Starting Out In A Value-Added Busines

Carl Johnson: “Something you need to determine, if you’re going to start your own value-added business is what you need to survive on as a markup based on your volume predictions. You need more money in the beginning. If you sell direct to the consumer, you can get less than a retailer and have a greater profit margin. If you’re selling to a market or distributors, you have to sell wholesale, or at a lower cost. Can you survive on that wholesale rate?

“What we sell for $4, the smart retailers will sell for $7. Our cost to them is $4, and they sell a lot. If retailers sell it for $10 to $12, they sell very little because the customer knows better. He has become sophisticated. People are [used] to looking for sales, and we are not a sales item. Our profit margins are inherently low because we sell to retailers and we pay more for our product.

“You have to know what the product costs. You have to know what the retail level is, what the product sells for at the retail level, and you have to price yourself somewhere in between.

“To get started you have to have a far superior product or you have to sell for less.

“Your scallops have to be frozen in one hour or one day versus buying them from a wholesaler, putting them in a container, and then freezing them. That’s where the fisherman has the advantage.

“The fisherman has an advantage if he can catch, shuck, and freeze his catch. His sourcing, his supply chain is shortened. If you’re a groundfisherman and you're catching finfish, cut fillets to a certain size: the small ones can go for fish and chips, and the big ones are used for white tablecloth restaurants: to high end users. Restaurants will buy all the small ones. The fish markets are buying the expensive stuff and the cost-conscious places are buying the small.

“Sell by size grades. Restaurants can use virtually anything for fish and chips and chowders.”
(Mason interjected, “Turn your mis-cuts into treasure.”)

Carl continued, “High-end restaurants, supermarkets, and fish markets are looking for large fillets. Fishermen can make an extra 20 to 30 cents per lb. if they grade their product.”

Mason: “You need someone to promote, tout, advertise your product. An endorsement lends credibility.”Carl: “I can’t buy directly from any fisherman because I have to buy from HACCP-certified source. So I have to buy from a dealer.”

HACCP (Hazard Analysis Critical Control Point) HACCP is the mandatory seafood inspection program. Rather than onsite inspectors, as the meat industry and other food handlers have, the seafood industry lobbied for and got HACCP. Processors, or anyone making a “change” in seafood, are required to have in place a system for identifying where hazards could occur in their handling protocols at every step through their facility, analyzing how the breakdown would occur, identifying places for controlling hazards and fixing problems, and keeping records of doing this daily. The records can be inspected.

Carl: “If a fisherman were to get himself HACCP-certified, (It’s about $300) he could sell to anyone, not just a dealer.” If crab pickers can get certified, why can’t fishermen?

“HACCP-certified fishermen could make crab casseroles in disposable containers, put crumbs or whatever they want on it, put a label on it, freeze it, and distribute it. For instance, casseroles are RTE products (Ready To Eat) or RTC (Ready To Cook).

“Joe Fisherman’s scallop and mussel casserole could be available at the IGA or Hannaford’s. Why not?” he said. “Instead of selling scallops for $9/lb. they could be selling them for $15/lb. because they don’t have to do 10,000 lbs. Just do their season’s catch and snap a lid on it: those aluminum things they sell. Add a nice label, and there it is. Fishermen’s Scallop Casserole with sherry and butter. And get $5 for it. Gauge it to the portion or the selling price you think will sell.

“If a couple of fisherman got together and had a garage facility that was HACCP approved for doing this, you could just go to Sam’s Club and buy some ready-made seafood dressing that you can buy in tubes. You slice it and put it on top of your scallops in a retail pack container or pouch purchased from a wholesale distributor such as Sysco or Dennis Paper, put a little bit of butter on it, add a nice label, and you can sell it to the local markets or sell it out of your truck.

Carl added, “The State of Maine has to figure out how to let processors do value-added products.”

This advice would work for any seafood a fisherman catches. He or she could use Carl’s recipe or his own or his wife’s, mother’s, or grandmother's favorite recipe.