Northern Cod Building the Fishery of the Future What We Have Heard Workshop Summary

Transcription

1 Northern Cod Building the Fishery of the Future What We Have Heard Workshop Summary Robert Verge, P.Eng., MBA, CPA, CA, CMC Managing Director Canadian Centre for Fisheries Innovation November,

2 The Resource Stock has increased but remains in critical zone 34% of Blim Blim can change but it would change the eventual level of the fishery Removals must be kept at lowest possible level Fish are returning to historical locations and behavioural patterns Good age distribution, indicating a healthy stock Changes in resource reflect changes in the ecosystem It s not just warming; it s changing environmental conditions It s a long-term process but we see occasional shifts Total biomass is well below pre-collapse levels stable or declining in recent years Build-up of groundfish appears stalled Indication of reduced ecosystem productivity and availability of prey species (capelin and shrimp) Harp seal population now about 4 times 1960s levels 2

3 The Economic Challenge Sustainability: people or fish? The biggest threat to sustainability is excessive economic dependence It will be difficult to meet all the expectations people have Replacing revenue and income from crab and shrimp will require a lot more cod We won t have enough cod for quite some time We need a more diversified fishery, not totally dependent on cod We need to maximize the value we get from cod 3

4 Markets Supply of whitefish has changed dramatically since 1992 Alaskan pollock, tilapia, pangasius Low end of market not really available to us How do we differentiate our cod from other species and other suppliers how can we stand out in a crowd? Cod increasing in popularity in US but sales tied to Lent East North Central region is more attractive than New England Independent restaurants + non-commercial operators = opportunity but challenge to access EU market for fish is growing Groundfish is growing faster all in cod due to increased availability Chilled is growing fastest of all across Europe and in all formats Cod and salmon used to complement each other Unusual circumstances in UK, due to Brexit Customers expect year-round availability and quality is consistent 4

5 North American Opportunities US market will be very important Consumption of cod in US collapsed along with supply from Canada Aquaculture rapidly outpacing cod and groundfish tilapia and pangasius replacing pollock Cod has been increasing lately, due to efforts by Iceland and Russia Most US whitefish usage is not a good fit for NL cod Twice-frozen fillets from China dominate supply at low prices But increasing consumer demand for premium fish; growth occurring in fresh and frozen fillets Cod is leading whitefish in foodservice, unlike retail Regions: east north central, mountain pacific, south atlantic Position ourselves in fresh, frozen loins Wild cod pricing will change based on supply Premium means near perfect Cod below that will get market prices ($ less) A premium strategy can t be aimed just at US market 5

6 Retail vs. Foodservice Stability builds long-term seafood value supply and price Supply shortages are destructive to value Investments at risk key to profitability is control of supply to mitigate risk Unlike crab or shrimp, cod buyers have multiple options other than NL cod Long term value of seafood has not kept pace with other costs due to aquaculture Smaller number of companies is better Foodservice 50% of volume but 70% of value Retail runs on promotion run departments in rotation; but dept managers have to maintain margins Fish at retail are mainly sold on promotion, at a discount Shrink is a problem products not sold Foodservice opportunity for NL cod frozen portion What do you do with the rest of the fish? 6

7 Emerging Opportunities in Asia Majority of fish consumed is from Asia (farmed and wild) Most cod is imported for processing and re-export But trend is changing, due to growing middle class and desire to eat better quality seafood food safety is key Spending power has increased and will continue to increase More income = more seafood; status symbol China s middle class is now as big as the entire US market 35% of seafood consumed in the world is eaten in China China s consumers see Canada as a pristine source of seafood Hema a division of Alibaba uses online apps to educate consumers on the origin of seafood and the quality Apps remember all purchases First store opened in Jan 16 - US$35 MM sales in

8 Fresh vs. Frozen Cooke did not own a freezer for 30 years Even operating in remote locations in Chile and Scotland Now applying similar ideas to capture fishing NL cod must and can be positioned as a high-priced premium seafood protein Must be superior quality Must have third party certification Bar to achieve a premium Must be available year-round Have to be able to guarantee reliability of supply Challenges texture, bleeding and age Logistics need vessel to plate strategy 8

