1

The Changing Seafood IndustryPast, Present, Future

Robert Verge, Managing DirectorCanadian Centre for Fisheries Innovation

October 8, 2014

2

Global Fish Supply & Utilization

SOURCE: UN FAO

3

Global Fish Prices

SOURCE: UN FAO

4

US Seafood Prices

5

A Great Business To Be In?

► Steadily expanding market for seafood – since 1950 Increasing population Increasing per capita consumption Supply struggling to keep up Rising prices

► Are we in the seafood industry’s golden age?

► Why don’t we feel better about it?

6

We Are Not Sharing In The Growth

7

Our Share of Key Markets Is Shrinking

8

The Currency Effect

9

What Is Our Share Of Final Value?

35%

65%

Canada represented < 0.6% of the global seafood value chain, 2008

NL represented < 0.15%

Total – US$818 billion

Source: UN FAO

10

Workshop, Sept 16-17

► Purpose: to obtain input for designing R&D program NL CETA fund – $400 million, partly to be spent on R&D

► Attendees Leaders from aquaculture, harvesting, processing, and support

sectors Academia Government

► Agenda Systematic review of markets, resources, industry characteristics,

identifying needs and potential for improvement Each session: speakers to frame issues + challenge attendees to

think about them, followed by discussion of issues

► Outcomes Very positive experience for attendees Great discussion Consensus on future direction

11

The Future – Opportunity & Challenge

► Continued growth in market demand for seafood

► Globalizing markets & supply chains + consolidation of seafood distribution

► New free-trade agreements European Union + South Korea

► Dramatic changes Resource regime shift – Crab + Shrimp Cod + Capelin ENGOs and sustainability Currency exchange rates Energy demand, supply, and costs Technology Demographics (globally and locally) NL industry in transition from labour-intensive to capital-intensive

► Intensifying competition Aquaculture continuing to expand rapidly Developing countries increasing export market share Increasing abundance of cod in the Barents Sea China gaining tremendous scale processing resources harvested elsewhere (e.g.

Barents Sea, Alaska, NL)

12

Opportunities vs. Capabilities

Resources

MarketsIndustry

Capabilities& Capacities

Opportunities

Demand is growing

Wild resources are limited, changing

Need new capabilities

What capabilities do we need?

What opportunities do we want to pursue?

13

Evolution of NL Industry

Highest value does not coincide with highest landings

14

NW Atlantic Fish Catches, 1960-2011

15

NAFO Catches, Principal NL Species

16

Changing Resources

17

Extreme Seasonality

18

Fewer Harvesters

19

Fewer Plants

20

Less Plant Employment

21

Annual Incomes, By Source

22

A Diminishing Labour Supply

2014

23

Industry Economics

► Economics – a quest for value Function of industry structure, competitive behaviour, financial

performance Structure a function of resources, regulation, markets Competitive behaviour a function of industry concentration, buyer-

seller relationships, entry-exit conditions Financial performance a function of industry characteristics and

enterprise circumstances

► NL Aquaculture concentrated, vertically integrated, expanding Fishery in decline – not market-driven, structured to under-perform Shore prices fail to serve the industry Technology constrained; capacity poorly utilized Small plants producing commodity products a recipe for disaster Little time difference between landings and exports – reduced

value Groundfish – it will be different this time Need to find a balance of social/economic/political objectives

24

What Business Are We In?

► Three models Market-driven/responsive – e.g. aquaculture, Highliner Fishing – e.g. Norway Value-driven – e.g. Iceland

► Consensus that focus should be on adding value, to maximize value from our resources, not just fishing, to export raw materials for processing That changes everything!

25

Can We Do It?

► Gap analysis: present future what we must do to prepare Markets Value chain Processing Eco-system/resources Harvesting Aquaculture People Energy Investment/financing

► Participants concerned that needed changes will require governments to allow/enable industry to do what is needed through regulatory change

How much time do we have?• Markets – CETA• Resource regime shift• Demographics