Pandemic buying shifts prove a boon for direct-to-consumer online seafood subscription services
Almost exactly a year ago, Ian Amin, the senior director of supply chain for Home Chef, a Chicago, Illinois, U.S.A.-based meal kit and food delivery company, was driving to pick up a new puppy in Wisconsin when he received a call from his boss that would change the trajectory of his entire year.
Kroger, which bought Home Chef in 2018, was facing an acute food shortage as a result of panic-buying driven by the rapid spread of COVID-19 across the United States.
“Customers were stocking up their pantries and Home Chef was asked to supply anything we could to Kroger stores to help,” Amin said.
Working out of his car on a Saturday morning with poor cell phone reception and a five-week-old puppy crying in the back seat, Amin managed to get his entire team on a conference call and work out a plan to source thousands of ingredients on short notice.
“We had huge organic sales growth, particularly online,” he said. “Tens of thousands of customers were joining overnight. Almost all of these customers were ordering more food than a typical customer would order, which meant my team had to source more food than we ever had before.”
Operating in conjunction with teams from across the company, Amin said Home Chef was able to contract additional volume, add new suppliers, and engage with the mass of new customers to keep them engaged.
Safety and food safety remained the company’s top concerns throughout the crisis, Amin said.
“We felt we had a duty to help Americans stay at home, eat safely, and avoid spreading COVID. And we took that very seriously and we still do today,” he said.
Due to the fallout of the COVID-19 pandemic, as restaurants shut down and consumers got tired of cooking the same meals every week, Home Chef and other food subscription services experienced exponential growth through 2020, according to Amin and representatives of Wild Alaskan Company, J.J. McDonnell & Co., and Real Oyster Cult speaking at the 2021 Seafood Expo North America Reconnect on 15 March.
Arron Kallenberg, the founder and CEO of Wild Alaskan Company, a monthly seafood membership service that ships Alaskan seafood to homes across the United States, said subscriptions increased by a multiple of seven during those early days of the pandemic. There was a month-long period where traffic to the company’s website was going up 400 percent a day, he said, and it added the bulk of its 150,000 customers in the past 10 months.
“That was quite dramatic and I would say, traumatic, for our team of 18 employees at the time,” Kallenberg said. The company quickly scaled up and now has more than 50 employees, he said.
Kallenberg said the growth wasn’t due to a shift in the company’s tactics, but rather a dramatic reduction for competition in online ads during the early days of the pandemic that made it much more affordable for the company to go big in its online advertising efforts.
“Despite all the demand, I don’t think consumers got up in the morning and said to themselves, ‘There’s a global pandemic, I’m going to order more seafood online.’ I don’t think that was their first thought. The point is, we didn’t change our tactics,” he said. “COVID dramatically reduced the demand for online ad inventory. There was about a six- to eight-week period where prices for online advertising fell to rock bottom. I heard one internet advertising executive say it was the single largest dislocation for demand and supply for ad inventory in the history of human existence. So that was how Wild Alaskan, not by changing a single thing, just by having a more affordable prices, was able to increase our daily membership by about seven times.”
Stephanie Pazzaglia, the business development manager at seafood distributor and processor Elkridge, Maryland-based J.J. McDonnell & Co., said COVID-19 forced the company to perform a massive pivot away from foodservice and toward retail.
“As many challenges as the pandemic did present us with, it also provided us with a lot of opportunities, which was fantastic, but definitely a new way of growth for us,” she said. “We saw increased retail business, individual packaged items, home delivery items, and that enhanced demand gave us the push to utilize our packaging equipment and to really enhance our packaging program overall. This allowed [us] to take on more co-packing opportunities…and we invested in new equipment and the teams to handle this new business.”
The company also built up its direct-to-consumer business, both through its service window at its headquarters and through deliveries to the local community near its distribution center.
“Some of our salespeople were even reaching out to certain neighborhoods and building a whole order for these neighborhoods,” Pazzaglia said. “And these were not small orders – they were USD 1,000 to USD 2,000 [EUR 838 to EUR 1,677] orders that were a weekly trend that the community could get excited about and order together, and that particular salesperson would personally schedule a drop or a pick-up each week.”
The pandemic also gave the company a prime opportunity to rethink and rework its processes to make it more efficient, Pazzaglia said.
“It definitely gave us a kick in the butt to face the growing pains, and personally I think it’s a fantastic way that we were able to adapt to this pandemic because it really is an ongoing project and an ever-learning process,” she said. “It was a chance to grow, a chance to change, and a chance to adapt.”
Rob Knecht, the co-founder and CEO of Duxbury, Massachusetts-based Real Oyster Cult, a direct-to-consumer business that Knecht describes as “a raw bar experience delivered monthly to customers’ doors,” said his company experienced “lights-out” growth since April 2020.
“With that opportunity came a lot of challenges,” he said.
On the supply side, oyster farms shut down after restaurants stopped buying their products. Real Oyster Cult also had challenges sourcing packaging equipment and materials. When its fulfillment partner shut down for a month, Knecht said he decided to commit to a rehashing of the company’s processes, taking its fulfillment in-house, procuring most of its own product, and even training some of the oyster farmers it had worked with to work in its warehouse in the Boston area to ensure the company could stay up and running.
Knecht said he hasn’t seen any leveling off of his business at all, even a year removed from the beginning of the pandemic.
“I think maybe this is a cataclysmic shift in behavior: Consumers are getting really comfortable with having fresh seafood delivered to their doors,” he said.
Amin agreed the consumer trends that emerged during the pandemic appear to be permanent.
“We’re not going back to where things were before. I think we had a unique opportunity to capture the minds of our consumers and seeing what the advantages of a meal-kit service, and what we’re seeing is that they’re wanting to stick with us and interested in getting that kind of variety and convenience on a regular basis,” he said. “So yes, things are shifting, but we’re definitely able to hold on to quite a lot of what was gained during the pandemic.”
Amin said after trying to “crack the nut” of selling seafood online for years, consumers now appear to be comfortable ordering food – even fresh and live seafood – online.
“It might be more expensive to order salmon through Home Chef than if you were to go your local Kroger and Costco and buy it there, but there’s a lot of value that we’re adding,” he said. “It’s sent directly to your door, it has a recipe card with it, it’s a perfectly-sized portion and we’re really teaching you how to use that product. For something like seafood, education is really important, because there are certainly pockets in the United States where you have consumers who are very well-educated on seafood and know how to cook it. But I grew up in the Midwest – I didn’t eat seafood. We had fish sticks, that’s just how it was. After I joined Home Chef and was able to try out the product myself, now I love pan-seared salmon. I love scallops. I love the kind of stuff that I’ve been exposed to through this business and I think others here on the panel have had that same opportunity to show customers the benefits of really fresh oysters or really great Alaskan wild seafood.”