9 Sustainability The Rubik s Cube of fisheries management WWF + Unilever = MSC (1997) 55% of all cod, haddock, and hake now MSC certified Sustainability is a business decision It takes a lot of money WWF humans and wildlife have to live together Sustainability divide: market demand vs. fishery operations 15 years in Atlantic Canada Honest Broker Strength through collaboration FIPs multi-stakeholder effort to address environmental challenges Well-defined process Let buyers know we are trying to improve 9

10 Alaska Not just dependent on one species; strength is diversity of species; impacts of climate change being seen on resource Pollock: million metric tonnes Fillets 38% of value but fillet block; surimi 37% Problems: demand has not kept pace with supply; prices down Europe is largest market; US is significant; China for re-processing Market research to ensure targeting right customers with right products Promotion to raise awareness Product development helps increase demand; now working on byproducts E-commerce part of global strategy Work with customers to develop marketing programs 10

11 Norway 2005 scientists predicted a massive cod bloom cod quotas rising and markets could absorb 2013 harvest over 1 million tonnes prediction came true but cod prices collapsed quotas should be tempered by market advice Highly seasonal fishery peaking in Q1 of year, especially March Heavy dependence on inshore vessels but over half of vessels gone since 1985; fleet becoming more consolidated; largest portion is <15m Norwegians market Skrei as a special product tell a story to distinguish Frozen cod landings more predictable Salted and dried approximately half, due to seasonality of fishery; fresh/frozen other half, including H&G Salted wet and dried to Portugal and Spain + Brazil Stock fish for Africa and Italy - production fits seasonal migration Frozen H&G to China and Baltics; frozen fillets to US and UK; fresh H&G to Germany and France 11

12 Iceland ITQ system economic outcome has been very good but it has been very controversial Known for responsible fisheries management, quality of product, R&D Focus on value, not volume: discards not allowed; full utilization Strong service industries Not always this way industry has evolved from volume, gillnets, weak processing, low-value products, excess capacity, poor profitability, crisis Turning point in 2000 introduced ITQs; took time to work Now put much more effort into export of fresh fish products now 39% of value; fillets + fillet portions; salted has decreased and changed UK most important buyer, majority frozen; France second, dominated by fresh fillets and portions; Spain third, with salted + frozen; US becoming important, fresh fillets and portions; Nigeria for stock fish Structure of industry, technology have changed to allow increase in value large, vertically integrated + small independent firms specialized; companies have freedom to position themselves Have to compete with aquculture Market orientation is crucial but not without cost 12

13 Iceland Case Studies Grab opportunities, diversify Commitment to R&D Collaboration of industry, government, academia Fewer and better equipped boats Job creation in service and support greater than job losses in industry State of the art plant C$25 million produce 35 t per day If you do not invest in technology, you will not be competitive Optimized transportation Norway Cod most important but diversity of species important, as well Seasonality of catch leads to processing into salt Pros and cons of different gear types Variations: gear use, fish quality, price premium for line caught fish Red and white processing strategy processing aquaculture and wild capture Produce both salted/dried and fresh/frozen High level of automation; investing in innovation Collection of by-products integrated into processing line (Biomega) 13

14 Our Industry Harvesting Cod currently 3% of landed value; 2J3KL 1.4% 12,121 tonnes in 2017; prices have increased in recent years Season longer but still significant peak No. enterprises 1,518 in 2017, most <40 ; predominantly gill net landings 201 ports, 91 with <10 tonnes Processing Will you be prepared to compete in the age of globalization? Changes are being forced upon us 5 game changers Most plants processing cod still doing what they did in 1992 Labour will be an issue in the plants need more automation If don t adapt, become a raw material supplier will require investment GIDC Collaboration between harvesting and processing Responding to challenges of seasonality, quality Gear types, handling, ports, operating season, plant modernization, branding 14

15 Key Issues Resource growth Sustainability: people vs. fish Competitiveness in meeting market requirements Revenues vs. costs low end of the market is not available to us Coordination of effort in the value chain Different models Alaska, Norway, Iceland Different ways of organizing industry operations -> different outcomes Gap between where we need to be and where we are What do we want to do? Plate to ocean what options do we have? What are the pros and cons of each? Are we rebuilding the past or building the future? Where will the entrepreneurship, investment, and people come from? 15