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Seafood Marketing
State of Alaska > Commerce > DED > Seafood Home  > Seafood Marketing  > Presentation  > Mark-Ups
 

This segment of the workshop was presented by Chris Mitchell. For further information, please contact him at:

Mr. Chris Mitchell,
Marketing Consultant
Seafood Market Developers
425-702-0275
CFoodBizz@aol.com

 
Mark-Ups in the Distribution Channels
and Fishermen Direct Marketing
 

Ocean to Oven

This chart describes the standard distribution channel for seafood products.
Fishermen: Individual who harvests seafood.
Primary Processor: Processor who engages in the first level of processing. It may be the only processing that occurs before it reaches the consumer.
Secondary Processor: Sometimes the same as the primary processor. Often makes the high-value products: smoked, fillets, etc.
Importer: This represents another method for product to enter the distribution channel. Behind it is fishermen and processing.
Distributor: The company that buys and sells a number of products intended for the same buyer. Distribution companies often handle much of the logistics.
Broker: Brokers generally bring together buyers and sellers, but do not obtain title. As such, they rarely hold product. They earn a commission.
Retail: The retail segment includes grocery stores, meat markets and other outlets where individual consumers/shoppers purchase items.
Foodservice: The foodservice segment includes: restaurants and institutional buyers (hospitals, colleges, jails).
Customer: Whether it is retail or foodservice, customers are those that ultimately consume the product.

Mark-Ups

Processor Distributor 15%
Distributor Foodservice/Retail 15-25%
Broker Commission 3-5%
Foodservice/Retail Consumers 40+%

Fishermen often wonder why the same flesh they sell for $.50/lb goes for $5.00/lb in the market. What magic occurs between the dock and display case? Aside from all of the expenses that go into processing product and moving it to its final destination, each link in the chain takes profits.

While only estimates, processors might take a 15% markup on their costs. Distributors take a 15 - 25% markup. Brokers traditionally earn 3 to 5% for their troubles. Foodservice and retail look for upwards of a 40% markup on the final sale.

Fisherman Direct Marketing

  • Selling to a higher point in the distribution chain
  • Direct marketing is a hot concept. Why?
  • Problems/concerns with direct marketing
  • New responsibilities come along with new opportunities
  • Finding new buyers and convincing them to purchase
  • Additional demands of value-added production

Fishermen direct marketing is a hot concept because fishermen want to earn the markups currently realized by all those in the middle. This means they will be selling their product to a higher point in the distribution chain.

As can be expected, selling to a different buyer presents different challenges. Anyone wanting to take change their selling patterns must be willing to accept new responsibilities. Among other tasks, a fisherman will need to find new buyers and convince them to purchase the product. There will also be a suite of additional demands that come from becoming a processor.

Is Direct Marketing for You?

Test Yourself...

  • Paperwork, bookkeeping and details
  • Sales
  • Waiting for your money
  • Same old same old, week after week
  • The physical effort
  • Supportive family?
  • Commitment of time and capital

So…

If you think you are good and ready for direct marketing be sure you are good and ready for the following things:

  • Paperwork, bookkeeping and details - are you good with money management?
  • Sales - do you like to convince people to buy things?
  • Waiting for your money - do you have enough money to stay alive until buyers pay you? What if they don’t pay you?
  • Same old same old, week after week - it can get routine.
  • The physical effort - probably not too tough if you are a rugged fisherman
  • Supportive family? - new business ventures can strain more than the pocket book
  • Commitment of time and capital - new business ventures can strain more than a marriage

Why Most Direct Marketing Efforts Fail

  • Lack of planning and discipline
  • Lack of capital
  • Doing it all is difficult
  • Inadequate attention to quality & customer specs
  • Inadequate attention to marketing
  • Failure to adequately review risk
  • Failure to use all resources available

There are reasons why direct marketing efforts fail. These are reasons that pertain to any new business. It is important not to underestimate the value of planning for these problems.

New businesses must be wary of:

  • Lack of planning and discipline
  • Lack of capital
  • Doing it all is difficult
  • Inadequate attention to quality & customer specs
  • Inadequate attention to marketing
  • Failure to adequately review risk
  • Failure to use all resources available

A Success Story---Triad Fisheries and Bruce Gore

There are fishermen direct marketing success stories. One of the best comes from a troller named Bruce Gore who owns Triad Fisheries. After much experimentation, Gore found a high quality process for what was already a high value species. Gore worked hard to brand his product.

A sign of his success is apparent today. What started as a one boat fleet is now over thirty. Gore has more requests for product than he can supply. However, he will not add any vessels to his fleet until they can meet his quality specifications. While prices of salmon continue to fall, Bruce Gore continues to find higher prices.