Kim Gorton: Seafood industry still in crisis mode

Kim Gorton is the president and CEO of Slade Gorton, a third-generation, family-owned seafood importer, processor, and distributor based in Boston, Massachusetts, U.S.A.

Seafoodsource: What is your take on the state of the seafood industry right now?

Gorton: The global supply chain is in a state of fairly significant disruption right now; long order lead times, production capacity constraints, reduced ocean freight capacity, clogged ports, warehouses, and a shortage of trucks, which when combined have added significant costs and the need to plan much farther ahead. I don’t see these dynamics letting up anytime soon. Forecasting has always been challenging in our business based on the high level of imports and the relative complexity of the seafood category, but in hindsight, we had it easy relative to where we are now. Unfortunately, the uncertainty around the impact on the foodservice sector of inflation, lack of labor, and potential challenges related to coronavirus variants keeps me up at night more than anything else. My sense is that there may be a number of foodservice operators that got through the past year by the skin of their teeth. For those who survived round one – and tragically, so many businesses were not able to survive that – I am hopeful that the resilience, grit, and ingenuity we have seen over the past 18 months will help them survive any impacts of potential restrictions as we move into the winter months

SeafoodSource: How did the COVID-19 situation affect Slade Gorton?

Gorton: I can only speak for Slade Gorton when speaking to this, but we’ve been extraordinarily fortunate to have almost no failures among our customers. Those failures would have been the worst thing for our business. Certainly, the funds made available by the government to businesses in the seafood industry as well as restaurants was critical to helping us get through the worst days of the crisis.

We had the mindset all along that we’re no good to our vendor if we fail, just as our customer is no good to us if he fails. So when our customers needed help, we did everything we could to support them. During the height of the pandemic, there was definitely fear of what was to come … We had to extend payment terms and that came with a fair amount of uncertainty about the future. But we have a vendor base that’s incredible, and they were a big part of the solution in being flexible and working together with us to get through the crisis. That’s one of the things I love about this business. There tends to be a kind of solidarity during times of difficulty. And I’ve learned that relationships still matter quite a bit and that loyalty still exists.

SeafoodSource: With such a drastic shift in the marketplace, are you surprised more seafood companies didn’t fail last year?

Gorton: I think that this industry has never been for the faint of heart. We are used to dealing with challenges, though I don’t think we’ve ever faced anything even remotely on this scale. But there are many things happening that affect supply and demand on a daily basis and we’re used to dealing with mini-traumas. A survival mindset is just something we’re used to having in the industry. At Slade Gorton, I’ve always said failure is not an option, it’s just not. So we never had that as a possible outcome. We did and will always do whatever is needed to make it work. For us, last April was pretty ugly – our foodservice sales were down 75 percent in that month. Just as I am sure is true for many other companies in the seafood industry, we had the grit and guts to be able to take imperfect information, make decisions, move on and then do it again. It wasn’t always going to be right, but you can’t be paralyzed by indecision, we just needed to roll up our sleeves and get it done. I am extraordinarily proud of my team for getting through those times – there wasn’t a single person who didn’t step up and perform exceptionally.

SeafoodSource: How much longer do you foresee the seafood industry being in crisis mode?

Gorton: I don’t think there’s an easy answer to this. I think where we are as an industry, we are not going to be without continued challenges. I can only speak for Slade Gorton, however we are focused on being nimble and supporting our customers and vendors as they too must continue to be nimble. It’s certainly encouraging to see schools back in session – I have one last child still in college and he’s on his way back for the fall – and that is awesome. But lots of entertainment-based businesses and the travel industry aren’t coming back as quickly as we would like. I hope we’re through the worst of it; I don’t anticipate return to depths of challenges we were at a year ago. And for the seafood industry overall, there’s some good news, in that increase in demand in the retail sector that emerged during the pandemic seems here to stay.

SeafoodSource: How is Slade Gorton approaching the rest of this year and its planning for next year?

Gorton: We’ve spent a fair amount of time discussing what we can we learn from this, and where are the opportunities coming out of this. I think this is a phenomenal time to do that. So many things have changed, I now see a world of opportunity in the seafood industry and beyond. My belief is that the companies who take the attitude of shifting from, “Isn’t this awful?” to turning lemons into lemonade will be set up to thrive in the new world order.

