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Report by Allied Management Resources Ltd and Edward Davidson Associates UK Market Opportunities for Identified Un

Project Objectives. Identify the species with the best growth prospects in the UK market as priorities for strategic actionIdentify the key market sectors/trade channels which will enable the execution of such a strategyThrough dialogue with key trade sectors, identify specific business/marketing

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Report by Allied Management Resources Ltd and Edward Davidson Associates UK Market Opportunities for Identified Un

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    2. Project Objectives Identify the species with the best growth prospects in the UK market as priorities for strategic action Identify the key market sectors/trade channels which will enable the execution of such a strategy Through dialogue with key trade sectors, identify specific business/marketing actions required to facilitate the proposed development strategy Determine the current barriers to entry and formulate recommendations/next steps required to overcome such barriers and enable potential market penetration strategies for catchers and processors

    3. Methodology (1) Through the formulation of a screening matrix, 5 key species where identified for inclusion in the project Shrimp (Brown and Pink) Oysters Cockles Razor Clams Squid Face to face meetings were undertaken with Joss Wiggins, Kent and Essex Fisheries Mike Montgomery, Seafish Dr Paul Clark, Natural History Museum John Lake, John Lake Shellfish John Williamson, Lynn Shellfish Mat Mander, Chief Fishery Officer ESFJC

    4. Methodology (2) These meetings aimed to explore Species availability and potential for additional volumes Sources of supply Current sales outlets Seasonality Environmental/biodiversity impact/quota status Any current UK business and routes to market Potential for industry co-operation and possible consolidation Status of current processing facilities Broad current technical and processing barriers to entry Willingness for participation in developing/investing in UK market opportunities

    5. Methodology (3) Telephone interviews were undertaken with A senior UK retailer buyer The Managing Director of leading retail multiple seafood supplier Senior purchasing manager in major seafood company A major London based specialist seafood supplier to M&S, Sainsbury’s, and top class restaurants A regionally based specialist food service/restaurant and mail order seafood supplier The Chief Executive of a a major UK chilled soup and ready meal manufacturer The Director of a major seafood wholesaler to the food service sector The Chief Executive of a major Scottish based shellfish organisation A sample of high end restaurants London based top end restaurant seafood wholesaler Senior marketing manager of a major seafood company

    6. Anticipated Outcomes Best opportunities for new specie development in the retail sector Key influential factors for potential penetration into the food service/restaurant sectors Use of species for added value/ingredient opportunities Potential routes to market Availability and reliability of supply Supply chain issues Outline technical requirements. e.g. BRC/Grade A water etc Importance of provenance/regionality Recommendations for further research/next steps MUSSEL CASE HISTORY

    7. Market Background (1)

    8. Market Background (2) Since the year 2000 the UK combined chilled, ambient and frozen retail shellfish market has more than doubled in value to £498m (A C Nielsen) With the exception of Lobster all species have seen excellent growth (see table below) The Scallop market has seen the most dynamic growth but in sheer value terms Prawns have increased over this period by over £200m The growth of species such as Scallops and Mussels highlights consumer propensity to purchase lesser known species Within the prawn category the massive growth (c 900%),in warm water species, from less than £20m in 2000 to £180m in 2008, is a key example of what can be achieved through NPD and marketing

    9. Market Background (3)

    10. Selection Matrix

    11. Focus Species/Regions Shrimp - Brown (Crangon crangon) and Pink (Pandalus Montagui) – The Wash Pacific Oysters (Crassostrea gigas) – Scotland and East Coast of England Cockles (Cerastoderma Edule) – The Wash and Thames Estuary Razor Clams - American Invasive (Ensis Species) – The Wash and Thames Estuary Squid (Loligo Vulagaris/Forbesi) – Bristol Channel/Scotland

    13. Pink Shrimp – Pandalus Montagui Indigenous to the UK – caught mainly in the Wash, but found all around the UK coast line Autumn and Spring fisheries Currently only one known vessel fishing (in the Wash) Very minimal quantity landed today although over 40 vessels fished this specie in the 70’s and 80’s for UK consumption No current quotas with any DEFRA licensed vessel able to fish (in principle) Cooked on-board due to high risk of post catching mortalities Natural mortalities would exceed any quantities landed and therefore no impact on current eco systems expected if fished Reported that significant stocks available in the Wash Catchers/processors keen to develop markets for this specie Background Details

