“Everyone’s crystal ball is broken” – COVID-19 has scrambled the industry’s ability to plan ahead

Historically, conversations around logistics didn’t always reach the top level of the seafood industry’s decision-making hierarchy, but in the past two years, that has changed.

A Global Seafood Market Conference (GSMC) panel on Tuesday, 18 January, examined how logistics became top-of-mind for seafood executives, and how the COVID-19 pandemic has decimated the industry’s ability to use forecasting for business-planning purposes.

“Moving boxes, getting them to where they have to go, has become a very big part of the C-suite discussion,” Lineage Logistics Senior Vice President of Sales Dan DiDonato said. “[Executives] are no longer just giving that task to a back-office person that’s managing logistics, with logistics [having become] a big pain point.”

With the global shipping industry facing unprecedented challenges, the price of shipping goods has exploded, and just as crucially for the seafood industry, delivery times have become less dependable, Slade Gorton Vice President of Foodservice Sales and Marketing James Berger said.

“We’re increasingly in the risk-mitigation business. Getting goods to customers … That supply chain has become difficult,” Berger said. “The overseas suppliers can no longer quote us freight. When we’re quoting … a foodservice distributor, it’s tough to say ‘Here’s your freight rate’ on a container that’s not going to get into the country for another seven months.”

Bay Hill Seafood President and CEO Justin Conrad said the shipping crisis has caused shattered the industry’s ability to plan ahead.

“It’s tough, because you never know what’s around the corner,” Conrad said. “There’s a potential that the market comes down. How much inventory risk do you want to take to position yourself that far out? And there’s possibly of the scale sliding higher.”

But Conrad said the silver lining of the shipping crunch is that it could push the seafood industry to better organize and manage its supply chains.

“If you can manage your inventory better and maintain good communication, I do think there’s some continued opportunity for seafood,” Conrad said.

DiDonato agreed, saying the high-level conversations focused on logistics taking place in C-suites of seafood businesses across the country are good for the industry.

“For a long time, it hasn’t always percolated to the highest levels of the organization. The thought was ‘release the order and the warehouse will take care of it,’ but that doesn’t happen anymore,” he said. “It is an opportunity for this industry to really think about logistics and how that plays a part in getting those goods that they purchase and procure to the customer. We hold the bag at the end, so we’re the ones that have to figure out what happens next.”

The panelists named labor shortages and labor-cost increases, foodservice struggles with the coronavirus, and higher seafood prices as the other top challenges they’re dealing with heading into 2022. Through the course of 2021, customers continued to pay higher prices for most seafood items, primarily due to inflation. The panelists agreed they thought the American public would begin to wary and rebel against the prices, but thus far, there has been only limited impact on buying trends, with some customers beginning to trade down to lower-priced products toward the latter half of the year, according to the panel.

“There hasn’t been a lot of ineleasticity on the price. Even in the second [COVID] wave, people were still going out to eat,” Berger said. “It’s interesting to [see how it will] play out when the supply side starts rebalancing itself, but the last couple months, people were just saying ‘Just give me anything, I’ll pay [for] it.’”

Conrad said higher wages and government pandemic aid have given Americans more money to spend.

“People still had money in their pockets, and were able to go out and buy [seafood],” he said.

Given recent sales data, Conrad said he believes seafood prices won’t decline anytime soon.

“These prices, I think they’re here to stay, at last for the next year, 16 months, 18 months,” he said.

“To get those prices – especially on the lower-priced products – down, we have to fix production. We’re going to have to figure out how we’re going to work safely in [the current] environment, then we have to figure out the supply chain and the logistics,” he said. “Until we get that figured out, I can’t see those prices going down.”

DiDonato said it’s his belief that price fatigue is going to hit the top of the market first.

“At some point, someone is going to say, ‘I’m not going to pay $45 for a pound of king crab,’” he said. “When people begin to stop buying those expensive items, we will see that impact on certain locations across the country.”

The price of labor – from warehouse employees to restaurant workers – is a primary factor driving up seafood prices both at retail and in foodservice, according to DiDonato.

“I think labor will continue to be a challenge for us,” he said.

Besides the toll of COVID-19 on keeping workers away from the job, cold-storage facilities and other industrial employers now have to pay up to USD 25 [EUR 22] an hour for able-bodied workers, DiDonato said.

“We’re all competing for the same labor,” he said. “For that type of employee, a USD 5.00 [EUR 4.40] an hour raise, that’s everything for them. It changes their life. We’re doing everything we can to figure out, besides [building] the culture we create in our environments, how do we get that employee to understand we can only pay this much for this skillset in this job.”

The upward trend in wages, along with concerns for worker safety, will likely drive the industry to push forward with automation.

“Labor is something that, again, has been driving automation for a long time,” DiDonato said. “For the first time since I can remember being in this business, I think right now is probably going to be the biggest opportunity for the [industry] to figure out how they automate … We’re poised for automation, we just have to get there.”

A shortage of labor at restaurants across the country is also forcing a rapid reimagining of the foodservice sector, according to Berger.

“It’s hard to put a lot of different items on your menu when you don’t have the labor in the back of your house,” he said. “When your distributor is having trouble too – when it’s hard to get products – [you need] a way to simplify the menu and say ‘I’m going to do five different things with three items instead of five different fish.”

Automation is “already here” in the foodservice industry, Berger said, and another trend making inroads into restaurants is the use of value-added seafood products.

“A value-added [product creates] an easier process,” he said. “It’s an easier way to serve fish.”

With that, there has also been some SKU rationalization in the foodservice industry, Berger said.

“They’re figuring out how to turn 120 items into 50 items,” he said. “They’re trying to be just as creative as everyone else.”

Restaurants have largely given up on selling seafood for take-out, according to the panel. There hasn’t been a lot of demand for it through the pandemic, and restaurants tried but failed to figure out how to to make cooked fish to-go. Even breaded seafood doesn’t travel very well, the panel agreed. Fortunately for the industry, industrial foodservice is making a comeback, according to the panel.

With the massive changes that have swept through the industry, everyone at the executive level is still trying to figure out what the future holds, according to DiDonato.

“I think everyone’s crystal ball is broken, and it has for the last two years,” he said. “I think for 2022, keep your seatbelt on because we’ll see something similar to 2021.”

Photo courtesy of Sorn340 Studio Images/Shutterstock