“Some say Covid was the biggest marketing campaign for salmon,” Bakkafrost CEO Regin Jacobsen told a conference session at Seafood Expo Global (SEG) 2023 in Barcelona focusing on seafood business strategies in strange economic times. Like most companies, over the past three-plus years, the Faroe Islands-headquartered salmon farmer found itself tested by the pandemic and then more recently by the turbulences of the global inflationary and fuel and energy crises. But amid the so-called “polycrisis”, there’s been a silver lining: along the way, people have been brought closer to seafood as a food category – they’ve been buying more of it because they have gained the confidence to prepare it at home. Salmon has been one of the big winners in this regard, with its popularity now reaching new levels.
Before Covid, between 40 and 50% of Bakkafrost’s salmon went to the catering sector, but in the pandemic, most of this volume was diverted into retail. Having the ability to switch between foodservice and retail was hugely important for the company, Jacobsen said.
“We sold much more to supermarkets than we predicted or budgeted for,” he said. “Now people are used to eating salmon at home and are going out to buy it. Sometimes something good comes out of a crisis – more consumers are buying fish from supermarkets, and we are now seeing that while people are back eating in restaurants, they still buy fish from supermarkets. The demand is high for these products.”
“Now war is affecting the business,” Jacobsen said, explaining that Bakkafrost stopped selling fish to Russia two days after the invasion of Ukraine. At the same time, it stopped sourcing raw materials from the country.
“We now see that prices are increasing and that has an effect on our customers. But everything is increasing in price,” he said. “There are opportunities in every crisis, and if we can manage to utilise those opportunities during a crisis, we will be stronger on the other side. It’s about preparing ourselves, and learning how to navigate through the storms.
“In the Faroes, we say the danger is always when you are close to land because that’s where the rocks are, and that is something we need to think about when we navigate difficult waters – that there might be some hidden dangers,” he said.
The pandemic also allowed Trident Seafoods to show its resilience, said the US seafood company’s CEO Joe Bundrant. When Covid hit in March 2020, the Seattle-headquartered firm shut down its main office and sent out 500 staff to work remotely.
“We developed what I believe is a world-leading protocol for putting people into quarantine. Trident employs 5,000 people in Alaska and they rotate twice a year making it 10,000 trips to Alaska each year – all of those individuals went through two weeks of quarantine in a hotel. If they left the room, they were terminated. We gave them three meals a day, exercise mats, Kindles to read and tried to keep them actively engaged. Once they went to their location where there was a ship or processing plant, they were kept in enclosed campuses. Our vessels would call into port and offload the harvest, but no-one was allowed to leave – we executed that in 2020 to perfection,” Bundrant explained.
At the same time, the company implemented major austerity measures – looking at every expenditure.
“Managing through crisis is what every business is about,” he told the SEG conference.
Future smart
Thanks in part to the agility shown by seafood companies, today’s marketplace is very different from the one that existed pre-Covid.
“Seafood in general has gained competitive advantage,” Jacobsen said, explaining that a lot of land-based farmed meats are fed on grains that have soared in price. “Inflation in these products has brought food prices up and they are not going to come down again.”
The Bakkafrost chief also believes that environmental, social governance (ESG) has become more important than ever before, and that it will directly shape the industry going forward.
Seafood already has an advantage when it comes to ESG, he said. “That gives us a good starting point, and it’s important that we start to run. I think that in 10 years from now, we will look back and see that something happened during this period.
“We need to do this smarter…we have to manage our stocks better; we have to find ways to produce more from less raw materials – like salmon which has a low feed conversion ratio. We need to make sure we have good fish welfare, we can reduce mortality and improve the smolt production etc. All these factors have become more important. It’s done with certification but not only that – the ESG area is already a huge universe and will continue to become more important.”
Aquaculture Stewardship Council (ASC) CEO Chris Ninnes agreed, highlighting that while terrestrially-produced proteins are two dimensional in their use of land resources that are ever-decreasing, seafood production has a three-dimensional advantage thanks to the water bodies in which this takes place.
“Opportunities are there to be much more efficient,” Ninnes said. “Also, the environmental and carbon footprints of seafood – both farmed and wild – is far better than most terrestrial protein systems.
“I always like to think of seafood as part of a solution, rather than a problem. There are always things that you can do better, we all recognise that, but seafood is part of that future solution.”
Cost squeezes
With regards to the current inflationary pressures, with consumers struggling all over the world, Bundrant doesn’t believe the high prices will persist forever, but anticipates some difficult times ahead.
“At the end of the day, seafood is competing for a share of the stomach with all of the other foods on the planet and when peoples’ food dollars are squeezed, they’re looking for the best value,” he said.
According to Felix Ratheb, CEO of the South African-based seafood group Sea Harvest, the biggest challenge now, is that with the cost of sales as a business having gone up by 26%, it’s very difficult – probably impossible – to go to consumers in the current economic environment and ask them to pay that same additional amount for their fish.
“Post-Covid is a very difficult period. I believe it’s much tougher now than it was during Covid because of the huge inflation coming for every line item that we have,” Ratheb said. “There’s only so much you can push before the consumer doesn’t buy anymore. But you’ve still got to have a business and pay your employees, and have returns for shareholders etc. I think that’s a challenge we’re all facing right now.”
Bundrant also advised that the cost of repairing and replacing aging vessels, equipment and processes is rising at a rate that’s well in excess of the product price increases.
“Navigating through that is a huge challenge,” he said.
