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Shellfish Industry Turns To DTC To Boost Profits

Shellfish Industry Tries DTC Strategy

As the U.S. shellfish industry was headed into 2020, the big concern was climate change. People who made their living in the business were worried that higher ocean temperatures would increase algae blooms and therefore be a destructive factor in the care, farming and feeding of all kinds of shellfish – from shrimp to clams to oysters to lobsters.

What a difference half a year makes. Climate change has quickly taken a back seat to the pandemic, as this sector of the $5.3 billion seafood business works to recover from an event that brought shellfishing to its knees in March and April, and is just now starting to recover.

The Northeast, where most of the country’s shellfishing takes place, has been hit hard. Take the Connecticut-Long Island oyster ecosystem on Long Island Sound, which is the body of water that defines the border between the two states. As it slowly starts to recover from the devastating losses of the restaurant business during the early days of the pandemic, shellfishing companies in the region are now trying to find new ways to get their product to market.

In order to understand how the pandemic has impacted the shellfish industry, it’s important to have some background into how it works, using oysters as an example. The process starts with a seed, or baby, oyster about as big as a fingernail. This is then seeded inside shallow oyster beds, which are then farmed by aquaculturists. This is the area of expertise for marine biologists such as Karen Rivara, who owns and operates Aeros Cultured Oyster Company on the northern shore of Long Island. She is also a member of the Noank Agriculture Cooperative, which includes all elements of the oyster hatching and farming community on the Long Island side of the sound.

After the oysters are mature enough to harvest, which can take anywhere from 18 to 24 months, shellfish harvesting companies – like Matt Katcham’s Peconic Gold Oysters – use specially equipped boats to harvest them, sometimes bringing in as many as 7,000 at a time. That’s 583 dozen oysters that Katcham can sell to restaurants or directly to consumers.

PYMNTS spoke to both Rivara and Katcham about the pandemic’s effect on the oyster business. It’s been a devastating blow, especially early on. According to a survey by Connecticut Sea Grant, as reported by The New London Day, the Connecticut shellfish business suffered a 93 percent loss in revenue due to the pandemic between March and mid-May. Since then, as eateries have begun to reopen, the state's shellfish farmers, who typically make 98 percent of their sales to restaurants, have recouped between 15 percent and 50 percent of their typical sales.

However, both Katcham and Rivara say the pandemic could have hit both of their businesses much harder.

“We've been okay this year – I was expecting it to be worse, but people are buying seeds that they're going to end up selling next year, and in some cases, within the year after,” Rivara said. “So, as far as oysters are concerned, if the sellers can envision that they're going to stay in business, and most people do, they're going to buy seeds so that they're still able to do business when we recover from the pandemic.”

Rivara can play the long game, but Katcham’s business is more immediate and direct. In the past, it has centered around the restaurants that populate the Hamptons and Montauk resort areas during the summer and around the New York City restaurants for the rest of the year. For this season, outdoor dining didn’t open until Memorial Day, and on Long Island, indoor dining only opened in mid-July. In New York City, indoor dining is still closed.

“We’ve done okay, considering,” Katcham said. “The way I see it, people want real food. They want food that has come to them directly from the source, and that has always been a big attraction for fresh seafood and shellfish. We’ve even seen some of the smaller shellfish farmers doing well.”

Although it can’t completely pick up the slack from losing most of the New York City business, Katcham has tried selling direct to consumers. On one hand, it’s limiting because buyers would need to know how to shuck oysters (not for those who lack patience), or they would need to find another way to consume them. Katcham has supplemented raw oysters at his farm stand with other dishes such as Oysters Rockefeller and oyster quiche. All are sold via contactless payment methods, such as PayPal or Venmo.

Government assistance programs have been of minimal help, mostly because shellfish farming has been lumped in with agricultural farming. According to Connecticut’s New London Day, “the USDA was allocated up to $16 billion earlier this year to deliver direct relief to farmers and ranchers impacted by the pandemic through a program known as the Coronavirus Food Assistance Program, or CFAP. But as of now, the USDA [has] deemed shellfish farmers ineligible for that money, arguing that they instead would receive aid from the National Oceanographic and Atmospheric Administration.”

The Paycheck Protection Program (PPP), which is slated to run out at the end of July, has helped some, according to Rivara. “Actually Cornell (University) Cooperative Extension did something pretty interesting with their PPP payout,” she noted. “They hired oyster farmers to hold oysters for them for their restoration programs. So that was very, very helpful for the growers, [as] it gave them money to tide them over. Some of the money that's available either goes through NOAA National Fisheries Service or it goes through the USDA, and we're kind of in the middle … we're not often a commodity that's covered.”

At the end of the day, Rivara is a scientist. As such, she believes that a COVID-19 vaccine will be the only cure for the shellfish industry’s ills. Outside of that, she preaches patience.

“What we need to do is get through the next year, and every business is going to tell you that, because there's no certainty,” she said. “When there's a vaccine, I think people will feel much more confident about their businesses’ future than they do right now. I think once the restaurants can reopen, oyster farmers will be able to get right back in there and sell product like before. The demand is there.”

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