Tough Times for The Big 3

Seafood doesn't lend itself to a neat, tidy balance sheet, which explains why Del Monte Foods Co. is on the verge of unloading its StarKist canned tuna brand to South Korea's Dongwon Group for more than $300 million. Skipjack and yellowfin, or light, tuna prices are rising, as are fuel and aluminum costs. So the San Francisco food conglomerate is shedding its seafood division before it cuts too deep into its bottom line.

Times for The Big 3 canned tuna brands - StarKist, Bumble Bee and Chicken of the Sea - are tough. U.S. shelf-stable tuna sales (excluding Wal-Mart) were up 0.7 percent by unit value to $978.2 million for the 52 weeks ending May 17, reports The Nielsen Co. But unit volume during the same period was down 4.5 percent to 331.5 million units.

Tight supplies of light tuna are driving up prices and are largely to blame for the drop in volume sales. The supply shortfall was responsible for a 0.3 percent slide in Connors Bros.' U.S. seafood volume sales in the first quarter of 2008 (the Canadian company owns Bumble Bee). Excluding light tuna sales, Connors' U.S. seafood volume sales were actually up 3.5 percent.

The U.S. shelf-stable tuna category's struggles go beyond market realities. Consumer misinterpretation of the 2004 joint U.S. Food and Drug Administration and Environmental Protection Agency methylmercury advisory, which warns pregnant and nursing women and young children to limit weekly albacore, or white, tuna consumption to 6 ounces, is still dogging The Big 3. According to Nielsen, 4.5 million households with an annual income of less than $30,000 stopped purchasing canned tuna in 2007, even though packaged seafood products are immune to a recession.

The Big 3 are trying to stimulate the category by bolstering consumer education and introducing more value-added tuna products, which contributed to the increase in sales value.

But for Del Monte, the tuna market is just too volatile to justify hanging on to StarKist and the iconic Charlie the Tuna.

Dongwon Group, which holds about three-quarters of South Korea's canned tuna market, is much more accustomed to the ups and downs of the global seafood market, as are Connors Bros. and Thai Union Frozen Products, which owns Chicken of the Sea. The company just may provide the wherewithal and stability StarKist requires to help revive the stagnant U.S. shelf-stable tuna category.

Best regards,
Steven Hedlund
Associate Editor
SeaFood Business

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