    14. Brown Shrimp – Crangon crangon Indigenous to the UK – but caught mainly in the Wash, Morecambe Bay and Humber Areas (6 distinct UK locations identified with no larval mixing) Autumn and Spring fisheries Mainly exported to Holland as cooked shell-on Very small UK potted shrimps sales in the Food Service sector No current quota’s with any DEFRA licensed vessel able to fish (in principle) Approximately 1500 tonnes caught in the UK pa compared to 20-30,000 tonnes in Holland Cooked on-board due to high risk of post catching mortalities Natural mortalities exceed fishing quantities landed No current foreseen stock issues – shrimps can reach marketable size in 54 days Background Details

    15. Catching 50 vessels fished in the Wash in 2008 reporting a good catching year for Brown Shrimp (no current market for Pinks) Beam Trawling is the main method used but ‘putts’ used in the Severn Estuary (fixed net funnels which catch the shrimps as they are carried on the tide) Best vessels have fully automated stainless steel on-board cookers and refrigerated holds – but many boats do not have this level of sophistication Graded into 3 sizes post cooking by a ‘muck riddle’ with undersized product returned to the sea alive Product is cooked immediately after catching to avoid mortalities and to achieve a better quality, colour, taste and texture Chilled with untreated seawater post cooking prior to refrigeration or un-refrigerated storage

    16. Processing (Applicable to Browns and Pinks) As product is cooked on board, processing on land is mainly packing for export and IQF freezing – no cooking is done on shore (a small amount of potted shrimp is produced for UK consumption) Currently 95% of landed product is exported to Holland, mainly fresh shell-on Some product is nitrogen frozen to ensure availability continuity when species is out of season or weather conditions restrict fishing Main processors have their own vessels but also take in product from other independents There is currently no segregation by vessel and hence no traceability Currently most product is sent (from Holland) to Morocco for hand peeling in modern factories – but Heiploeg in Holland are currently trialling new peeling machines with reported yields in line with hand peeling There is evidence of high levels of investment in on-board cooking and on-shore freezing within the UK One catcher processors believes UV filtration could be used to purify the seawater before cooling Investment necessary to facilitate UK market penetration would be considered by the main catcher/processors

    17. UK Market Potential (1) Given the current lucrative export market for Brown Shrimps the catcher/processors interviewed (and ESFJC) are keen to develop markets for Pink Shrimps UK consumer awareness of Brown Shrimp is very low and practically non-existent for Pinks, however – There is currently high growth potential for regional products in the UK retail sector and the importance of provenance is now a key market driver The Retailer and restaurants interviewed for this report all showed a positive interest in UK shrimp developments Pink Shrimps (and Brown) are indigenous species and hence have a high provenance factor potential It was felt that Pink Shrimps would be significantly cheaper than Pandalus Borealis and would be much ‘greener’ (lower carbon footprint than Cold Water and Warm Water prawns)

    18. UK Market Potential (2) Given their size, usage as an ingredient is an attractive route to market e.g. sandwich filling, pasta, pizza topping, Shrimp cocktail etc – NPD would be required Significant Food Service potential also exits e.g. Pink Shrimp starter, mousse etc There could also be Retailer support for a ‘potted shrimp’ re-birth if done properly (either Brown or Pink would be acceptable) Further research should be under taken into European usage (particularly Holland and Belgium) to help identify trends and market potential

    19. Market Development Issues Lack of technical controls i.e. cooking on-board No traceability – all grades of vessel landing to the processor Chilling on-board with un-treated seawater Lack of on-board refrigeration No UK automated peeling at present No BRC approved UK processors at present Capital cost of new processing/packing/peeling equipment Technical and management costs to satisfy UK retailers Seawater purification research needed or boat re-design required to facilitate sufficient fresh water storage No current NPD or added value initiatives Lack of consumer product knowledge or awareness Unknown chilled shelf life and microbiological properties Unknown consumer acceptance of the product characteristics

