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The future of fishing and the seafood industry. Ragnar Tveteras University of Stavanger, Norway International Fishmeal and Fish Oil Organisation Annual Conference 2006 Barcelona, Spain. Issues. Global supply trends Global demand trends

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The future of fishing and the seafood industry l.jpg

The future of fishing and the seafood industry

Ragnar Tveteras

University of Stavanger, Norway

International Fishmeal and Fish Oil Organisation

Annual Conference 2006

Barcelona, Spain


Issues l.jpg
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




Largest importers of seafood l.jpg
Largest importers of seafood developing countries


Supply side trends in food fisheries l.jpg
Supply side trends in food fisheries developing countries

  • 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 l.jpg
Supply side trends in aquaculture developing countries

  • Continuous innovation

  • Declining production costs

  • Consolidation in salmon aquaculture

  • Winning the battle of distribution into retail outlets

  • The species supply mix in the future will depend much on fish meal & oil substitution

  • Increased penetration from developing countries to 1. world markets



Production costs in salmon norwegian farming l.jpg
Production costs in salmon Norwegian farming developing countries

Source: Norwegian Directorate of Fisheries


Global meat production 1961 2005 l.jpg
Global meat production 1961-2005 developing countries


Gdp growth rates l.jpg
GDP growth rates developing countries


Global seafood demand trends l.jpg
Global seafood demand trends developing countries

  • 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 this

  • Health 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 l.jpg
Some buyers and suppliers in the European food industry developing countries

Salmon

companies

Small-scale

seafood

suppliers

Large seafood

companies

Food

giants

Meat product

suppliers


The salmon companies l.jpg
The salmon companies developing countries

Salmon

companies

  • Often vertically integrated farming-processing-distribution

  • Largest companies have yet not exploited coordination and scale economies fully

  • High variability in profitability across companies

  • But have set the standard for supply of seafood in several areas:

    • Volume, timing and prices





The salmon companies18 l.jpg
The salmon companies index in UK

Salmon

companies

  • Often vertically integrated farming-processing-distribution

  • Largest companies have yet not exploited coordination and scale economies fully

  • High variability in profitability across companies

  • But have set the standard for supply of seafood in several areas:

    • Volume, timing and prices

    • Availability of fresh fish to consumers


Slide19 l.jpg
Fresh & chilled products’ share of total frozen, fresh and chilled import quantity into European countries

Aquaculture

Fisheries

Source: FAO


The salmon companies20 l.jpg
The salmon companies chilled import quantity into European countries

Salmon

companies

  • 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 l.jpg
The new players – large seafood companies chilled import quantity into European countries

  • Sales 500 mill. to 1.2 billion USD

  • Expanding rapidly

  • Moving downstream in value chains

  • Supply a broad range of species and products

Large seafood

companies


The new players large seafood companies22 l.jpg
The new players – large seafood companies chilled import quantity into European countries

  • 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 seafood

companies


Where are profits made today l.jpg
Where are profits made today? chilled import quantity into European countries

Profitability

Food giants’ brands

Well-regulated

fisheries!

Meat products from

agriculture

Seafood industry

products

Processing and

distribution

Retailers

Primary production

(farmers and fishers)


Where are profits made in the future l.jpg
Where are profits made in the future? chilled import quantity into European countries

Profitability

Food giants’ brands

Meat products from

agriculture

Seafood industry

products

Processing and

distribution

Retailers

Primary production

(farmers and fishers)


Where are profits made in the future25 l.jpg
Where are profits made in the future? chilled import quantity into European countries

Profitability

Food giants’ brands

Feed fisheries

and processing?

Meat products from

agriculture

Seafood industry

products

Requires structural

changes here!

Processing and

distribution

Retailers

Primary production

(farmers and fishers)


Where are profits made in the future26 l.jpg
Where are profits made in the future? chilled import quantity into European countries

Profitability

Food giants’ brands

Meat products from

agriculture

Seafood industry

products

The focus of expanding

seafood companies!

Processing and

distribution

Retailers

Primary production

(farmers and fishers)


The seafood industry has so far largely ignored l.jpg
The seafood industry has so far largely ignored chilled import quantity into European countries

  • 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 l.jpg
Assets in seafood value chains chilled import quantity into European countries

Historical focus:

Fixed capital

vessels, farms

& processing

Resource

capital

Intangible capital

downstream in

value chain

Product

flow

Future focus?

Intangible capital

downstream in

value chain

Resource

capital

Fixed capital

vessels, farms

& processing


This is the focus of the expanding seafood companies l.jpg
This is the focus of the expanding seafood companies chilled import quantity into European countries

  • 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 seafood

companies


But the growth of the seafood sector particularly aquaculture has not gone unnoticed l.jpg
But the growth of the seafood sector, particularly aquaculture, has not gone unnoticed...


Global seafood industry is subject to increased scrutiny l.jpg
Global seafood industry is subject to increased scrutiny aquaculture, has not gone unnoticed...

  • Growth and success increase visibility

  • Focus on sustainability and food safety

  • Aquaculture products are being undermined by adverse criticism on sustainability


Concerns about sustainability l.jpg
Concerns about sustainability... aquaculture, has not gone unnoticed...


Salmon consumption dropped 20 in spain after the science article l.jpg
Salmon consumption dropped 20% in Spain after the Science article

’Salmon creates fear’

’Requiem for salmon’


The traffic light is red for several aquaculture species l.jpg
The traffic light is red for several aquaculture species… article

’Farmed salmon:…Water pollution…Damage to coastal habitats…threats to wild salmon stocks…chemical use…toxics in farmed fish’

Farmed salmon = Major environmental impact!


Sustainability and food safety major risks l.jpg
Sustainability and food safety - major risks article

  • 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 l.jpg
Where is the fish meal and oil industry in this picture? article

  • The industry supplies feed inputs that will only become more scarce in the future

  • How 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 l.jpg
Concluding remarks article

  • 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


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