These days chains such as Costco and Whole Foods Market sell seafood in such quantities that they can make deals directly with fisheries and set up their own processing plants, cutting out the middleman.
The result: These chains are now both customers and competitors to the nation's wholesale distributors, such as the ones in Jessup.
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For example, about 10 years ago Whole Foods bought a seafood distributor in Gloucester, Mass., where its employees buy fish right off the boats and process them. More recently, Whole Foods bought Select Fish Co., a specialty seafood distributor in Seattle, and leased a plant in Yakatak, Alaska.
In this region, Whole Foods limits itself to one distributor, Iceland Fish Co. in Elkridge, which works with the processing and distribution plants Whole Foods owns.
"We've dug deeper and deeper and deeper into seafood," said Joe Stofer, the company's seafood buyer. "We've really gone to having a very controlled buying and distribution system."
If Costco is short on a seafood item, it will turn to distributors. But when it can, Costco prefers to deal directly with fishing companies, including industry giants such as Trident Seafoods and Pacific Seafood Group. That helps Costco control cost and quality, said Jeff Lyons, a vice president at Costco Wholesale Corp.
He said Costco, a members-only warehouse club, is able to negotiate such low prices that it competes with distributors for the business of mom and pop grocers. He said many small grocers buy seafood at the chain's 318 U.S. stores rather than buy from distributors.
"They use our expertise and our size to get great value and then they turn around and make a margin on the product," Lyons said. "We even get some big distributors who buy full truckloads of shrimp or crab legs worth several hundred thousand dollars" from Costco.
The response of Jessup-based distributor J.J. McDonnell & Co. has been to try to add more value. "We're going more upscale," said Kurt Friesland, who buys and sells fish for J.J. McDonnell. "We address a market segment that requires knowledge, service, background."
-- Dina ElBoghdady