    20. Next Step Recommendations Undertake consumer focus groups to gain an improved in-sight into consumer attitudes and inform development initiatives Commission NPD company for targeted UK consumption Identify a UK retailer and/or food service outlet for product trial and feedback Identify packaging formats required for retail and food service market penetration Identify volume potential by sector for agreed products Formulate a financial model to determine pricing potential and profit viability

    22. Pacific Oysters – Crassostrea gigas Initially from Japan (Japanese Oyster), with evidence of some wild product now around the UK coast but not currently harvested – Natural England concerned about rates of wild reproduction In the UK this is primarily a farmed species with sites in Scotland (Strathclyde area), Channel Islands, Northern Ireland and the South West and East Anglia areas of England – 2 hatchery sites now in the UK Pacific Oysters sold almost entirely live in the UK (Pacific is 90% of sales with Native at 10% only) The most common method of farming oysters is to place them in large net bags which are laid on trestles in the water. The trestles are placed so that they are only uncovered during Spring tides i.e. twice per month. Oysters ready for harvest are brought closer to the shore for 'hardening-off'. When laid closer to the shore they are exposed to the air twice each day and learn to open and shut their shells, thus extending their shelf-life. Background Details (1)

    23. The Pacific oyster does not breed naturally in Scotland and all seed is produced in a hatchery. Oyster seed takes around 3-3½ years to reach minimum marketable size. Estimated that up to 85% are exported with restaurants (via wholesalers and inland markets (Billingsgate)) second in line followed by retail Half shell tried in Ireland several years ago but failed New Zealand market a half shell product and some coated meat is imported from the far east. Poor prices realised in the UK – does not inspire investment Background Details (2)

    24. Processing Meat flavour and quality entirely determined by the water it is grown in No current added value activity – Sold live No current UK processing facilities beyond basic washing, grading and depuration A small Asian market for some imported frozen oyster meat Some exported to middle east but struggle to compete with cheaper French product Larger sizes sold in the UK smaller sizes exported to France and Belgium No natives sold through the UK retailers

    25. UK Market Potential The UK retail sector is mainly serviced from Scottish product sold on the back of the growing mussel market Oyster consumption in the retail sector has grown from 0-£1.3m in 9 years to January 2009 Product for UK retail has to be from A grade water Product supplied into the UK food service sector is from France, Ireland and Scotland Harvesting wild gigas could provide lower cost raw material for value adding Half shell and added value opportunities would be considered by the wholesalers/suppliers interviewed – margin improvement needed Possibility for a coated meat variant Consumers not aware of Natives – could be a market opportunity Would benefit from NPD and consumer research Could be considered sustainable as it a farmed product

    26. Market Development Issues BRC, HACCP and full traceability already exits Some retailers already sell Pacific Oysters as do top end restaurants No real marketing drive or initiative in the UK No real industry voice No consumer awareness campaigns, tastings, promotions etc No added value i.e. no convenient/low risk product to encourage consumers into the category Unknown UK volume potential (1,300 tonnes live weight 2008) Unknown UK farming capacity Not available in small quantities for the smaller wholesalers Getting the value/pricing right

    27. Next Step Recommendations Undertake consumer focus groups to gain an improved in-sight into consumer attitudes and inform development initiatives Commission NPD company for targeted UK consumption Identify a UK retailer and/or food service outlet for product trial and feedback Identify packaging formats required for retail and food service market penetration Research European usage Identify volume potential by sector for agreed products Formulate a financial model to determine pricing potential and profit viability Commission an Oyster forum to facilitate a ‘One voice’ approach Become experts

    29. Cockle – (Cerastoderma Edule) Indigenous to the UK – caught mainly in the Wash, The Thames Estuary, Morecambe Bay, The Bury Inlet (MSC) and the Dee Fishing season - mid June to end October (but open all year) 95% of current catch is exported Fresh cooked meat sold primarily to Holland for very high prices Frozen stock used for processing during winter (Jan to April) Jars and canned meat is processed for Spain and Portugal Either dredged or raked (blow ring) No complete DEFRA collation of annual caught volume but could certainly be in excess of 20,000 tonnes, there are un-regulated fisheries Reported that significant stocks available in the Thames and the Wash but concerns over reduced quota’s and ‘blow ring’ effect on the fisheries Certainly the Thames and Wash fisheries could seek MSC certification Catchers/processors keen to develop markets for this specie Background Details

