The future of fishing and the seafood industry Ragnar Tveteras University of Stavanger, Norway...
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The future of fishing and the seafood industry Ragnar Tveteras University of Stavanger, University of Stavanger, Norway Norway International Fishmeal and Fish Oil Organisation Annual Conference 2006 Barcelona, Spain
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Transcript of The future of fishing and the seafood industry Ragnar Tveteras University of Stavanger, Norway...
The future of fishing and the seafood industry
Ragnar Tveteras
University of Stavanger, NorwayUniversity of Stavanger, Norway
International Fishmeal and Fish Oil Organisation
Annual Conference 2006 Barcelona, Spain
Issues
Global supply trends
Global demand trends
Development of prices at different stages of supply chain for selected species/products
Emergence of large suppliers of seafood with focus on processing and distribution
At what stages of seafood supply chains will profits be earned in the future?
Strategic challenges for the aquaculture industry
The global supply from the oceans
0
20
40
60
80
100
120
140
160
1976
1978
1980
1982
1884
1986
1988
1990
1992
1994
1996
1998
2000
2002
Mil
lio
n t
on
nes
Capture feed Capture food Aquaculture
FAO 2005FAO 2005
Global exports of seafood products from developed and developing countries
0
2
4
6
8
10
12
14
16
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
Mill
. to
nn
pro
du
ct
we
igh
t
Developed
Developing
Largest importers of seafood
0
1
2
3
4
5
6
7
8
9
10
1976
1980
1984
1988
1992
1996
2000
Mil
l. t
on
ne
s p
rod
uc
t w
eig
ht
EU
J apan
China
East/South-EastAsia
USA
Rest of world
Supply side trends in food fisheries
Many food fisheries struggle with poor regulation– Both in developed and developing countries, for
example, the European Union– Technology and capacity versus political will and
resources– It will take a long time to improve regulation
performance
Some food fisheries sectors are improving their competitiveness through increased ability to supply modern distribution channels with e.g. fresh fish
Supply side trends in aquaculture
Continuous innovationDeclining production costsConsolidation in salmon aquacultureWinning the battle of distribution into retail outletsThe species supply mix in the future will depend much on fish meal & oil substitutionIncreased penetration from developing countries to 1. world markets
Production costs in farming in the sea and on land
0 0.5 1 1.5 2 2.5 3 3.5 4
Tilapia, South-Amerika
Tilapia, USA
Cod, vessel 8-13m, Norway
Cod trawler +250GRT, Norway
Seabass/-bream, Mediteranean
Catfish, USA, low cost
Catfish, USA, high cost
Salmon, Norge
Salmon, Chile
Shrimp, Thailand
Shrimp, USA
Pork, USA
Pork, USA
Broiler, Thailand
Broiler, USA
USD/kilo
Production costs in salmon Norwegian farming
Source: Norwegian Directorate of Fisheries
0123456789
10
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
US
D p
er
kilo
Production costRevenue
Global meat production 1961-2005
0
20
40
60
80
100
1201
96
1
19
64
19
67
19
70
19
73
19
76
19
79
19
82
19
85
19
88
19
91
19
94
19
97
20
00
20
03
Mil
l. t
on
ne
s o
f m
ea
t
Pig
Chicken
Cattle
GDP growth rates
0
2
4
6
8
10
12
2004 2005 2006 2007
USA
Euro area
Developing countries
China
India
Russia
World
Global seafood demand trends
Income growth in many countries– Middle class grows– Accompanied by development of modern food distribution
systems and shift in distribution channels to consumers– Shift from cheap proteins to more luxury seafood– Industrialized aquaculture species benefits particularly from
thisHealth trends in developed countries– Omega-3 is one of the winners when consumers search for
healthy alternatives in their diets
Fish meal & oil sector benefit from increased demand for fish in general and carnivorous fish and shrimp in particular
Some buyers and suppliers in the European food industry
Foodgiants
Meat productsuppliers
Large seafoodcompanies
Salmoncompanies
Small-scaleseafoodsuppliers
The salmon companies
Salmoncompanies
Often vertically integrated farming-processing-distributionLargest companies have yet not exploited coordination and scale economies fullyHigh variability in profitability across companiesBut have set the standard for supply of seafood in several areas:– Volume, timing and prices
Retail prices on selected food products and retail price index
in UK
40
60
80
100
120
140
160
Pri
ce
in
de
x (
Ja
n. 1
99
1 =
10
0)
Beef
Pork
Poultry
Retail price index
Retail prices on selected food products and retail price index
in UK
40
60
80
100
120
140
160
Pri
ce
in
de
x (
Ja
n. 1
99
1 =
10
0)
Cod
Beef
Pork
Poultry
Retail price index
Retail prices on selected food products and retail price index
in UK
40
60
80
100
120
140
160
1991-0
1
1992-0
1
1993-0
1
1994-0
1
1995-0
1
1996-0
1
1997-0
1
1998-0
1
1999-0
1
2000-0
1
2001-0
1
2002-0
1
2003-0
1
2004-0
1
Pri
ce
in
de
x (
Ja
n. 1
99
1 =
10
0)
Cod
Beef
Pork
Poultry
Salmon
Retail price index
The salmon companies
Salmoncompanies
Often vertically integrated farming-processing-distributionLargest companies have yet not exploited coordination and scale economies fullyHigh variability in profitability across companiesBut have set the standard for supply of seafood in several areas:– Volume, timing and prices
– Availability of fresh fish to consumers
Fresh & chilled products’ share of total frozen, fresh and chilled import quantity into
European countries
0
10
20
30
40
50
60
70
80
90
100
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
Fre
sh
/ch
ille
d p
rod
uc
ts in
% o
f fr
oze
n +
fre
sh
/ch
ille
d Atlantic salmon
Seabass
Seabream
Atlantic cod
European plaice
Haddock
Source: FAO
Aquaculture
Fisheries
The salmon companies
Salmoncompanies
Is the ‘one-species’ strategy viable?When will they include significant volumes of other species?How will the salmon sector deal with increased scarcity of fish meal and oil?
