Fishing for the market – a whole sector approach to Blue Growth.
Reflections on the Blue Growth Investment conference – Grenada May 2016
By: Mike Mitchell, Fair Seas Limited
Fish remains among the most traded food commodities worldwide. In 2012 about 200 countries reported exports of fish and fishery products. The fishery trade is especially important for developing nations, in some cases accounting for more than half of the total value of traded commodities.
FAO SOFIA Report 2014
Seafood is one of the world’s most widely traded commodities, and if marine resources are managed responsibly they have the potential to be both a plentiful source of healthy protein and a valuable revenue stream for developing nation economies. In order to realise the potential in both of these areas, we need to consider how to maximise fishery earnings by accessing the most appropriate markets for all parts of the catch. In some cases, there may be a latent potential to increase revenue through accessing high value export markets in developed world economies alongside improving value streams from domestic, regional and existing trade routes.
It would be useful for any blue growth fisheries project to begin with an analysis of the resource availability. Species mix, volumes and any seasonal aspects to supply need to be fully mapped in order to understand the current disposition of catches (and their associated co-products) across all of the existing formats and markets. A cross-reference analysis of global market data should be able to identify whether the current products are achieving above or below international price averages, as well as whether or not there are any gaps in the range, which could add to the portfolio and increase revenue.
In order to do this effectively it is necessary to stop thinking about seafood as a traded commodity and begin to imagine how seafood products can meet the many aspects of consumer need. Perhaps we should not consider that the seafood industry begins with the capture of fish, rather it begins with identifying how a consumer may most prefer to eat fish.
Enabling conditions for entry into high value developed world markets.
There are a number of pre-conditions that must be met by those seeking to supply food products into developed world markets. These conditions apply equally to domestic and international supply chains and whilst it may be tempting to consider them as barriers to entry for developing world producers, if they are understood and deployed as an integral part of blue growth investment initiatives, they could equally constitute a market advantage.
- Food Safety
- Ethical Trade
- Supply chain logistics
Food Safety – perhaps the prime concern of food retailers and brands in the developed world. No responsible business would knowingly sell product that is potentially injurious to the health of the consumer, and a raft of due-diligence tools are now routinely applied to the upstream supply chains of major retailers and brands. For seafood manufacturers, this largely entails the management of time and temperature variables in the cold chain, along with ensuring safe and hygienic product handling processes and maintaining good product traceability. A fundamental understanding of HACCP is required and in some cases, customers may require certification of manufacturing processes, (including storage and distribution services), against a credible third party standard for food safety such as that of the British Retail Consortium (BRC). Competent laboratory services are needed to support Good Manufacturing Practice and give confidence to the buyer that the product, the environment and food contact materials (including water and ice) meet food safe standards.
The production of demonstrably safe food is not only an enabling provision, it is an absolute entry level requirement for businesses seeking to maximise their earning potential through access to high value developed-world markets.
Sustainability – many large retailers and brands underpin their own brand values by aligning themselves with certification standards or other forms of fishery ratings systems. Over the last decade, the fear of hostile intervention from conservation charities and eNGO’s has ensured that this has become (and remains) a high priority. There is an understanding that consumers have the right to expect their food products to be sourced sustainably, and the means to demonstrate sustainable sourcing has now become an entry-level requirement for many parts of the market. There are a number of third party standards available in this area, but given the technical and governance infrastructures required to meet these standards, (for instance, the Marine Stewardship Council), many developing world fisheries may deem themselves disadvantaged in not being able to immediately meet them.
Even though such assurance systems do require significant resource underpinning through environmental monitoring, scientific stock assessments, good regulation and effective enforcement, this does not have to be a barrier to entry for blue growth economies. Many of the largest brands and retailers recognise the intent for improvement through such schemes as Fishery Improvement Partnerships (FIPs) and early entry into improver programs that address these concerns can actually secure market advantage over other sources that do not recognise or respond to the demand for sustainable sourcing.
Ethical trade – recent negative publicity regarding the abuse of workers in the fishing industry and the on-shore seafood processing sector has led to an increased focus on social accountability in upstream supply chains by the big brands and retailers. Risk analysis tools are currently being developed, with the avoidance of high risk supply chains emerging as one potential market response. Some certification tools such as the Supplier Ethical data Exchange (SEDEX) already exist in this area, particularly in aquaculture and shore based processing sectors, but there are fewer supply chain tools for ethical assurance in the at-sea fishing industry, although there is currently significant effort being invested to develop these.
To allay concerns and to address the issue of market sensitivity to the risk of forced labour, bonded labour, human trafficking and other crimes against workers, it would be provident for blue growth economies to consider how to best reflect how the fair treatment of individuals and the community benefits of development are built-in to any proposition from the very beginning.