    30. Catching 42 dredging licences in place for the Wash, only 32 taken up (4t/4 landings/boat/per week) with 30 hand raking licences also available (2t/day/boat) 14 licences in the Thames Estuary for 4 landings per boat per week Hand raked is too small and too expensive for export but does (through the fisheries committee’s and Natural England), have a disproportionate amount of the quota Minimum cockle meat size for Spain is 1200 pieces per kilo (hand raked is too small) – 16mm minimum size in the Thames Morecambe Bay cockles are larger than those caught on the East coast One processor (Lynn Fish) can catch upwards of 100 tonnes per day through their own 15 vessels Stocks (biomass) calculated each year and quota’s set accordingly No apparent shortage of catching potential in The Wash Needs to be ‘A’ grade water category for UK retailers (Thames is ‘B/C’)

    31. Processing A reasonably sophisticated level of shore processing is apparent Evidence of recent major capital investment Depuration, de-shelling, cooking, IQF freezing, canning and bottling all available with significant processing capacity stated (Lynn Fish can process 200 tonnes per day currently running at 2/3rd capacity) Potential for BRC within current processors Willingness to invest in kit and necessary technical input if potential for UK retail/high end restaurant entry is identified No added value processing considered to date Lack of UK consumer knowledge about this specie Price for the simple cockle is inflated due to foreign demand (Waitrose sell cockle meat at +£16 per kilo!

    32. UK Market Potential Given the current demand in the lucrative export market for Cockles, the UK catcher/processors interviewed appear to be having somewhat of a hay day however- There is currently high growth potential for regional products in the UK retail sector and as such with the right help and encouragement there would be processor interest in developing UK potential The Retailer interviewed for this report is currently selling fresh cockle meat (albeit at highly inflated prices from the MSC approved Bury inlet) and genuinely showed a positive interest in UK cockle developments (“ get me live cockles at £1/kg and I’ll create a UK market”). Cockles are an indigenous species and hence have a high provenance factor potential but are relatively unknown now by the UK consumer The UK London seafood specialist clearly expressed an interest in cockles and the regional wholesaler is very keen but needs access to smaller volumes i.e. 5kg packs instead of the current 50kg’s available. There are some cockles caught in Scotland which if progressed could be of interest to the Scottish group interviewed

    33. Market Development Issues Lack of technical controls at processor level i.e. no BRC No current investment in packing other than cans or bottles A ‘Marmite’ product? No traceability – product would need to be from A grade water for the retailers Technical and management costs to satisfy UK retailers No current NPD or added value initiatives Lack of consumer product knowledge or awareness Unknown chilled shelf life and microbiological properties Sold pickled in jars and so natural product characteristics relatively unknown in the UK ‘Blow Ring’ environmental issues unknown

    34. Next Step Recommendations Thames Estuary unlikely to commit resource and focus on UK market Questions about consumer acceptability High raw material cost It is recommended that

    36. Razor Clams – Ensis Species Three UK native species, Ensis siliqua, Ensis ensis and Ensis arcuatus More prolific is the American invasive specie Ensis directus which is much smaller than the native species This species has a 5 year life cycle and the majority die before reaching current UK allowable minimum landing size A small quantity is currently canned (in Boston) for the Spanish market which is mainly supplied with cheap Chilean product A UK derogation order would be required to allow smaller clams to be landed if this fishery is to be exploited…these could be ideal for added value opportunities Located all around the UK coastal waters, found in muddy and sandy sediment Hand dived and dredging( allowed only in mobile sandy sediment areas) are the main catching methods however, a new suction method is being used on the continent (DVD available) No current significant commercial fishery in the UK, product only found in top end seafood restaurants A seven year effort to finally open a fishery in the Wash was thwarted due to lack of demand and poor price realisation compared to cockles Genuine processor/seller interest in development opportunities for this species Product tastes a little like mussels but with the texture and colour of squid Background Details

    37. Processing Mainly sold live banded together to reduce mobility and mortalities Live product is typically steamed or grilled Can be purified (depuration) cooked and de-shelled on a commercial level IQF potential available for potential added value development i.e. coating

