Seafood inflation spawns waves of panic for seafood establishments

Seafood inflation spawns waves of panic for seafood establishments

Tangled in a net of politics, conservationism and runaway food costs, seafood has become an albatross for operators, sinking margins and increasingly forcing them to consider how their offerings reflect on their public image.

Given international tensions that impact its availability, surging global demand that accelerates its scarcity, global warming that fuels species depletion and escalating gas prices that jack up its cost, seafood has become one of the most expensive food products to pass through a restaurant’s loading bay—and one that is disappearing rapidly from menus.

Don Keller, president of the seven-month-old Dish Bar & Grill [2] in Hartford, Conn., has taken a number of seafood products off his menu because they are not only prohibitively expensive to buy, they are prohibitively expensive to ask consumers to buy. Among the discontinued seafood offerings are Alaskan king crabs, Chilean sea bass and other flat fish.

“We just went through a menu change and, in our way of thinking, Alaskan king crab is priced out of the market,” he said. “So we are using more lobster. Same thing with Chilean sea bass, and it is getting harder and harder to find. At $32 a pound for Chilean sea bass, we’d have to charge at least $40 a plate, and we consider ourselves a value player.”

Dish Bar & Grill, with 200 seats, boasts a $20 to $30 check average.

Red Lobster [3], a nearly 700-unit seafood chain with the purchasing muscle to lock in millions of dollars of inventory below market prices, also has been affected by rising prices and environmental concerns.

The casual-dining chain, which is owned by Orlando, Fla.-based Darden [4] Restaurants Inc., has removed Chilean sea bass and orange roughy from its menu, spokeswoman Wendy Spirduso said.

With an average dinner check of $17 to $18, Red Lobster’s image as a family-friendly value option would be destroyed if it tried to stock various seafood items at the price ranges they currently command in the market, Spirduso said.

“Because of our buying power, we don’t normally have to take any pricing adjustments on our menu,” she said. “But we are very much aware of what is happening in the market.”

According to seafood trade groups, what’s happening is that many species now are commanding historic spikes in price.

Once considered a protein that fit everyone’s wallet size comfortably, the flatfish is trading at double-digit percentage increases, according to the April Producer Price Index, the Bureau of Labor Statistics’ record of wholesale commodity inflation costs.

Although the costs of some items have declined—such as lobster, down 13 percent from last year—almost everything else is up.

Salmon is up 31 percent; shrimp is up 38.3 percent; pollock, the fish McDonald’s [5], Burger King [6] and other fast feeders use in their fish filet sandwiches, is up 53 percent; flounder is up 40 percent; halibut is up 43 percent; and a broad category called “fresh packaged fish” is up 5 percent.

The PPI does not track such categories as Chilean sea bass, orange roughy, grouper, catfish, pompano or other species operators say are wreaking havoc with their budgets.

While some of that inflation is linked to the high cost of gasoline and the fuel surcharges vendors are charging to deliver food inventories to restaurants, a blizzard of other global macroeconomic factors are at play, too. Once regarded as an economical protein, seafood has changed enormously in the recent decades as a rising tide of affluence in India, China, Russia and elsewhere has placed inflationary demands on dwindling catches.

The greatly weakened U.S. dollar also is aggravating seafood inflation and its availability to American consumers. The Los Angeles Times recently reported that New England fishermen preferring the more valuable yen are opting to sell bluefin tuna to Japanese seafood buyers, who exploit the currency disparities to offset fuel costs and shrinking fish stocks. Some fish then may be exported from Tokyo back to U.S. restaurants at a 30-percent mark-up, with such choice tuna cuts as toro for sushi rising from $38 to $60 a pound in just the past year.

Increasingly scarce seafood resources also are creating trade frictions between countries usually on good terms, as some follow the United States’ lead and extend their coastal borders by hundreds of miles to keep native fisheries off-limits to foreign fleets.

Meanwhile, environmentalists say the collapse and closing of the wild salmon fisheries in Washington and California earlier this year was an event bound to be repeated with other species in the years to come.

According to the Seafood Choices Alliances, it may already be too late for cod as the North Atlantic fishery—once the most plentiful cod population in the world—is no longer considered a viable site for commercial fishing.

Cod heads the list of 13 flatfish Greenpeace is urging fishermen, retailers and restaurateurs to protect through a voluntary moratorium. After cod, Greenpeace lists as endangered, in descending order, Atlantic haddock, or scrod; Atlantic halibut; farm-raised Atlantic salmon; Atlantic sea scallops; Chilean sea bass; Greenland turbot; Artic hard shell clams; orange roughy; sharks; and swordfish. Bluefin, yellowfin and bigeye tuna also are on the list.

When officials closed the California and Washington state salmon fisheries earlier this year, Yves Roubaud, executive chef and proprietor-partner of Lettuce Entertain You Enterprises [7]’ three-unit Shaw’s Crab House chain, praised the action.

“Salmon prices have risen about 30 percent in the last couple of years due to supply-and-demand issues,” Roubaud said. “Closing the Washington state fishery from California through Washington was a good idea, although it is hurting in the short run.”

Bon Appetit [8] Management, a Palo Alto, Calif.-based contract feeder with 150 accounts at museums, colleges and corporations in 28 states, is known for having a vigorous seafood sustainability policy.

Maisie Greenwalt, vice president of Bon Appetit Management, a subsidiary of Compass Group [9], said chefs at individual locations have the latitude to buy and serve what they choose based on market conditions and customer demand. But, she added, the company works closely with the Monterey Bay Aquarium, a client, to help establish purchasing policies that are environmentally conscientious. Bon Appetit distributes to its chefs in the field a Seafood Watch Guide that “red lists” products the company discourages.

Greenwalt said Bon Appetit’s customer base tends to be well-educated and conscientious about the perils facing the seas, and they often seek information about why some species are or are not available.

Shrimp, she noted, is a product whose price points and scarcity is keeping it off the clients’ menus.

“I think we serve a lot less shrimp than a lot of companies our size,” she said. “But we just can’t find a supply that is sustainable and cost-effective for us.”

Even though Bon Appetit found a Chilean-sea-bass producer in the former Soviet Republic [10] of Georgia with a Marine Stewardship Council certification, Greenwalt said the company decided not to buy it. The MSC is a London-based, nongovernmental organization with United Nations sponsorship that promotes responsible fishing practices.

“We chose not to buy it because we thought it would send a confusing message to our consumers when it is so well known that the species is endangered broadly,” she said. “Not only that, you can’t say you are reducing your carbon footprint if you are importing fish from Europe.”

To ensure it is purchasing product from reliable sources that practice commercially viable conservation, Red Lobster last year created a new senior-executive position, director of sustainability, which is occupied by Ian Olson. Olson consults with a host of international NGOs and government agencies about seafood sustainability, Spirduso said.

Moreover, Red Lobster servers are briefed daily on what to tell guests who inquire why certain species are or are not on the menu, Spirduso explained.

For some chains, however, it’s the cost of serving seafood, and not the public relations image, that is more problematic.

“I’ve never seen the cost of food this high, but seafood is just ridiculous,” said Steve Hade, human resources director and purchasing director for the nine-unit Cattlemen’s steakhouse chain in Santa Rosa, Calif.

Hade said he could afford to lock in seafood prices only three to four months out. “We’ve already been told that the next time we renew our Alaskan king crab, it’s going to be 31 percent higher,” he said. “Which means we’re going to take it off the menu.”