Covid-19 impacts on markets from January to March 2021

Review of the impacts of the Covid-19 pandemic on seafood markets from January to March 2021.

Please refer to the downloadable version of this report for a full set of references, citations, footnotes and hyperlinks to external websites.

Key points

  • Retail sales dropped back from the unprecedented increase seen in March 2020 but continued to outperform overall retail sales in recent years.
  • Foodservice businesses were limited to takeaway and delivery trade due to lockdown.
  • Fish and chip shops outperformed total foodservice, returning to pre-pandemic levels.
  • Export demand remained low.
  • Businesses that continued to trade with the EU experienced delays and disruptions as new trading arrangements were implemented.
  • Small businesses that had embraced selling directly to customers were positive about future business growth, even when restrictions begin to ease.

Retail

With the UK back in lockdown during January to March, retail sales remained strong. Overall, 2021 retail sales volume remained 14% above pre-Covid levels in January to March. The overall decrease in sales volumes seen in March 2021 compared to March 2020 was 30%. This decline was due to the unprecedented, 63% increase in retail sales volume in the lead up to the first lockdown in 2020.

Graph showing Weekly UK seafood retail sales volume 2021 vs 2020
Graph showing Weekly UK seafood retail sales volume 2021 vs 2020

Frozen seafood proved particularly popular as shoppers continued to make fewer, bigger trips and increasingly shopped online. Frozen products have helped consumers manage the high levels of uncertainty experienced since the start of the pandemic, providing good value and little waste. Frozen ‘family favourites’ like battered-, breaded- and fish fingers continued to see high demand in January to March.

As businesses considered which new products to launch this year, big brands focussed on retaining new customers. By offering easy and exciting products that can be prepared at home, brands hope to retain custom when foodservice reopens. Young’s, for example, launched new frozen products in the retail market following the boost in consumer demand for frozen seafood since the start of the pandemic .

Chilled seafood sales growth was also strong, despite reduced footfall in retail stores as consumers continued to embrace online ordering and deliveries. As many supermarkets had closed their fish counters before the start of the pandemic, the share of chilled sales volume via counters decreased from 12% in 2019 to 6% in 2021. Consequently, the sale of pre-packed chilled products has increased its share .

With more people furloughed or working from home, many have had more time to cook from scratch, using more chilled seafood products. Consumers also used chilled seafood to try to recreate restaurant meals at home during lockdown.

As with frozen, ambient (tinned) product is also a convenient product format for people to bulk buy and store for longer periods of time. Since the massive increase in sales volume around the time of the first lockdown, sales have dropped back but were still 6% above 2019 levels during January to March.

Table showing UK retail value and volume compared to 2020
Table showing UK retail value and volume compared to 2020
  Chilled Frozen Ambient Overall
Value (Jan-Mar) +14% +9% -17% +7%
Volume (Jan-Mar) +13% +6% -14% +4%

Since the start of the pandemic, consumers have changed how they shop, and grocery retailers have responded. According to an industry spotlight report on the new grocery retail journey, 46% of retailers reported a decrease in store visits. 85% said they saw an increase in online sales.

Both Tesco and Sainsbury’s reported doubling their delivery slots since March 2020 in response to the pandemic. Further research suggests that this shift online is here to stay with fewer buying trips and more online orders predicted.
Generally, grocery retail businesses continued to see strong sales during January to March. Data shows that with the exception of Co-op, all multiple retailers increased their sales volume compared to the year ending March 2020. Aldi, Ocado, Farmfoods, Lidl, Morrisons, and Iceland all increased their market share, while Sainsbury’s maintained market share and Tesco, Asda and Waitrose lost market share. The boost in market share for Iceland in particular highlights the increased demand for frozen foods. Ocado’s increased share, as an online-only retailer, demonstrates the move to online shopping for many.

Brands also identified new opportunities via partnerships with recipe box companies . Since the start of the pandemic, meal kit delivery businesses like Hello Fresh and Gousto have benefited from increased product and name recognition as people prepared more meals at home.

Meanwhile, independent fishmongers continued to profit from increased interest in ‘buying local’ with shoppers staying closer to home .

Retail sourcing issues in Northern Ireland

Alongside increased demand driven by lockdown restrictions, some shoppers in Northern Ireland faced limited choice during January and February due to issues with groupage and the paperwork required for individual consignments coming from Great Britain. Associated delays reduced the shelf life of products and made it more difficult for retailers to restock.

