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
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
160
140
120
100
80
60
40
20
0
19
76
19
78
19
80
19
82
18
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
Million tonnes
The global supply from the
oceans
Capture feed
Capture food
Aquaculture
FAO 2005
Global exports of seafood products from
developed and developing countries
16
12
10
Developed
Developing
8
6
4
2
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
0
1976
Mill. tonn product weight
14
10
9
EU
8
7
Japan
6
5
4
China
East/South-East
Asia
3
2
USA
1
0
0
2
0
0
6
1
9
9
2
1
9
9
8
1
9
8
4
1
9
8
0
8
9
1
9
7
6
Rest of world
1
Mill. tonnes product weight
Largest importers of
seafood
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 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 farming
in the sea and on land
Broiler, USA
Broiler, Thailand
Pork, USA
Pork, USA
Shrimp, USA
Shrimp, Thailand
Salmon, Chile
Salmon, Norge
Catfish, USA, high cost
Catfish, USA, low cost
Seabass/-bream, Mediteranean
Cod trawler +250GRT, Norway
Cod, vessel 8-13m, Norway
Tilapia, USA
Tilapia, South-Amerika
0
0.5
1
1.5
2
2.5
USD/kilo
3
3.5
4
10
9
8
7
6
5
4
3
2
1
0
Source: Norwegian Directorate of Fisheries
2004
2002
2000
1998
1996
1994
1992
1990
1988
Production cost
Revenue
1986
USD per kilo
Production costs in salmon
Norwegian farming
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
Mill. tonnes of meat
Global meat production
1961-2005
120
100
80
Pig
60
Chicken
40
Cattle
20
0
GDP growth rates
12
10
USA
Euro area
8
Developing countries
6
China
India
4
Russia
World
2
0
2004
2005
2006
2007
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
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
Salmon
companies
Food
giants
Small-scale
seafood
suppliers
Large seafood
companies
Meat product
suppliers
The salmon companies
Salmon
companies
Often vertically integrated farming-processingdistribution
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
9
19 1-0
9 1
19 2-0
93 1
19 -0
94 1
19 -0
95 1
19 -0
9 1
19 6-0
97 1
19 -0
98 1
19 -0
99 1
20 -0
0 1
20 0-0
01 1
20 -0
02 1
20 -0
03 1
20 -0
04 1
-0
1
19
Price index (Jan. 1991 = 100)
Retail prices on selected
food products and retail price
index in UK
160
140
120
100
80
40
Beef
Pork
Poultry
60
Retail price index
9
19 1-0
9 1
19 2-0
93 1
19 -0
94 1
19 -0
95 1
19 -0
9 1
19 6-0
97 1
19 -0
98 1
19 -0
99 1
20 -0
0 1
20 0-0
01 1
20 -0
02 1
20 -0
03 1
20 -0
04 1
-0
1
19
Price index (Jan. 1991 = 100)
Retail prices on selected
food products and retail price
index in UK
160
140
Cod
120
100
80
Beef
Pork
60
Poultry
40
Retail price index
19
9
19 1-0
9 1
19 2-0
93 1
19 -0
94 1
19 -0
95 1
19 -0
96 1
19 -0
97 1
19 -0
98 1
19 -0
99 1
20 -0
00 1
20 -0
01 1
20 -0
02 1
20 -0
03 1
20 -0
04 1
-0
1
Price index (Jan. 1991 = 100)
Retail prices on selected
food products and retail price
index in UK
160
140
120
100
Cod
Beef
Pork
80
Poultry
60
Salmon
40
Retail price index
The salmon companies
Salmon
companies
Often vertically integrated farming-processingdistribution
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
100
Aquaculture
90
80
70
Atlantic salmon
60
Seabass
Seabream
50
40
30
Atlantic cod
European plaice
Fisheries
Haddock
20
10
2003
2002
2001
2000
1999
1998
1997
0
1996
fresh/chilled
Fresh/chilled products in % of frozen +
Fresh & chilled products’ share of total
frozen, fresh and chilled import quantity
into European countries
Source: FAO
The salmon companies
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
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 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 seafood
companies
Where are profits made
today?
Profitability
Food giants’ brands
Well-regulated
fisheries!
Meat products from
agriculture
Seafood industry
products
Primary production
(farmers and fishers)
Processing and
distribution
Retailers
Where are profits made in
the future?
Profitability
Food giants’ brands
Meat products from
agriculture
Seafood industry
products
Primary production
(farmers and fishers)
Processing and
distribution
Retailers
Where are profits made in
the future?
Profitability
Food giants’ brands
Feed fisheries
and processing?
Meat products from
agriculture
Seafood industry
products
Requires structural
changes here!
Primary production
(farmers and fishers)
Processing and
distribution
Retailers
Where are profits made in
the future?
Profitability
Food giants’ brands
Meat products from
agriculture
Seafood industry
products
The focus of expanding
seafood companies!
Primary production
(farmers and fishers)
Processing and
distribution
Retailers
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
Historical focus:
Resource
capital
Fixed capital
vessels, farms
& processing
Intangible capital
downstream in
value chain
Product
flow
Future focus?
Resource
capital
Fixed capital
vessels, farms
& processing
Intangible capital
downstream in
value chain
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 seafood
companies
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
’Salmon creates fear’
’Requiem for salmon’
The traffic light is red for
several aquaculture species…
’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
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 future
How high prices will go depends on:
– Rate of growth for species that use fish meal & oil
intensively – depends on consumers’ willingness-topay
– 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