By DEVIKA BANERJI
The changing tides of seafood economics are spurring North Carolina fish houses to try out new ways to keep afloat in a sea of adversities.
Over the past decade, local fish houses are fighting against an influx of cheaper and higher volumes of seafood imports. Adding to this, the economic downturn of 2008 has hit the wholesale and retail operations of fish houses, particularly those that rely on coastal tourists.
“In the last 15 years or so, things have been changing,” says Travis Elliott, owner of Capt’n Pete’s Seafood Market at Holden Beach. “We have changed accordingly. The way customers buy and consume seafood has changed.”
Elliott is not alone in trying to adapt to economic challenges that fish houses now face. A North Carolina Sea Grant study also shows that efforts taken by fish houses to restructure their businesses are keeping the local fisheries industry sailing.
The five-year inventory released in 2012, which updates an inventory carried out in 2007, shows that the fish house industry in North Carolina is bucking the declining trend that started in the 1990s. While domestic seafood packing capacity is still contracting, the rate slowed down sharply from 2006 to 2011. Compared to an almost 30 percent reduction in fish houses from 2001 to 2005, the decline restricted itself to 10 percent in the subsequent five years. The inventory included fish houses that primarily began as wholesale dealers.
This deceleration continues even in light of ongoing problems, such as depressed domestic prices undercut by high volumes of seafood imports, high operating costs and tighter fishing restrictions.
“Fish houses are increasingly trying out new things and exploring new business models and moving away from old ways that have stopped working,” says Barry Nash, seafood technology and marketing specialist with Sea Grant and co-author of the fish house inventory. “They are using better marketing skills, adding new products and increasingly moving on to retail operations,” he adds.
Many fish houses are moving away from wholesale and toward retail operations to enhance their profit margins. Most are transitioning from high-volume to low-volume trade focused on diverse markets, promoted through new branding programs and using new marketing strategies, such as social media, to woo customers and keep their businesses going even on a rainy day.
“They are trying a lot of things which are centered basically on exploring ways to improve their relationship with the customer. Some of these measures are expanding and will hopefully reach a larger percentage of the industry,” says Barbara Garrity-Blake, cultural anthropologist and the other author of the inventory update.
Some also are selectively investing in value-added seafood products, ranging from smoked crabs to shrimp sandwiches that give customers many more options than fish houses of yore. Others are trying out community supported fisheries that help sell advance “shares” of weekly local catch to customers typically located inland. Fish houses are increasingly using creative methods to steer their customers away from imported seafood options available at the grocery store and facilitating better and easy access to local catch.
RETAIL HELPS PAY BILLS
Gone are the days when most fish houses along the coast were purely wholesale enterprises. A majority of fish houses — 67 percent — along the North Carolina coast operate retail outlets to augment their wholesale businesses. Most say retail is highly profitable because, unlike wholesale trade, dealers can establish their own prices and receive their money at the points of sale.
“Retail pays the bill while wholesale breaks even,” a dealer is quoted in the inventory report. Another dealer is reported as saying that his retail business “has been a big help” given declining prices of his shrimp in wholesale trade. Another dealer interviewed for the report notes that his retail outlet has improved his profit margins.
Fish house owners also say that the focus on retail trade is influenced by the way customers are buying and consuming seafood.
“People do not buy huge quantities and freeze them any longer, like they used to do earlier. You can go to the grocery store and get frozen stuff. People buy fresh and in small quantities,” says Capt’n Pete’s Elliott. He has shifted almost his entire business to retail over the last 15 years.
“Most of my customers are tourists and retail just makes more sense,” Elliott adds. “I would say about 99.5 percent of my business is retail.”
The report also notes that a manager of a prominent fish house credited a boost in annual sales from $383,589 in 2006 to $921,454 in 2010, a growth of 140 percent, to retail trade.
“We have a tourist-based economy here and retail gives better value and works better. Wholesale might work in other places like Pamlico County, but we rely on retail,” says Hardy Plyer of Ocracoke Seafood Company, a fish house run by the nonprofit Ocracoke Working Watermen Association since 2005.