Other issues cropped up for Northern Irish independent retailers trying to source less common species where the added requirements to ship small quantities was deemed too high by suppliers in Great Britain. Denholm Fishselling Ltd in Portavogie supplies many of these businesses. Director, Sam Mawhinney, explained:

A core part of our business is operating a daily refrigerated fish transport service between Scotland and Northern Ireland to supply a range of businesses from family run fishmongers to large wholesalers in Northern Ireland and the Republic of Ireland.

Since January, transporting mixed consignments across the Irish Sea requires a lot more paperwork, specifically for Health and Catch Certificates which must be provided for each individual consignment. Because of this added resource burden, sourcing fish from Scotland is costing more now, resulting in less choice and higher costs for some customers.
Sam Mawhinney, Director of Denholm Fishselling Ltd

Foodservice

Lockdown restrictions supressed foodservice trade during January to March. Businesses were largely limited to offering takeaways, home delivery, and at-home meal kit options.

As delivery demand continued to boom, many businesses sought innovative ways to meet this demand and connect with customers . Digital technology has supported this growth by making it quicker and easier for customers to order out of home. Early signs indicate that this is a change in habit that is likely to stick with consumers. Household spend on home delivery remained consistent through 2020 and into 2021, even when restrictions eased and out of home spending started to recover in summer 2020.

According to the latest data, seafood delivery orders grew across all foodservice channels during January to March, up 10% overall compared to 2020. A small sample of panel data from the NPD Group shows growth was particularly strong for full-service restaurants, seeing an overall increase of 25% for seafood delivery visits.

Picking up on this market development, food delivery platforms announced plans to expand their services . This gave more restaurants around the UK the option to grow delivery sales.

Mourne Seafood in Northern Ireland is one business that intends to keep building on their new online sales and delivery platform, ‘Mourne at Home’, for pre-prepared meals. This approach comes even as they make plans to reopen their dine-in restaurants when lockdown restrictions lift. Bob McCoubrey, owner of Mourne Seafood commented:

We’ve had huge success with ‘Mourne at Home’ since launching it during the first lockdown and plan to maintain this offering even after we are able to reopen our restaurants for dine-in service in the coming weeks.
Bob McCoubrey, owner of Mourne Seafood

And this isn’t the only change started during Covid-19 that Mourne Seafood plans to keep. Bob added:

Following the success of the large outdoor dining space we opened last year between lockdowns, al fresco dining may be something else that is here to stay post-Covid. It has given Belfast a more vibrant and European feel and we’re planning to build on this when restrictions ease later in the spring.
Bob McCoubrey, owner of Mourne Seafood

Takeaway demand also remained strong during January to March, with fish and chips proving particularly popular. Usually, the early part of the year is a ‘quiet’ time for fish and chip sales. However, some businesses reported unusually high demand for the time of year. This was facilitated by continued growth in ‘click and collect’, online ordering and home delivery sales.

This upturn was welcomed because at the end of 2020 fish and chip shop visits were down around 25% and spend was down 21%. The Fish and Chip shop trade continued to recover more quickly than all other ‘out of home’ seafood channels in early 2021. By the end of March, fish and chip shop visits were only 0.2% below pre-pandemic levels and outperforming all other channels including total foodservice.

Graph showing % change in Foodservice visits compared to the previous year
Graph showing % change in Foodservice visits compared to the previous year
  Total food service sector Quick service restaurants (excluding Fish and Chip shops) Fish and chips sector
Jan-Mar (Q1 2020) -10% -6% -2%
Apr-Jun (Q2 2020) -77% -66% -73%
Jul-Sep (Q3 2020) -42% -33% -22%
Oct-Dec (Q4 2020) -45% -29% -8%
Jan-Mar (Q1 2021) -52% -25% -0.2%

Demand for fish and chips is expected to remain strong as restrictions begin to ease later in the year. With many expecting to holiday closer to home this year, consumers have named fish and chips as one of the top meals they are looking forward to enjoying with family and friends .

During January to March, many fish and chip shop operators continued to operate more streamlined opening hours and reduced menus to increase efficiency and reduce waste. By the end of March, fish and chip businesses began anticipating changes in demand. They expected competition to increase as restrictions ease and customers have more dining options.

Read more from Andrew Crook, President of the National Federation of Fish Friers (NFFF) here.

When plans to ease restrictions were announced, foodservice businesses started thinking about reopening dine-in services in April and May. Some expect an increased push for British seafood in 2021 as seafood suppliers look to replace lost export markets with domestic sales .

