The tuna canning oligopoly and the European market:

Implication for the fisheries

Patrice Guillotreau, University of Nantes, France

Rémi Mongruel, Ifremer Brest, France

Ramòn Jiménez-Toribio, University of Huelva, Spain

The challenge of change: Managing for Sustainability of Oceanic Top Predator Species, NSF, Santa Barbara, 12-14 April 2007

Content

• Concentration in the tuna industry• Horizontal market integration (frozen and canned ;

skipjack and yellowfin) => Jeon et al. 2007 ; Squires et al. 2006

• Price-cost margins of the canneries• Market power and implications for the fisheries?...

1. Market and concentration of the tuna industry

Concentration of the World Canned Tuna Industry

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Cumulatedproduction

Cumulatedprocessingfirms

CR4 41%

CR5 46%

CR10 62%

FIRM Output 2003 (t)Star Kist 251400Thai Union (CoS) 194000Bolton - Trinity A 91500Sea Value 80000Bumble Bee 70500Isabel Garavilla 64000Salica Albacora 54000Jealsa 48000ONA 42500Calvo 35500Frinsa del Noroeste 34600Pescados Industrializados 30000Mitsubishi (Mauritius Tuna Fishing Canning Enterprise) 30000Hagoromo Foods Corporation (Aneka) 26320Palmera 15000Others 443760TOTAL 1511080

Global market

Concentration in EuropeCanned Tuna Oligopoly on the EU Market

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

CR4 43%

CR5 50%

CR10 72%

FIRM EU SALES 2003 (mt)Bolton - Trinity A 88590Star Kist 82392Isabel Garavilla 62000Salica Albacora 52000Jealsa 48000ONA 40085Frinsa del Noroeste 34600Mitsubishi (Mauritius Tuna Fishing Canning Enterprise) 27770Calvo 19500Thai Union (Chicken of the Sea) 17277Others 188103TOTAL 660316

CR4 US = 80%

Number of canneries and trade of canned products in France

(1822-2005)

0

50

100

150

200

250

1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

0,1

1

10

100

1000

10000

100000

1000000

Nb Canneries Estimated number Exports (T) Imports (T)

LOG TNB

First sardine crisis 1880-1887

Second sardine crisis 1902-1911

World war I 1914-1918

World war II 1939-1945

Exploitation of tropical tuna fishery

1957 - …

Discovery of gold mines in

California 1848-1853

The EU supply chain 2003 (source : Oceanic Dev.)

EU fleet (89 purse seiners)France and Spain

Atlantic 24 vessels

Indian 48

Pacific 17

Traders

ACPcanneries

Loin plants abroadSouth Am., Thailand…

EU Loin plantsSpain, Portugal…

EU canneries

EU market(supermarkets) Export markets

290 kT

339 kT

78 kT 5 kT

Imports

191 kT

17 kT

346 kT

685 kT

Seychelles 31% Cote d’Ivoire 19%

Thailand 13% Philippines 12% Ecuador 10%

Seychelles 15% Côte d’Ivoire 12%

UK 34% France 22% Germany 17%

Spain 84% Italy 10%

Latin America 40% Seychelles 11%

Ecuador 46% Colombia 19%

Italy 46% Spain 38%

Asian & American canneries

Taiwan, South Korea, Japan, Mexico, US,…

THAILAND

SPAIN+10

ITALY

FRANCE

SPAIN-10

JAPAN

YELLOWFIN

1995-1 : 2005-12

Legend:

Granger causality

LOP 5% (bivariate)

LOP 5% (multivariate)

2. Horizontal market integration2.1 Raw tuna

All series I(1,0) or so (JP)

All series bivariately cointegrated at the 5% level

THAILAND

SPAIN

AMERICASJAPAN

SKIPJACK

1995-2 : 2002-8

Legend:

Granger causality

LOP 5% (bivariate)

LOP 5% (multivariate)

Every series bivariately cointegrated at 5% but Japan with Thailand and Americas

SKIPJACK AND YELLOWFIN

1995-1 : 2005-12

JOHANSEN PROCEDURE :

All series bivariately cointegrated at the 5% level

Multivariate cointegration : 3 models indicate cointegration at the 5% level with consistent Trace and Max E.V. tests :

1) Yellowfin (Thailand-France-Italy-Spain) and Skipjack (Spain)

