Retail Supply and the Purchase of Midwestern Fresh Fish on Ice
June 23, 2011
Rejeana M. Gvillo, Graduate Student; Nicole J. Olynk, Assistant Professor; and Kwamena K. Quagrainie, Aquaculture Marketing Director
The Midwest region of the United States has witnessed growth in the aquaculture sector in both volume and total sales over the past ten years. Midwestern tilapia, catfish, yellow perch, trout, and hybrid-striped bass producers may be interested in marketing their fish to retailers as regionally grown and fresh seeking a premium.
Reliable data show per capita fish and seafood consumption has increased over the past 20 years by 1.6 pounds. Observing this increase in fish and seafood consumption, grocery stores and other markets may be interested in expanding or further specializing their current fish and seafood assortment by offering regionally grown, fresh fish on ice to their customers. Currently, the fish and seafood market in the Midwest region of the US is dominated by frozen products, which are mainly imported. In fact, $13.1 billion of edible fishery products were imported into the US in 2009, with Asia being the top exporter. The 2007 Census of Agriculture reported an increase in total Midwestern food fish farms from 276 in 2005 to 458 in 2007. Overall, Wisconsin has the most food fish farms, 121, Ohio, Missouri, and Minnesota have the next highest number 63, 60, and 58, respectively.
Aquaculture producers in the Midwest may need assistance with marketing tactics such as how to obtain a premium. Which marketing tactics may obtain a premium? For instance, demographic characteristics of consumers may influence whether a grocery store currently supplies fresh fish and seafood. Some fish species may earn a higher premium than others. Particular ethnic groups may eat more fish and seafood products than others while levels of consumer income may affect fish and seafood consumption. If regional aquaculture producers are aware of how consumer characteristics affect fish and seafood consumption, they may be able to successfully market their fish products with a premium. The two objectives of this study are focused on increasing and specializing marketing efforts for Midwest producers of fresh fish by: (1) determining the role that selected consumer demographic and store characteristics play in influencing a store or market’s probability of selling fresh fish on ice and (2) estimating the willingness of Midwestern retailers of fresh fish on ice to pay a premium for a regional, fresh fish product.
To examine marketing tactics for selling fresh fish in the Midwest, a survey was developed and governmental data were used to examine characteristics for retailers located in the Midwest who sell fish and seafood products. The goal of the study is to explain what influences a retailer’s probability of supplying fresh fish on ice. The segment of stores which sold fresh fish on ice was further studied to identify factors influencing a store’s probability of paying a premium for regionally grown fresh fish on ice.
Previous studies found that factors such as race, urbanization, seasonality, and region of the country affected consumers’ consumption of fish and seafood. Demographic and consumer characteristics in the surrounding areas of the retailers were examined to estimate the probability of a particular retailer supplying fresh fish on ice.
As ethnic populations in the US continue to increase, consumption patterns and lifestyles of American consumers change. A prior study found that income levels affected at-home fish and seafood consumption. Most stores having a separate seafood counter tend to be larger and are affiliated with a regional or national chain. Whether or not a store is affiliated with a chain may be relevant to its willingness to supply fresh fish on ice as well.
To explain what influences the probability of a retailer supplying fresh fish on ice, data from 125 Midwest retailers was collected, revealing that 53% of the sampled retailers supplied fresh fish on ice in 2010. Of the 125 stores surveyed, 22% were chain affiliated. There were 131 fish processors located in the Midwest, and an average of 1213 restaurants located in each retailer’s district.4 US Census Bureau (2000) data identified characteristics of the population surrounding each of the surveyed retailers. Average per capita income for the zip code surrounding a retailer in the sample ranged from $9,522 to $76,157 while total population per zip code ranged from 335 to 108,144.
If a retailer currently sells fresh fish on ice, it may be interested in expanding its fish selection to include fresh fish on ice that is grown within the region. Producers may be able to differentiate their product, and demand a price premium, by labeling their products as “regionally” grown. To determine if retailers are willing to pay a premium for regionally grown, fresh fish on ice, open-ended willingness to pay questions were asked for eight species including tilapia, catfish, trout, yellow perch, hybrid striped bass, bluegill, largemouth bass, and carp.
Studies have shown that consumers are willing to pay for regionally grown products. However, besides being locally or regionally grown, fish products have many other attributes that consumers may value. Since consumers place high values on the freshness of seafood products, retailers may be willing to pay more for fish products grown in the same region. Farmed fish products, unlike marine fish products, can be available year round, suggesting potential for supply consistency, which according to prior research may be regarded as “essential”. By estimating the magnitudes of factors influencing a retailer’s probability of paying more for a regionally grown fish, aquaculture producers may be able to improve their fish production and processing characteristics.