“Wholesale is high-volume, low-profit margin enterprise. Profits decline in direct proportion to a reduction in the volume of seafood sold,” noted another prominent wholesale dealer, quoted in the report, summing up his business.
SMALL VOLUMES, HIGH MARGINS
In the past five years, North Carolina has witnessed a widespread local foods movement. There is a consumer-driven emphasis on whole, local foods and community-based food systems as opposed to industrialized, processed foods.
“It’s part of a larger trend in the country where people are becoming more aware of the health and community benefits of buying from local farmers and fishermen. There have been many reports that have attested to the better quality of local food,” Garrity-Blake says.
“Choosing to buy local has also become a political choice that shows you back the community that brings the food to you,” she adds.
Such a preference is supported by efforts taken by fish houses, restaurants and other tourist-attracting stakeholders who are intensifying community campaigns to promote and provide local products and establish marketing strategies based on selling fresh and going local.
Shoppers at a seafood retail store often find an educational video on local fish and fishermen playing in the store. They also are often handed informational material that aims to build a brand and establish loyal customers through increased awareness of the benefits of local finfish and shellfish.
These fish houses are responding to demand for low-volume individual sales and focusing on a customer base that cares for the origin of seafood and is willing to pay a higher price.
“Increased consumer awareness of the environmental and human health costs of farm-raised imported seafood has led to more consumers asking about the origins of seafood and requesting fresh, locally harvested products,” adds Garrity-Blake, who also served on the N.C. Waterfront Access Study Committee from 2006 to 2007.
Also, Nash cites increasing seafood demand from college-educated individuals and professionals who care about the origins of their seafood and have enough disposable incomes to pay more for local catch.
North Carolina fish houses are capitalizing on this trend and are improving their sales and profit margins. They are enhancing and meeting this specific demand, which is not affected by imports.
“Our focus is to let our customers know where the fish is coming from and that it is fresh. That is what works for us because they care about that. We let them know that we sell fresh and it all comes from North Carolina,” Plyer explains.
This is an essential transition given the decrease in fishermen, working waterfronts and tougher fishing restrictions — all that is leading to less fish available for the market. “There are fewer fishermen and there are more fishing restrictions. This makes us get less fish than before,” Plyer continues.
Such a transition is going hand-in-hand with new marketing and branding efforts.
Communities, government agencies and nonprofit local branding programs, also known as “local catch” groups, are assisting fish houses to improve sales and tap more customers. These branding programs have caught on in the past five years.
The inventory shows that 31 percent of the respondents were members of local groups like Carteret Catch, Brunswick Catch, Outer Banks Catch or Ocracoke Fresh. These programs are providing a higher profile and brand value to local catch, which is improving sales, the report notes.
“Fish houses are increasingly investing time and effort in branding their catch and enhancing its value. This has helped many to increase their sales,” Nash says.
Despite such positive feedback, however, 69 percent of the respondents continue to be either unfamiliar with such branding programs or not part of one because their businesses fall outside the geographic boundaries of current catch groups. For example, businesses in western Albermarle and Pamlico sound communities do not belong to local catch programs.
Such programs are more useful for fish houses with retail operations that have face-to-face contact with their customers, Garrity-Blake notes. Wholesale-only fish houses might not be very active participants in such efforts yet, she adds.
The branding efforts may be stronger in other groups, including among locals, tourists and allied business stakeholders. “This trend is catching up fast as more and more restaurants are assisting this initiative,” Garrity-Blake adds.
The existing groups also have formed an umbrella organization called North Carolina Catch that ties the works of the local efforts, while also working with other fishing communities to expand statewide and national brand recognition for North Carolina seafood.
MORE FOR THE PALATE
Fish houses also are experimenting with value-added seafood products. From frozen crab cakes, deviled shrimp, ready-to-eat salads and spreads, stuffed fillet or shrimp to smoked fish, frozen oysters and bacon-wrapped scallops, fish houses are increasingly offering customers value-added food options to carry home. Some even are providing recipes to customers to establish their brand and give their customers more than what they are seeking from a fish house.