As restaurants plan to reopen there is still much that remains uncertain, including the risk of local ‘lock-down’ restrictions in response to Covid-19 hot spots. Foodservice businesses therefore need to remain flexible. Data from the monthly Market Recovery Monitor suggests that around 40% of licensed premises have some outdoor space . According to the same survey, only 12% of casual dining restaurants have outdoor space. For those businesses able to offer outdoor seating, demand is still likely to be weather-dependent.

The value of the UK restaurant sector is expected to grow by over 30% in 2021 after a 53% market contraction in 2020 . But not all foodservice businesses will reopen. Research by the Evening Standard shows that more than 800 branded restaurants, bars and coffee shops have permanently closed since the start of the pandemic. It is expected that the wider hospitality sector will take longer than others to recover jobs lost in 2020. Pre-Covid levels of growth are not expected to return until 2023.

Exports

As was widely reported, exporters faced significant and varied problems from January to March. Problems were primarily due to the ongoing impacts of Covid-19 on seafood supply chains and disruption associated with new trading arrangements with the EU.

Covid-19 restrictions in key international markets continued to cause trade challenges. With much of the global foodservice sector restricted, export demand for UK seafood was limited.

The ongoing pandemic situation led to an increase in trade frictions with China, a key trading partner. In January, China stepped up testing and inspection of imported frozen seafood . This was reportedly to prevent Covid-19 outbreaks after authorities repeatedly reported detecting Covid-19 on imported frozen products. In mid-January, Chinese authorities proposed new Export Health Certificates (EHC) for fishery products exported to China.

Trade with the EU was also severely disrupted, particularly in January. While ongoing Covid-19 restrictions suppressed demand, businesses that continued to trade with the EU experienced delays and disruption under the new trading arrangements.

At the end of the transition period, gridlocks and long border queues did not materialise to the extent that was initially feared in a ‘worst-case’ scenario. However, many businesses faced issues related to the introduction of new IT systems and requirements for new documentation including health certificates, customs documentation and catch certificates.

Issues with these new systems and requirements led to delays and disruptions for exports from Great Britain, impacting on supply chains. Many of these issues related to groupage consignments. Groupage is where logistics companies consolidate consignments from multiple suppliers into a single consignment for export. Problems were found where a single documentation error would hold up the entire consignment until the errors were corrected. Lack of clarity around the source of errors caused further confusion for many businesses.

Inspections and checks on the EU side led to further delays. In some cases, different Border Control Posts in the EU interpreted the new rules differently. This meant that a consignment which was considered compliant in one country was not deemed compliant in another. These inconsistencies drove further frustrations amongst exporters.

These issues did not affect every consignment, and many could be resolved relatively quickly. However, the increased uncertainty and decreased reliability of goods exported from Great Britain caused reputational issues for seafood exporters.

With many businesses unable to guarantee product delivery dates, some worried about losing critical markets to other suppliers. This was a particular problem for live and fresh seafood exporters. Santiago Buesa, of SB Fish in Troon, Ayrshire, was quoted in the Guardian in early January explaining the impacts of export delays on his business:

Our customers are pulling out. [We offer] fresh product and the customers expect to have it fresh. [Because of delays] they’re not buying. It’s a catastrophe.
Santiago Buesa, SB Fish

Though some immediate losses may have been covered with new government support schemes, any permanent loss of custom could have longer term consequences for affected seafood businesses. Furthermore, not all businesses were able to claim for losses. Those that chose not to export in January to avoid disruption were not eligible for government support as they could not demonstrate concrete trade losses.

Actual and expected trade disruptions resulted in significantly reduced trade volumes during January to March. Businesses that went ahead with trading in January faced disruptions and delayed consignments. Other businesses chose not to export in January to avoid expected disruption.

Graph showing % change in value of seafood exports compared to previous year by month.
Graph showing % change in value of seafood exports compared to previous year by month.

UK exports value year on year by month

  Demersal Pelagic  Shellfish Salmon
Oct 20 1% -6% -19% -30%
Nov 20  -19% 18% -21% -32%
Dec 20  -11% 21% 3% -45%
Jan 21 -73% -51% -74% -80%
Feb 21 -5% -37% -26% -26%
Mar 21 +9% -50% +55% +46%

In January, export value to the EU dropped 85% compared to 2020, while total export value was down 75% . January export volume to the EU was down 81% and total export volume dropped 64% compared to January 2020. In response, there was a collective effort to try and tackle export issues as they arose. This included the formation of the Scottish Seafood Taskforce.