    38. UK Market Potential Probably limited opportunity for the live in-shell presentation other than in top end food service outlets Current growth in clam consumption in the UK which if correctly positioned Razors could benefit from Added value potential i.e. coated/torpedo clam etc, presents the more likely market penetration potential for both retail and food service Already sold by the regional wholesaler interviewed who would be keen to be involved in any further development opportunities Genuine interest expressed to be involved in the development of this species for the UK market from the processors and the retailer interviewed The idea of hand harvested, with UK provenance is appealing, however to be commercially viable an alternative (but non aggressive) method of fishing would be required

    39. Market Development Issues No current commercial fishery No current commercially tested processing (other than canning) Likelihood of capital investment required to exploit this species commercially in the UK Microbiological and chemical data required Technical and management costs to satisfy UK retailers No current NPD or added value initiatives Lack of consumer product knowledge or awareness

    40. Next Step Recommendations Identify a target fishery and catching method Undertake consumer focus groups to gain an improved in-sight into consumer attitudes and inform development initiatives Commission NPD company for targeted UK consumption Identify a UK retailer and/or food service outlet for product trial and feedback Identify packaging formats required for retail and food service market penetration Identify volume potential by sector for agreed products Formulate a financial model to determine pricing potential and profit viability

    42. Squid – Loligo Vulgaris/Forbesi Indigenous to the UK and found all around the coastline, England and Scotland Vulgaris is larger and more common in the south – up to 500mm targeted by hand line boats for export Forbesi is smaller with the ideal size being cc 150mm – no current demand for smaller sizes Mostly exported fresh to Europe, Scottish product has good quality reputation in Spain (Rapid deterioration if kept on deck un-iced) UK consumption is mainly through restaurants Scottish fishery (Moray Firth/Firth of Forth) small (100-300mm) July-Sept with 300mm+ November and December - sold fresh and frozen whole (no added value) Bristol Channel fishery 3-6 weeks only (End July/August) targeted by 3-10 trawlers 1/tonne/day mainly sold to Greece Devon/Cornwall by-catch but cannot sell to Europe without ink sack which is often lost in this type of fishery In general fisheries are unpredictable and no UK stock assessment is currently undertaken Little or no UK consumer knowledge of how to cook/handle squid Background Details

    43. Processing Sold fresh or frozen in raw state No further processing taking place in the UK

    44. UK Market Potential Product is mainly known as calamari and sold as coated rings or strips in the UK (imported) Some cooked rings are used in seafood cocktails (Lyons) UK retail consumption has quadrupled to £4.5m (RSV) since 2000 Opportunity for further added value development i.e. steaks/paella Potential for exploiting/marketing UK/regional provenance Interest expressed from potential catchers for UK development involvement

    45. Market Development Issues Stock assessment and reliability of supply/fisheries Feasibility and viability of targeted fisheries Lack of current UK consumer knowledge/education UK cooking and processing technology required Likelihood of capital investment required to exploit further development of squid commercially in the UK

    46. Next Step Recommendations Unlikely that the UK processing industry would invest in squid cooking and processing technology without access to good value, consistent raw material No current reliable UK source of raw material Unlikely to be cost competitive with imports (large scale fisheries / processing) It is recommended that

    48. History 10 years ago the UK mussel industry consisted of a number of small growers (mainly ex salmon farmers) with outputs between 30 and 150 tonnes per annum In the early days most of the production was sold via wholesalers Today farms can produce in excess of 300 tonnes per annum Increased output and the resultant improved value for money proposition lead to more market demand which enabled more investment and year round supply Branded added value products paved the way for retail expansion, most of which, due to their success, are now in own label Key market drivers have been provenance, quality, value for money protein and product innovation In real terms, due to efficiency improvements and economies of scale, mussels are now cheaper to the consumer than in 2001 (price per kilo has increased due to the growth of added value) Today, groups such as SSMG provide sales and marketing sophistication, NPD, logistics and a route to market for the growing number of mussel farmers