To examine what influences the probability of a retailer paying a premium for regionally grown, fresh fish on ice, data from 69 retailers (of the 125 surveyed) were used to estimate the factors influencing a retailers’ willingness to pay premiums for regionally grown, fresh fish on ice. On average, freshwater fish accounted for 35% of retailers’ sales and 35% of retailers sold more than 400 pounds of fillets a week. Fresh fish deliveries averaged 4.3 times per week, and 86% of retailers reported their customers preferred fresh fish products over frozen and value added fish products (i.e., marinated, stuffed, breaded).
Tilapia had an average willingness to pay premium for regionally grown fish of $0.38 more per pound. Yellow perch was second at $0.34 more per pound, while catfish was $0.30, followed by trout at $0.29. If raised in the Midwest, 40 retailers indicated they would purchase tilapia, 26 would purchase catfish, 25 would purchase yellow perch, and 22 would purchase trout. The top fish species sold by retailers were salmon, tilapia, catfish, and cod, respectively. These species are among the top ten species consumed in the US in 2009.
To examine what influences the probability of a retailer supplying fresh fish on ice, eight variables were used: chain affiliated, per capita income, total population, Caucasian population, African American population, Asian population, the number of fish processors located in the retailer’s county, and the number of restaurants located in the retailer’s district.
The results indicated that a store is more likely to supply fresh fish on ice if it is a chain store. Perhaps larger stores have adequate spacing to accommodate fish and seafood counters while smaller stores may not. As total population increased in the area, a retailer’s probability of supplying fresh fish on ice decreased. This may be explained by the fact where there are higher populations in inner cities, there is less space for retailers to have large displays of fresh fish on ice. The study found that as Caucasian and African American populations increase in the locale, the probability that a retailer will supply fresh fish on ice increases.
Another variable examined was the number of fish processors located in the retailers’ corresponding county. Because of its positive significance, it seems as though the proximity of processors to grocery stores and fish retailers is important to directly selling fresh fish products to the markets. The number of restaurants located in the retailers’ corresponding district was not significant. Unlike previous research, this study does not support a positive effect for per capita income for the probability of a retailer paying a premium for regionally grown fresh fish on ice.
To examine what influences the probability of a retailer paying a premium for fresh fish on ice, six variables were examined including: percentage of freshwater fish sales, if the retailer sold more than 400 pounds of fillets a week, weekly deliveries of fresh fish, if the retailer preferred fresh fish (more than frozen or value-added), if the retailer’s supply of fresh fish came only from out-of-state, and if the retailer’s supply of fresh fish came only from in-state.
For regionally grown, fresh tilapia, catfish, trout, and yellow perch on ice, the marginal effect of deliveries per week changed from negative to positive as willingness to pay amounts increased. This study finds, as a retailer’s weekly fresh fish deliveries increases, a retailer is more likely to pay more for regionally grown fresh fish on ice.
This study suggests that the probability of retailers’ willingness to pay more for fresh grown in the Midwest is low. This may be true because retailers are reluctant to increase prices of what customers prefer. Another interpretation could be that because these fresh species are grown in the Midwest, retailers do not want to pay more as they already able to get the fresh quantities needed.
Specialized marketing efforts made by regional fish producers may increase sales of their fresh fish products. However, there seems to be little room for increases in overall revenue to be made by differentiating their product as “regionally” grown. Improved marketing strategies targeted at chain grocery stores may increase fresh fish on ice sales, as well as marketing products into areas with Caucasian and African American populations (when compared to Asian and other), potentially increasing fresh fish on ice sales.
This work suggests that Midwest aquaculture producers should be looking to establish working relationships with fish processors and retailers that are located in the same (or neighboring) county as retailers who are currently selling fresh fish on ice. Though most retailers are not willing to pay significant premiums, the probability of selling fresh fish on ice significantly increases if the retailer is located in a county with a fish processor; this could allow for continued expansion of the Midwest aquaculture sector, but little proof of premiums for regionally grown fresh fish. Perhaps marketing regionally grown fresh fish to restaurants in inner cities would be a way of providing the product to inner city populations, where there is little room for large grocery stores with elaborate fish and seafood counters. Connecting the Midwest region’s fresh fish producers to grocery stores and other retailers who are interested in or are already supplying fresh fish on ice is necessary to increase fresh fish sales.
For the four species examined, the overall probability of paying more for regionally grown fish is relatively low; most retailers are not willing to pay any more for Midwest fresh fish than they currently pay. However, all four species had some retailers indicating a willingness to pay more per pound for regionally grown fish. Perhaps these retailers have a consumer base whose interests lie in locally produced fresh fish on ice. Future research could examine retailers (and perhaps restaurants) that specialize in local product.
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1 A version of this study is available with specific citations and other technical information. Contact the editor, Gerry Harrison, for the technical version at: firstname.lastname@example.org.