September 25, 2024 - According to the IBIS World’s August 2024 Industry Report for Fish and Seafood Wholesaling, the fish and seafood wholesaling industry has seen an overall rise in revenue in part due to favorable changes in market pricing over the past five years. In the same period, the industry also reports that profit margins have declined. Citrin Cooperman has seen a similar trend with our client base in the industry as fish and seafood pricing is heavily impacted by demand and supply, as well as consumer preferences. This market volatility is presented due in part to fish and seafood pricing being heavily impacted by demand and supply, as well as consumer preferences.

In the past year, the industry has gone through significant fluctuations in pricing, causing companies to evaluate the value of their inventory recorded and determine whether book values exceed net realizable value. As a result, many of the companies have incurred a loss in operations due to the volatility in the market. As the goods in the seafood industry are seen as a commodity, sudden increases or decreases in pricing can have a significant impact on the company’s decisions and inventory management. Here are three steps leaders of seafood companies can take to help their business succeed in the current market.

Inventory management considerations

Seafood companies should consider whether entering into contracts with suppliers and buyers would be beneficial to promote some stability and control over the fluctuation in pricing. Companies with the ability to enter into these agreements should explore the length of the agreement and whether the term is something that is manageable for the company to withstand in the event of strong changes in the economy. Additionally, they should take into account whether there are any metrics included that would help alleviate economic pressures that could cause a sudden rise in inventory acquisition costs. For longer term contracts, including a metric for impact of inflation or other metrics suitable for the product, such as an auction house selling price or industry market pricing metrics, could help to alleviate some of these pressures. Companies that are able to enter into these arrangements could have better control over margins.

Funding assistance programs

If a seafood company is unable to make inventory management changes, there may be other options. Companies may qualify for other opportunities for support, such as programs with the National Oceanic and Atmosphere Administration (NOAA). NOAA offers a various range of grants that can aid seafood companies with funding and support efforts including research and conservation projects. Outside of the fish and seafood specific industry assistance, companies may be eligible to receive grant funding through the Industrial Assessment Centers (IAC) Implementation Grants Program. These grants from the IAC can cover one or more projects per quarterly funding round at a 50% cost share. In order to be eligible for the IAC grant funding, companies must reach certain requirements. However, the funding offers a potential opportunity to implement energy saving measures, improve productivity, and reduce waste.

Implementation of new technologies

Lastly, seafood companies should explore avenues to improve their margins by implementing new technologies. In Citrin Cooperman’s 2024 Manufacturing and Distribution Pulse Survey Report, 65% of respondents reported that they are utilizing advanced tools such as data analytics to improve product profitability. As the industry is being impacted by cost fluctuations, companies can seek alternative options in order to stay competitive in the market with the implementation of robotics and automation. Companies that have the ability to explore and implement robotics and automation could see increased costs and need for capital to support the implementation in an effort to help reduce labor costs and increase efficiency. Seafood companies should look to perform further analyses to determine whether implementation of automated processes aligns with their short-term or long-term goals.

How Citrin Cooperman can help

Citrin Cooperman is proud to be home to one of the leading manufacturing and distribution practices in the country, providing specialized services to food and beverage companies. If your seafood company is interested in exploring how to remain agile in the face of market volatility, please contact your Citrin Cooperman advisor or Barrett Bernier at bbernier@citrincooperman.com.