U.S. shrimp imports will decline in 2022 for the second straight year, but that’s not due to lack of overall seafood demand, according to Rich Products Consumer Brands Division Senior Vice President Shannon Gilreath.
Speaking at the National Fisheries Institute Global Seafood Market Conference on 17 January in La Quinta, California, U.S.A., Gilreath said a softening of the U.S. shrimp market in 2022 was a result of rising prices due to inflationary impacts.
“The processors, manufacturers, and others throughout the supply chain have really gotten squeezed through all of this, and its challenging to pass on all the costs that are being realized from the time they buy the shrimp, process, and deliver to the shelf,” Gilreath said. “Overall, not bad news for shrimp. The category is growing, it's healthy, and it's experienced significant growth through the pandemic.”
Prices for everything from flour to soybean oil to corrugated cardboard to energy and cold storage have raised the overall cost of shrimp to the consumer, and as a result, fewer households bought shrimp year-over-year in 2022, existing buyers made fewer trips to buy shrimp, and buyers purchased fewer units of shrimp per shopping trip, according to Nielson data shared by Gilreath.
After two years of growth, dollars spent on frozen seafood in the U.S. were flat in 2022 at USD 8 billion (EUR 7.4 billion). Shrimp represented 48 percent of the category’s sales but saw the highest absolute dollar decline in 2022, down 3.6 percent or USD 144 million (EUR 132.6 million).
But Gilreath said U.S. shrimp consumption has not hit a ceiling, but rather ran into consumer price sensitivity that will resolve as suppliers work through high-priced stockpiles accumulated through the Covid-related surge in demand in 2021.
“The dynamics and demographics of the U.S. shrimp consumer have changed,” Gilreath said. “Some consumers are new to the frozen seafood category and have started buying at higher levels. They’re stocking their freezers. Their occasions have changed. They’re eating at home more and seeking new varieties of protein. Even though there are short-term impacts based on pricing, long-term, the seafood space will continue to grow and be vibrant, especially in the retail sector as new consumers are shopping the category.”
Gilreath noted frozen seafood household penetration in the U.S. stands at 62.8 million households, or around 50 percent. A looming recession could inhibit expansion of the category, but growth is inevitable, she said.
“When you think about the fact that there’s 50 percent of U.S. households that still don’t buy this category, there's significant upside,” she said. “And then you think about the volatility of the other proteins – beef especially – consumers are willing to pay for shrimp. It is a more premium item and it's a substitution [for] beef. We do know that consumers will trade down to poultry and other cheaper proteins when necessary, but we believe it'll be a short-term impact.”
Gilreath noted in 2021 and 2022, the seafood category began returning to pre-Covid buying spikes around Lent and the year-end holidays. She said as shrimp suppliers work through their stockpiles, retailers will be able to take advantage of lower-priced shrimp to use promotions to drive consumption during those key buying periods.
“Over the last three years, we've seen tremendous household increases in [seafood spending] and just sheer sales across the presidency in landscape,” she said. “Since 2018, [spending by] dollars across the frozen seafood space have increased 65 percentage to 2022. Year over year, we're seeing some softness as a direct result of some of the increased pricing and the inverse correlation of price and demand. So that softening is evident in 2022, but it's not significant with the increase of promotions back to our business, with the increased supply that we'll have available, and with the lower shrimp prices we have once we’ve all worked through our inventories enabling us to promote at higher levels.”
In fact, a recession could present some positives for U.S. shrimp consumption, Gilreath said.
“As demand starts to slow, retailers are going to demand that brands and manufacturers start to promote again to really drive that demand and rebuild the category,” she said. “We've seen significant growth and we don't want to see it erode, so we will be leaning in and doing some things to be able to promote again and drive consumption to ensure that we maintain those critical households.
Further resilience has been seen in the breaded shrimp subsector, which has proved less sensitive to price fluctuations than unbreaded value-added shrimp, according to Gilreath, citing Nielson data. And additional positives for U.S. shrimp consumption are the full reopening of the fine-dining sector and a national pick-up in business travel.
But in closing, Gilreath warned that significant challenges remained for the U.S. sector to break through in the short-term.
“We're going to do what we need to do to drive demand for our retailers and for our brands and our companies. But the cost problem is real. We talked about maybe hitting a peak in terms of where we think pricing inflation is going to be, but based on this and where we've been, there is still some lag and some pullthrough that will happen with pricing that is quite significant. And so, ultimately, we will see prices stay elevated. I don't believe as shrimp prices come down, you'll see prices come down,” she said. “We're at a new normal in terms of pricing and as brands and as manufacturers, we will have to change our promotion strategies and our price architectures to be able to drive consumption to ensure that we have a very healthy category. We don't want to lose these households and ultimately, we want to make seafood something that all can afford. We’re going to need get innovative as an industry to more demand, because there's definitely the opportunity.”
Photo courtesy of Rich Products