That said, even while I think it’s extremely important to be nimble, it’s hard to do that on the fly with containerloads of products, especially at the price of transportation right now. Lead times are so long now that you just can’t turn on a dime; you can’t quickly turn something on or shut something off. And inflation is a concern, especially given seafood tends to be on average a more-expensive protein. Fortunately other proteins are also seeing high prices. We are all getting better at the ‘new normal’ in the industry – we’ve gotten used to being agile, and we’ll have to continue to do that.

SeafoodSource: What are the dangers of inflation in the U.S. economy to the seafood industry?

Gorton: One of the big challenges we face in the industry is inflation, because at some point, operators tend to take items off their menus if they get too expensive. They’ll substitute with a less-expensive product that has similar eating qualities or cooking profiles, or they’ll use a less-desirable cut of the fish or do two smaller portions versus one big portion. We need to find ways to help our foodservice partners optimize in order to counteract their rising costs of food and labor.

What I’ve been heartened to see, I will say, is that I’ve seen a tremendous amount of collaboration and cooperation and understanding in the industry. It’s not this knock-down, drag-out zero-sum game between suppliers and vendors or even competitors. I’m a big fan of finding precompetitive ways to help the entire industry. For example, a number of NFI members have been working together to address some of the importing challenges we’ve had. There’s a growing feeling that we’re in this together – to me, it feels a little like a return to my father’s time in terms of better overall camaraderie. Maybe that’s just my experience, but I’ve really been heartened to see that. Hopefully, when the dust settles some time from now, that type of collaboration can continue.

SeafoodSource: How do you explain the rising prices we’re seeing for seafood right now?

Gorton: Early on when we first started noticing the price inflation, I think it was caused by the race to quickly ramp back up to normal. That involved a race to fill the shelves, freezers, and restaurants back up, with an attitude of, “Don’t let me run out; I don’t care what I pay for it.” Now the primary cause is the global logistics dysfunction – there’s no other word for it. There’s the fact that ports have only a certain capacity to move products every day, and the seafood industry is just one industry competing to try to get their goods where they need to be, so costs are being driven up dramatically. We are paying five, six, seven times more for ocean freight than we were a year ago, and then there’s demurrage and detention fees. A shortage of trucks and truck drivers – they can name their price right now. Additionally, many cold storage facilities have had trouble accessing labor. Many believe that the foodservice industry has permanently lost a fair amount of workers to other industries but think labor supply will improve when the [unemployment] subsidy goes away in September, which I think will deepen the labor pool.

The last factor is that last year was brutal. Companies just got pummeled. We don’t have large processing operations at Slade Gorton, so I can’t speak to it personally, but one of greatest contributors to the inflation we’re seeing in seafood prices is stemming from companies’ need to price their products to ensure they have profits. That’s not to suggest they’re trying to overcompensate, but companies can’t survive forever operating on losses. Domestically, there have been challenges with either people being sick, with COVID-related shutdowns, and with processors being challenged to operate at full capacity. A lot of companies have spent a lot of money and resources on retrofitting plants to have greater social distance so they can operate in the new COVID world, and those costs can’t just be absorbed, they have to be passed along.

Overall, because the vast majority of seafood eaten in the U.S. is imported, those costs caused by all this supply-chain dysfunction have to be passed on to consumers, and I don’t see an end to that anytime soon.

SeafoodSource: Earlier, you mentioned seeing opportunities for Slade Gorton and for the seafood industry? What are some of those opportunities you see?

Gorton: Generally speaking, I think some of the opportunities are around how we communicate with our customers and with end-consumers, how we understand what the consumer ultimately cares about, how we’re able to respond to that as an industry and as a company, and how we use data and leverage technology to share information and to improve the speed at which that happens. Ultimately, it’s the continued quest to improve the process of getting seafood from the ocean to somebody’s dinner plate. As an industry, we have a great opportunity to gain a greater share of stomach. I think really focusing on what and where the consumer has evolved to – whether it’s because of the pandemic, or this continued interest in food from a social media perspective – is key. People are less afraid, and they’re looking for authenticity, a connection to their food sources. They’re also looking for fun, excitement, adventure. And I think they are looking at food as a means to come together. Food tends to be a unifier and an opportunity for people to be together and celebrate. So we’re focused on trying to affect that.

Photo courtesy of Slade Gorton