Logistics – this is an important aspect of global trade and investors will need to be mindful of the proximity of the resource to the intended market and whether there are efficient, regular and reliable forms of freight forwarding available. If shipping routes do not already exist to the desired export market, it will be necessary to consider them as part of a feasibility study prior to any investment and to be inclusive of freight handling businesses in any blue growth initiative.
Priority considerations for retailers and brands in developed world markets.
Market place investment initiatives are not a form of philanthropic funding and buyers are unlikely to consider investing in blue growth initiatives unless there is a clear commercial benefit for them. It may sound harsh, but it is true that any potential marketplace investor will premise conversations about blue growth initiatives with the question – ‘what is the business case for me?’
So, what are the benefits? These may include:
- More competitive pricing versus existing supply chain
- New product opportunity – especially for ‘first to market’ on new propositions
- Improved quality or service level versus existing supply chain
- Additional supply chain contingency for products with scarce or intermittent supply
- Make life easier – understanding the category and speeding up innovation
- CSR credentials – telling a good story to articulate higher brand value position
It is unfortunate that the final bullet point is perhaps the weakest motivation and will most likely not trigger buyer engagement unless one or more of the above conditions are also in place. However, recognising this does clarify the challenge of incentivising blue growth, and enables a clear view of what is required to build potential investor interest and confidence.
It is important to know what types of product are available from any source and how they will be able to reach their intended markets. European and North American markets are consumer-led, so products must meet the expectations of the marketplace in terms of their format and presentation. It is difficult to create consumer interest in niche product formats, so it is important to ‘marry’ the products available with the parts of the market that already values them.
In short – if you have the right species in the formats the market wants, then it may be possible to maximise their economic return. It is better to understand the potential target markets prior to supply-chain infrastructure investment than it is to try to find buyers for products after the investment has already been made – in this way, it is possible to identify the required standards, processes and product formats and to build these into consumer propositions as part of the development process rather than trying to retro-fit these into existing supply chains. It would be prudent in most cases to engage with key commercial players in each of the target markets before any seafood processing blue growth project is initiated.
Instead of saying ‘I have invested in developing my supply chain, do you want to buy my fish?’ we should be saying ‘help me to understand your supply chain so that I may invest wisely in my own to best meet your needs.’
Linking to the value chain to improve profitability.
Supply chain mapping and gap analysis exercises should not be solely focused on export markets – it is important that the disposition of product into all markets is considered so that the maximum value can be identified for all fractions of the catch in all markets. In any case, whether considering local or international market opportunities, it is better to sell what people want than it is to try to sell them something that you just happen to have.
The worlds of major multiple retailing and large scale food service have evolved in the past ten to twenty years and the big brands in these markets are constantly seeking to identify what the consumers want through the principles of ‘category management’. Beginning with the consumer, they seek to map their meal occasions, ensuring that the right product is presented to them in the right format at the right time to ensure that lifestyle needs are continually met. The marketplace is multi-dimensional – for instance, young professionals, busy families, singles and older people all have slightly different requirements, and a good retailer will ensure that they have offerings which meet all of these diverse meal occasions.
From a producer’s perspective, by seeking to understand consumer needs in your target market, it is possible to identify the most appropriate parts of the category that your offering best suits. A dialogue with potential development partners that have a direct interface with consumers (such as the major EU or US retailer/food service operators) would be helpful – and if there is a perceived market opportunity which delivers an advantage to them, such as first to market with a new provenance, or access to additional volume of a constrained commodity, then that partner may be prepared to invest in the project.
It is also important to consider how much value can be added to primary raw materials through primary and secondary processing operations. The biggest part of the developed world food market depends upon added value – scratch cooking with primary ingredients is a rare luxury in cash-rich/time poor economies, so differentiating your product through innovative and high quality value addition could help secure access to your intended markets.
Consider ‘provenance’ – is there an attractive story that can be built around the supply chain? The market is always seeking to add value through the development of a strong provenance narrative such as the recent trend to name Sicilian lemons and Madagascan vanilla in food product names in the UK. Are there other popular and recognisable local ingredients that could be used to complement the core protein offering? Retailers love to find exotic hook lines and will be receptive to helping develop supply chains which both meet their core category objectives and which can be described in an appealing manner to the shopper.
Investing in blue growth for a sustainable and profitable future
There are numerous and diverse investment channels available to stimulate blue growth. Not all types of funding are appropriate for all types of project, but it is clear that the marketplace can play a role in stimulating growth by attracting capital investment and creating good quality revenue streams. Any aspect of growth which is contingent on commercially stimulated trade improvement should also be premised on the principle of maximising revenue by identifying the most efficient and equitable disposition of the available resources. It follows then, that a ‘whole supply chain’ approach is an effective means of ensuring that the quayside is not allowed to act as a barrier for fishers to high economic return markets, and that through targeted value addition, each product is able to reach the most appropriate markets and meet the needs of the consumers in all of the sectors serviced.