Some businesses handled groupage issues by sending fewer, larger consignments or cutting out smaller consignments. Others, that previously exported a small amount to the EU, found the new costs uneconomical and decided to stop this trade. Some of these businesses then reduced staff in line with their decrease in production. The UK Government also worked closely with various EU member states to harmonise understanding and implementation of the new rules on either side of the border.

As paperwork and logistics issues declined in frequency and severity, the reduction in trade seen in January generally slowed in February and began to improve in March. By the end of March, reports began to emerge that exports were moving at a reasonable pace .

Nonetheless, many businesses reported higher associated costs, well above what had been anticipated. David Leiper, Managing Director of Seafood Ecosse, a processor and exporter based in Peterhead explained:

Compared to the same time last year, our overall costs are up around 27% as a result of the new paperwork requirements. These added costs are coming straight off our bottom line.
. David Leiper, Managing Director of Seafood Ecosse

These additional costs came at a time when many businesses were already in a particularly challenging financial position after a year of pandemic impacts on their raw material supplies, workforce, and markets.

Table showing % change in UK exports for demersal, pelagic, shellfish, salmon and overall by value and volume in January-March 2021 compared to 2020.
UK exports 2021 compared to 2020

UK exports 2021 compared to 2020

  Demersal Pelagic Shellfish Salmon Overall
Value  (Jan-Mar) -23% -46% -23% -27% -32%
Volume  (Jan-Mar) -17% -65% -37% -2% -41%

Overall, the value of exports to the EU by the end of March was 30% less than the same period in 2020.

Shellfish exports saw the greatest reduction for a few key reasons:

  • Depressed markets due to Covid-19 restrictions in key export countries.
  • Shellfish exports were more likely to rely on groupage and required more paperwork due to product variation.
  • Many operators trade on a flexible volume basis due to the nature of live crustacean fishing and some struggled to secure export health certificates quickly enough with such short lead times.
  • Live bivalve mollusc (mussel, cockle, clam, scallop and oyster) exports all but stopped in January. This followed an EU ban on all live bi-valve molluscs (LBM) not fit for human consumption at the point of export, or those from class B and C waters.

Fresh demersal whitefish exporters also struggled with groupage issues and depressed European demand. Some UK demersal vessels landed directly to the EU to limit transport and logistics issues or in some cases to achieve better prices.

Salmon exports were severely disrupted in January but recovered more quickly than shellfish in February. Single species loads, like salmon, proved simpler and quicker to inspect and process. As a result, these consignments began to be prioritised at the new major transport hubs set up in Scotland. Speeding up processing of these single consignment loads then allowed more resource to handle complex groupage consignments.

Pelagic exports were less impacted by delays and disruption as these products are less dependent on European hospitality markets. They are also sent as single consignments (similar to salmon), requiring less paperwork. Historically, the pelagic industry largely exports product to non-EU countries and was therefore already accustomed to handling much of the additional documentation required.

Rules of origin impacted some exporters. Businesses that exported products with raw material that originated outside of the European Economic Area (EEA) were subject to new tariffs of up to 18%.

Direct Sales to Consumers

Direct sales continued for those established in the market. Smaller, more adaptive businesses that had found ways to ‘cut out the middleman’ and get their products direct to customers during lockdown reported feeling positive about their business models as they anticipated the easing of restrictions.

These businesses likely benefitted from the shift seen in people’s diets and buying habits since the start of Covid-19, with more people buying food locally or growing their own .

Pesky Fish found new opportunities to grow when Covid-19 struck. The business was founded in 2017 to connect fishermen directly with wholesalers, retailers, restaurants and home chefs via an online marketplace. It has continued to boom in 2021, building on its new direct home delivery service. Rob O’Shea, Head of Consumer at Pesky Fish explained:

We have built up a really strong, loyal following of home chefs since the start of the pandemic when we started offering direct home deliveries. Because of the traceability, provenance and story that comes with each order, customers can create a real dining experience at home.

As foodservice returns we expect sales to grow to accommodate demand from both professional and home chefs, providing fresh seafood for both the dining-in and dining-out experience.
Rob O’Shea, Head of Consumer at Pesky Fish

Read more about Covid-19 impacts from January to March 2021

Contacts

For further information on our review of Covid-19 impacts on the seafood industry contact:

Ana Witteveen
Economist
t:
0131 524 8659
m:
07815 428 554