Fewer workers in fine dining may cut into seafood processors’ profits
Six Seven, an upscale restaurant located in Seattle’s historic Edgewater Hotel, serves northwest cuisine with a focus on fresh seafood. They source some of that product from Alaska’s fisheries, which provide more than half of the country’s wild-caught seafood according to the Alaska Seafood Marketing Institute.
The restaurant is open seven days a week, but the hotel’s general manager Ian McClendon said that he has noticed that other fine dining spots are operating for fewer hours.
“I would say several high-end restaurants that used to be open seven days a week down here at the waterfront are not open full time,” he said.
As restaurants reopened to in-person dining after pandemic closures, they struggled with staffing shortages, according to the National Restaurant Association. The association said that at the start of this year, 80% of restaurant operators reported they had a hard time filling open positions.
The Bureau of Labor Statistics reports that leisure and hospitality job openings, which include the restaurant sector, are near 20-year highs. McClendon said the hotel’s restaurant, Six Seven, has kept staff due to their union contracts.
Seafood processor Ocean Beauty Icicle’s former chief executive officer Mark Palmer said the restaurant staffing challenge has affected the amount of seafood some restaurants purchase.
In a November meeting hosted by the United Fishermen of Alaska, Palmer said that restaurants are operating with a smaller wait staff, selling fewer dishes for higher prices.
“Some of them have identified a new business model that doesn’t move more pounds of product. They move less, and it’s just as profitable,” he said.
Last year, a presentation from DataEssential for the Alaska Seafood Marketing Institute showed that Alaska seafood had a much higher median price point in fine dining institutions than the overall seafood average - $33.00 compared to $19.95.
Palmer said that many processors have traditionally depended on the sales to fine dining restaurants like Six Seven to help turn a profit.
“We rely on fine dining. We rely on white tablecloths. And that’s where we really can drive margin and that’s where a lot of premiums are paid,” Palmer said.
But even as processors get premium prices for Alaska seafood, a lower volume being purchased from restaurants means less pounds sold.
University of Alaska Anchorage emeritus professor of economics Gunnar Knapp has studied fisheries for decades. He said restaurants have adapted to having fewer workers by catering to this smaller clientele.
He said grocery and fish markets are also changing what and how much they buy to adjust to having fewer workers.
“Similarly, on the retail side, they're trying to do less that involves labor, and this can affect the mix of products they want to buy and have to stock and so on,” Knapp said.
These changes, Knapp said, come as many processors are contending with a shifting international market, including a shrinking amount of frozen salmon sold to Asia. Knapp said processors are paying to hold large quantities of some products.
“The longer that they have to hold those fish, the higher their storage costs, but also the higher their interest costs from borrowing,” he said.
Knapp said that in the future, retailers are likely to return to buying larger quantities of available fish like sockeye salmon.
“Eventually, some stores will say, ‘hey, we can sell more,’ and ‘all those other stores are keeping their prices high. We'll buy a sockeye salmon, and offer consumers this cheaper price that the other stores aren't passing along,’” he said. “Then the other stores have to price match, and then prices get into adjustment.”
A return to normal labor levels may not be the whole picture. The Edgewater Hotel’s general manager Ian McClendon said that even with a full restaurant, they’re buying less from Alaska because of continuing supply line constraints and in some instances, like with crab, lack of availability. He said that the restaurant, which is part of a larger hotel network, tries to buy in bulk from vendors. Now they have to source from more groups.
“Pre-pandemic, we had a pretty strict routine. Coming out of [the] pandemic, we've never had this many seafood vendors,” he said. “So we're having to find more people. It's harder for us to find products than it used to be before the pandemic.”
Some processors, such as Palmer, have called for legislative change to help address some challenges the industry is facing, including liquidity issues. That change could include involving the US Department of Agriculture or providing low interest financing solutions. For now, processors and their clients will have to continue to grapple with the challenges of labor shortages and a fluctuating market.
Get in touch with the author at firstname.lastname@example.org or 907-842-2200.