Nearly 29 percent of dealers surveyed for the inventory manufactured or marketed items whose commercial value was increased through the use of ingredients or methods that satisfied consumer expectations of enhanced nutrition, taste appeal or ease of preparation.
Sherrie Carawan of Mattamuskeet Seafood Company in Hyde County developed a profitable line of crab cakes that she sells to the wholesale market.
“Just by adding a little bit of processing, it gives us more money for our product,” Carawan says. “They also last longer and help reduce losses,” she adds. Carawan wants to add more options for her customers, but logistics and marketing gaps are hindering her expansion plans.
“There is a lot of demand but what we are having trouble with is logistics — trying to get our products to our customers,” Carawan explains.
The trend of offering locally processed seafood to consumers alongside fresh local catch, however, continues to be a niche. Many fish houses have explored the possibility but steered clear, given the capital-intensive nature of the products, insufficient labor to diversify into new products, and intense competition from new and cheaper products offered by large grocery chains and interstate food distributors, the report notes.
“I have seen people investing in it but I do not think it is a good idea,” says Plyer, explaining why he does not have value-added products. “We are not competing with the restaurants…. We are trying to provide fresh seafood to our customers.”
Some dealers like Elliott also cite additional health-regulation requirements for prepared food products as a factor that restricts them from venturing into value-added products.
Catching fish online
“I once put on Facebook about a batch of fish that had come. A man came from 30 miles away to buy the fish after seeing the post,” Elliott recalls. The incident has made Elliott vouch for the power of online social media marketing. He has a Facebook page that is updated on a daily basis, with 711 likes. His posts spark comments from loyal customers.
However, Elliott remains part of a minuscule 6 percent of those surveyed who are using Facebook as a marketing tool. Sixty-nine percent of fish houses covered by the inventory have no online presence at all. Only 17 percent have websites or are relying on websites operated by local seafood educational initiatives to raise the visibility of their businesses.
“Those who are using online marketing methods are very happy with it and it has benefited them. It helps them keep in touch with their customers,” adds Nash, who authored a Sea Grant guide to help the seafood industry use online strategies.
Also, a relatively new direct marketing model called community supported fisheries, or CSF, is being used by a few fish houses to help them meet the demand of inland metropolitan customers.
Within this model, customers buy shares of seafood in advance and have it delivered fresh. While the model has worked for fish houses like Core Sound Seafood on Harkers Island, it has few takers among wholesale dealers.
In the report, some dealers said that CSFs seem “like a lot of work” and create problems of oversupply of a certain commodity that could undermine contracts and hamper prearranged sales agreements. Others said that the model was more suited for retail traders than wholesale dealers.
Inland customers, who have higher disposable incomes than coastal customers, tend to pay higher prices for local catch, enhancing the profit margins of fish houses that have adopted CSF.
Against the odds
While the 2012 inventory update is less pessimistic than its predecessor, it does not signal an ultimate light at the end of the tunnel. The report notes that the deceleration in the contraction of the fish house industry can primarily be explained by the fall in the value of real estate after the economic crisis.
“The decline should be understood in the context of a deflated real estate market and the ongoing recession as coastal property values plunged after 2007,” the report notes. “The depressed real estate market affected those wishing to sell working waterfront property,” it adds.
However, trends are emerging in the way fish houses are rethinking their business and marketing strategies to stay afloat and carve out profitable niches.
“There are many variables that are affecting the fisheries industry. No one reason can explain all of it,” Garrity-Blake notes. “What is remarkable is that fish houses and fishermen are still hanging in there and trying different things and surviving against so many odds.”
Read the 2012 inventory update at here. The 2007 inventory is available here. Learn about North Carolina Sea Grant’s seafood research and outreach at ncseagrant.ncsu.edu/seafood.
This article was published in the Autumn 2013 issue of Coastwatch.
For contact information and reprint requests, visit ncseagrant.ncsu.edu/coastwatch/contact/.