meat,” Roerink said.
How grocers can hike holiday sales
Despite concerning news for fresh seafood in the third quarter, FMI - The Food Industry Association, retailers, and Roerink share a more positive outlook for the fourth quarter and the holiday season.
During the COVID-19 pandemic years, Americans shifted to smaller turkeys and different proteins for Christmas, Thanksgiving and New Year’s Day, according to Roerink.
“We saw beef and seafood like salmon become more involved and become more a part of meat-centric holidays,” she said.
Plus, while consumers are tightening their wallets, they spend more for holidays and special occasions, according to Circana data. Only 8% strictly stick to their shopping list, while 52% are willing to splurge for a special occasion/holiday and 45% splurge to do something nice for themselves, their family or friends.
Forty-one percent splurge on items for convenience and 34% splurge if the item is healthier than the alternative — which especially plays into seafood’s benefits.
“Consumers seem very aware of inflation having pushed the price point higher than the typical holiday spend, but special occasions are important and that means a greater willingness to splurge a little,” Roerink said.
Resner echoed Roerink’s sentiments.
“We feel customers will be looking to treat themselves and family to some indulgent items this holiday season. Crab, shrimp, and lobster are those items not normally always on the shopping list that, if you promote and market them correctly, you can get the customer to either add them to their list or by building impressive displays at store level can get them to buy by impulse,” Resner said. “Eye appeal equals by appeal, and with an attractive promo retail they just might buy some to eat that night, and some to save in their freezer.”
Fresh Thyme will focus its holiday promotions on crab legs and shrimp, Resner said.
Shoppers are optimistic about their financial situations heading into the holiday season, FMI executives said during the organization’s webinar on its recent U.S. Grocery Shopper Trends, Holiday Season report.
A majority of shoppers (80%) are excited for the holidays this year, according to FMI, and 18% of consumers are planning a celebration with more people than usual for the December holidays. And more shoppers — 34% versus 25% in 2022 — are excited to celebrate the New Year’s holiday, according to FMI.
“While consumers are understandably concerned about their finances amidst continued inflation heading into the holidays, shoppers are proving to be just as resilient when it comes to preparing for their holiday meal celebrations,” said FMI President and CEO Leslie G. Sarasin. “From looking for deals, shopping around at different stores and cooking more meals at home, shoppers remain excited for the holidays despite planning to ‘make do with less’ this year.”
Shoppers are saving money by going out to eat less, so they are taking advantage of expanded foodservice options at grocery stores, according to Sarasin — a trend that will benefit sales of holiday entertaining items like shrimp trays and seafood dips and spreads.
To drive that point home, food at home inflation rose 2.1% in October versus October 2022, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index while food away from home jumped 5.4%.
Already, a significant 75% of Americans prepare dinners at home on a daily basis, according to the FMI report, and 31% are preparing meals at home more often. Conversely, 60% of shoppers say they are eating out less and only 14% of shoppers plan to dine out more in 2024.
Over half (52%) of shoppers say grocery store prepared foods offer good value to dining out/takeout, Rick Stein, vice president of education program development at FMI, said during the webinar.
In fact, seafood deli sales increased 3.4% in the third quarter, according to Circana.
“Restaurant-like items that are created in the supermarket but sold out of the deli department are doing very well,” Roerink said.
Overall, Roerink expects more holiday gatherings at home with friends and family as — compared to during the peak COVID-19 years — “most surveys are showing a return to more normal times in terms of party size and dinner lineups.”
The National Retail Federation also expects record spending on all products during the holiday season, projecting a 3% to 4% increase to between $957.3 billion and $966.6 billion.
“This year, a whole new set of dynamics is in place,” said Jack Kleinhenz, chief economist for NRF. “The average household remains on relatively solid financial footing despite pressures from still-high inflation, stringent credit conditions and elevated interest rates.”
Additionally, recent revisions to government data indicate that consumers haven’t drawn down as much of their pandemic savings as believed earlier, and savings are providing a buffer to support spending, Kleinhenz said.
“The overall story for this holiday season is that it looks very good.”
The overall US economy is proving to be more resilient than anticipated, Kleinhenz added.
“I expect the recent rhythm of spending will continue into the holiday season and that consumers will continue to spend on a range of items and experiences but at a slower pace.”
It’s the economy, stupid
On the other hand, economic concerns persist. Thirty-nine percent of shoppers said their household finances have gotten worse in 2023, according to FMI.
And more holiday shoppers — 43% — rate their personal financial situation as fair or poor than last year, according to Circana. Nearly half (48%) of holiday shoppers say rising costs and other expenses will lead them to spend less this holiday season.
Consumers plan to spend an average of $754 on holiday shopping this year — below last year’s spending intentions, Circana found. As a result, 2023 holiday season spending may fall short compared to last year by as much as 2.5% during November and December.
FMI is urging consumers to budget ahead and plan holiday meals “as far in advance as possible,” Sarasin said. They can also take advantage of supermarkets’ registered dietitians who can help shoppers plan meals or suggest different recipes and ingredients that could be substituted for traditional holiday options, according to Sarasin.
This article is an excerpt from the December 2023 issue of Supermarket Perimeter. You can read the entire Seafood Holiday Outlook feature and more in the digital edition here.