The new players – large seafood companies
Sales 500 mill. to 1.2 billion USDExpanding rapidlyMoving downstream in value chainsSupply a broad range of species and products
Large seafoodcompanies
The new players – large seafood companies
Try to copy some of the strategies of leading food companies– Global sourcing of seafood– Adaptation to retailer
requirements (product range, volumes, regularity, etc.)
– Market intelligence– Economies of scope in
purchasing, processing and distribution
– Invest in brands
Large seafoodcompanies
Where are profits made today?
Primary production(farmers and fishers)
Processing anddistribution
Retailers
Profitability
Food giants’ brands
Meat products fromagriculture
Seafood industryproducts
Well-regulatedfisheries!
Where are profits made in the future?
Primary production(farmers and fishers)
Processing anddistribution
Retailers
Profitability
Food giants’ brands
Meat products fromagriculture
Seafood industryproducts
Where are profits made in the future?
Primary production(farmers and fishers)
Processing anddistribution
Retailers
Profitability
Food giants’ brands
Meat products fromagriculture
Seafood industryproducts
Requires structuralchanges here!
Feed fisheriesand processing?
Where are profits made in the future?
Primary production(farmers and fishers)
Processing anddistribution
Retailers
Profitability
Food giants’ brands
Meat products fromagriculture
Seafood industryproducts
The focus of expandingseafood companies!
The seafood industry has so far largely ignored
The traditional seafood industry has so far largely ignored the importance of investments in downstream activities – Knowledge on consumers and buyers– Product development– Branding and promotion– Distribution systems– Relationships with buyers
Most of these investments are in intangible assets
Assets in seafood value chains
Resourcecapital
Fixed capitalvessels, farms & processing
Intangible capitaldownstream in
value chain
Historical focus:
Resourcecapital
Fixed capitalvessels, farms & processing
Intangible capitaldownstream in
value chain
Future focus?
Productflow
This is the focus of the expanding seafood companies
They are betting that the highest returns on investment in seafood value chains are in downstream activities
If they are correct the future seafood industry will be fundamentally different from what we see today
Large seafoodcompanies
But the growth of the seafood sector, particularly
aquaculture, has not gone unnoticed...
Global seafood industry is subject to increased scrutiny
Growth and success increase visibility
Focus on sustainability and food safety
Aquaculture products are being undermined by adverse criticism on sustainability
Concerns about sustainability...
Salmon consumption dropped 20% in Spain after the Science article
’Requiem for salmon’’Salmon creates fear’
The traffic light is red for several aquaculture species…
Farmed salmon = Major environmental impact!
’Farmed salmon:…Water pollution…Damage to coastal habitats…threats to wild salmon stocks…chemical use…toxics in farmed fish’
Sustainability and food safety - major risks
Sustainability and food safety are major strategic risks for industrialized aquaculture
The aquaculture industry, both feed producers and fish farmers, have to manage these risks
A more consolidated industry will together with other stakeholders (NGOs and final buyers) be able to exercise increased pressure on parts of the industry that do not perform according to their standards
Where is the fish meal and oil industry in this picture?
The industry supplies feed inputs that will only become more scarce in the futureHow high prices will go depends on:– Rate of growth for species that use fish meal & oil
intensively – depends on consumers’ willingness-to-pay
– Omega-3 trends– Effect of innovations on substitution possibilities with
vegetable alternatives– The perceived sustainability and food safety of
seafood with high fish meal & oil inclusion rates
Concluding remarks
Fish meal and oil are valuable assets, not only due to a limited global supply, but also because of the health benefits they bring to consumers
But buyers of fishmeal and fish oil for the aquaculture sector, both in developed and developing countries, face challenges from markets in North America, EU and other rich countries
By forming strategic alliances with buyers and other stakeholders in the aquaculture sector to deal with issues of concern, whether real or perceived, the fish meal & oil industry adds value and reduce risk for buyers...
... and at the same time adds value and reduces risk for itself