    49. Aquaculture/Processing Developments Due to poor returns on Salmon farms in the late 80’s and early 90’s and the subsequent industry consolidation , many small farmers switched to mussel aquaculture Initially mussels were grown on rafts with limited output constraints The advent of long line methodology with better collection ropes and enhanced machinery was an important turning point in mussel farming allowing greater outputs with farms able to produce 300+ tonnes per annum MAP technology enabled the development of cooked mussel meat into the UK retailers Vacuum packing and pasteurisation technology significantly enhanced mussel growth facilitating the development of, convenient added value products into the Uk retail sector Advanced multi-head weighing technology enabled the successful introduction of seafood cocktail/medley packs including 3 or 4 components, all of which include mussels

    50. Marketing/Branding The UK chilled retail mussel market has developed from minimal sales of live product in hessian sacks and a few jars in vinegar to an array of sophisticated natural and added value products worth over £16m RSV in 2008 Product innovation has delivered well known favourites such as Moules Mariniere in consumer friendly, easy to prepare presentations facilitating market growth and penetration Mussels are now included as an ingredient in seafood cocktails, medley packs, chowders etc Green lipped mussels from New Zealand sold defrosted in ½ shell presentation have also aided market expansion The progression of groups such SSMG has provided a route to market for mussel farmers for fresh live and value added products (all retailer fish counters now have live mussels) Initially branded, most added value lines are now in own label, an indicator of success Even today, as with prawns, mussel meat is generally sold as a defrosted product enabling year round supply and consistency of raw material Mussels are sold across the demographic spectrum with all retailers and discounters enjoying good sales and growth Key current market players are SSMG Bantry Bay Cuan Dutch Imports

    51. UK Chilled/Ambient Mussel Products Retail Sector

    52. UK Frozen Mussel Products Retail Sector

    53. Market Analysis

    54. Market Analysis

    55. Market Analysis

    56. Market Analysis

    57. Market Analysis

    58. Market Analysis

    59. Market Analysis

    60. Market Analysis Summary Other than a small decline in 2007, mussels have enjoyed substantial growth since 2000 The switch to Nielsen (EPOS) in 2006 gives a far more accurate read of the market After a sharp rise in 2006 retail prices stabilised and have actually fallen back in 2008 The volume of fresh mussels consumed in 2008 reached a new high of almost 2,800 tonnes Despite a small dip in 2008, mussels in sauce (e.g. Moule Mariniere) now represent almost 50% of the volume consumed Consumers now prefer fresh natural mussels to those prepared, i.e. ½ shell, which having played a role in the market development, are now in decline being from defrosted raw material

    61. Key Learnings From the research it is apparent that there are several key factors which came together to enable the growth of mussels in the UK retail market sector Ideal water conditions for farm sites Farming technology improvements e.g. the move from rafts to long lines A growth in the number of farms facilitating year round supply of fresh product The formation of marketing co-operative groups such as SSMG which offer innovation and a route to market, effectively allowing farmers to focus on farming Farming focus which facilitated high quality consistent product The development of convenient ‘consumer friendly’ added value products such as Moule Mariniere Value for money price positioning driven by efficiencies and technology Retailer support, with the move to own label giving credence and credibility to the product ranges The success of the mussel category is due to the combination of the above key factors which by bringing together all the relevant ingredients; farming, processing, innovation, logistics and marketing has delivered a market worth in excess of £16m RSV

    62. Celebrity Chefs High profile chefs have significant influence on consumer purchasing, exemplified by: Strong growth in Scallop market – widely attributed to TV Chefs Saturday Kitchen phenomenon Some key chefs have strong local provenance credentials e.g. Hix, Stein, Oliver Rowe that can be exploited Engaging a chef or chefs in the consumer outreach process should be at the core of communication activities It is also recommended that the project implementation plans utilise chefs – preferably but not necessarily with an established media presence – to: Provide a creative input into the development process Help take the “fear factor” away from unfamiliar species Endorse added value products and recipes

    63. Road Map

    64. Summary Markets can be developed Farmers, catchers, processors, buyers all positive Some additional, farming /catching capacity exists Raw material stocks reported to be available Some additional processing capacity available Some willingness for capital investment from existing processors No consumer understanding or insight No current UK marketing focus / innovation No delivery mechanism / structure exits No leadership / drive No real product knowledge beyond basic formats Costs / price points / values not understood

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