2) Yellowfin (France-Italy-Spain) and Skipjack (Thailand-Spain)

3) Yellowfin (France-Italy) and Skipjack (Thailand-Spain)

LOP does not hold when Thailand SJ is included

All causalities are bidirectional in the mutlivariate models

THAILAND

SPAIN

ITALY FRANCE

SKIPJACK AND YELLOWFIN

1995-1 : 2005-12

SJ

SJ

YF

YF

YFYF

Legend:

Granger causality

LOP 5% (bivariate)

LOP 5% (multivariate)

0,00

2,00

4,00

6,00

8,00

10,00

12,00

France - Canned YFT, Retail Price (USD/kg) Italy, Canned YFT in Oil from Spain, USD/kg

2.2 Canned tunaYELLOWFIN

SKIPJACK

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

4,50

5,00

janv-

95

juil-

95

janv-

96

juil-

96

janv-

97

juil-

97

janv-

98

juil-

98

janv-

99

juil-

99

janv-

00

juil-

00

janv-

01

juil-

01

janv-

02

juil-

02

janv-

03

juil-

03

janv-

04

juil-

04

janv-

05

juil-

05

janv-

06

juil-

06

France, Canned SKJ in Oil from Ivory Coast (USD/kg)

UK - Canned SKJ from Thailand (USD/kg)

Germany - Canned SKJ in Oil from Philippines (USD/kg)

France (dry) retail price

Ivory Coast (oil) export to France

UK (dry) import from Thailand

Germany (oil) import from Philippines

France (dry) retail price

Italy (oil) import from Spain

YF

SJ

Canned tuna market (horizontal)

Multivariate cointegration SJ: UK-Germany-IC (but no LOP at 5%)

Bivariate cointegration

LOP: IC-UK and IC-Ger.

Causality: Bi. and G=>IC

Price series

No cointegration

3. Price-cost margins of the canneries

SKIPJACKCanned (dry) UK – Frozen Thailand

Canned (dry) UK – Frozen Spain

Canned (oil) Germany - Frozen Thailand

Canned (oil) Germany - Frozen Spain

All pairwise series cointegrated (bivariate tests)

Dual Granger causality in all cases

2 proportional (Germany) and 2 non-proportional (UK)

Canned (dry) France – Frozen Italy

Canned (dry) France – Frozen Spain

Canned (dry) France – Frozen Thailand

Canned (oil) Italy – Frozen Italy

Canned (oil) Italy – Frozen Spain

Canned (oil) Italy – Frozen Thailand

YELLOWFIN

None cointegrated (bivariate tests)

No Granger causality

No proportionality

Example: LCSJ-GERMANYt - 0.88*LSJ-SPAINt - 0.86 = t

LCSJ-UKt - 0.52*LSJ-BANGKOKt - 0.99 = t

0,00

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

9,00

jan

v-95

mai

-95

sep

t-95

jan

v-96

mai

-96

sep

t-96

jan

v-97

mai

-97

sep

t-97

jan

v-98

mai

-98

sep

t-98

jan

v-99

mai

-99

sep

t-99

jan

v-00

mai

-00

sep

t-00

jan

v-01

mai

-01

sep

t-01

jan

v-02

mai

-02

sep

t-02

jan

v-03

mai

-03

sep

t-03

jan

v-04

mai

-04

sep

t-04

jan

v-05

mai

-05

sep

t-05

jan

v-06

mai

-06

sep

t-06

4. Market power, so what ?...

Retail France dry YFT

Spain-Italy dry YFT

German-Bangkok oil SJ

Abidjan oil SJ

Price-cost margins of canned tuna sold in Europe

UK dry SJ

Key results:

•. Skipjack and yellowfin markets are cointegrated• Yellowfin is the leader market• European canned tuna markets are not so well

integrated spatially, except skipjack (caused by US !)• Raw tuna prices are better transmitted by the canning

industry for skipjack than for yellowfin• Margins of canneries and retailers are fairly stable for

skipjack and increase for yellowfin

Conclusion

• Consequences of the Yellowfin leadership?

• Competitive supply-side => race for fish

• Potential market power on the demand side =>

affect the consumer surplus (double marginalisation).

No impact on the fishing industry?

• Next step: testing for market power with an I.O.

structural model (e.g. Bresnahan-Lau)