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Battle of big fish in a bigger pond: what 1992 holds for EEC seafood scene.

Battle of Big Fish in a Bigger Pond: What 1992 Holds for EEC Seafood Scene

No major supply upheavals anticipated, as European demand should keep channels of distribution open. But the new economies of scale will reshape infrastructures, so be prepared.

Most European seafood companies have been making adjustments toward a single European market for years. For individual concerns, operations after January 1, 1993, will be business as usual, except that these entities may be bigger on that date, or may have become part of a large international conglomerate. Although mergers and acquisitions have not reached the degree of a frenzy feed, companies within the EEC are scrambling to get ready for the inner market. Alliances have been, and will continue to be, made, and big fish are gobbling up the small fry.

If present trends are indicative of what is 10 or 20 years down the pike, one can expect to see fewer, but much larger, producers of seafood. Companies within and without the community share one common aspect of their strategies: Get there and stay there.

While Japanese and American capital has been somewhat slow in coming to the EEC, companies within the European Free Trade Association (EFTA) are busy making cross-border mergers and acquisitions at an unprecedented rate. Although the phenomenon has not hit the fish industry too hard as yet, drastic changes are foreseen in many countries.


Fishing, like agriculture, still clings to tradition, while growth throughout the years has been mainly dependent upon cooperatives and collective sales organizations. It's only in recent years, with the advent of large modern production of seafood products, that companies have had to look beyond the closest port for supplies. At the same time, demand around the globe has skyrocketed. EEC countries with rich sources of fish have tapped into a blossoming industry and are making the best of their particular situations. Developments have not been simple and easy for all, though.

"The Irish industry is composed of small operations, causing problems for a marketing effort," said Alec Heskin from Bord Iascaigh Mhara, the Irish sea fisheries board. "The seafood industry is traditional, and everybody wants to protect sources of supply and markets. There's a lot of secrecy within the business. That, unfortunately, is going to take a generation to change. When you introduce an external environment or regulator, such as the internal market, things are going to happen."

Heskin compared the seafood trade to the dairy industry. One large dairy producer, with annual turnover of 600 million Irish pounds, is looking to buy out smaller competitors. Their goal is to reach total sales of one billion pounds, and they feel this is necessary to be a force in the dairy industry. Survival means big. "Producers here are scared," he said.

The amalgamation of groups of cooperatives, some specializing in pelagic fish, others in aquaculture, can be expected. In the end, there could be only four or five companies left. Heskin said the trend is presently occurring in fish farming.

Due to its abundant resources and small population (3 1/2 million), Ireland is production oriented, not market oriented. There is a lot of commodity trading, but the size of the domestic consumer base limits marketing efforts. Export markets provide an outlet, but this is more costly than selling at home. Marketing companies realize the dimensions of production capacity and a quality product, but the investment capital needed for product development and marketing has been slow in coming to Ireland.

"Sixty percent of GNP is exports. Ireland has a wide open economy, open to influences from Europe. With external rules coming from Brussels, it's going to act like a referee," said Heskin. "It will take the personality out of the industry and make it more bureaucratic. But now there are too many personalities, based on tradition, too many opinions."

The opening of the single European market allows free passage of goods, capital and individuals across borders. A peripheral, but extremely important, aspect that has not been written in any directives from Brussels is, ideas. When more products and people cross borders, new food ideas will be going back and forth with them. These will undoubtedly generate interest in new eating habits, and in turn, help to stimulate frozen food sales.

"Fish consumption will increase. Interest will be considerably larger, especially in markets like Denmark, where until recently housekeeping has had few variations," said Georges S. Tomaszewski of the International Gourmet Food Institute. IGFI provides flavorings and seasonings for the food industry, but it also has what is probably the most comprehensive files of food-related information in the world. "There weren't many people who knew how to prepare fish by other means than boiling or frying. Now we're getting ideas from the Mediterranean and from areas where fish has been treated in a more culinary fashion. Just a few years ago, people wouldn't dream of eating fish soup. Now it is popular in tiny restaurants, and will find its way into households."

Tomaszewski believes this will happen with other seafoods as well: first they will be "special occasion" dishes, but then will become fully integrated into the various structures of national eating habits. Price, however, can limit expansion, and in many parts of Europe, fish costs as much as meat, sometimes more. "Fish will become popular," believes Tomaszewski. "But this will be determined by prices. It can't remain as high as it presently is."

Royal Greenland (RG), whose marketing headquarters is in Denmark, is in the process of coordinating operations for the inner market. With its sales division in Aalborg, the company is in the EEC despite the fact that it is owned by the government of Greenland.

"In strong markets, we feel we have to have our own organization," said Jorgen Norup of RG. "It is necessary to be there to keep our finger on the pulse of the market."

Since the supply side of RG's operation is based entirely in Greenland, the company must constantly monitor output, and project production in order to coordinate this with its marketing arm. "Warehousing and transport are two specialized tasks we will get to function 100% in connection with the inner market, so we are able to push a button on the computer and get the goods to roll out to a customer by the quickest, least expensive means," said Norup.

Many producers within the Community do not see major changes after 1992, as they have been playing according to EEC rules for years. Even before the "White Book," which contains directives for finalization of the inner market, there were hundreds of rulings by which businesses had to abide. "We've had a single market for many years," said Paul Torring of the Danish Fish Processing and Exporters Association. "Developments we'll see are the normal tendencies in the food industry, larger business entities, faster product innovation, and the like."

Around 90% of Danish seafood production is exported, and 70% of production goes to other EEC nations. Countries closest to Denmark (West Germany and non-member Sweden) have been major buyers, while nations such as Italy, Spain and France have greatly increased purchases from Denmark in recent years.

"We don't feel any obstacles in international trade now, so there are no barriers to remove," said Torring. "It (inner market) won't generate more trade in itself."

A dynamic integration of global markets has occurred during the past decade and Far Eastern markets have become a wild card in this process. Demand from Japan for new species of seafood has caused many producers to concentrate on that opportunity. Cold-water fish are finding their way into Japanese and Taiwanese kitchens. This trend is expected to increase, as European products enjoy a certain vogue there, while fishing methods in that region are rapidly depleting pelagic stocks. An added bonus for producers is the fact that Far Eastern cuisine often calls for head-on products, which increases tonnage a few percentage points.

Unlike the U.S. market, where market share see-saws with the dollar, sales to Japan ought to continue on the upswing for some years, and since the country has become a major player in the world economy, more and more companies are investigating that market, if they have not already established a presence there.

While some outsiders fear a "Fortress Europe" situation, Community members strive to reassure the worriers that nothing will change relationships which already exist. Since many import duties and quotas have been posted, and are basically negotiable through international organizations, no big changes are expected here.

Non-members may, however, be facing a situation where standardization of control, additives, quality criteria, etc. forces them to customize a product to fit a single European market, much the way automobile producers fabricate cars in order to meet U.S. standards for that market.

A recent case in point, which may be used as a test in the future, is that of Thaituna. Greece, West Germany, France and Italy banned imports of same because it allegedly contained excessive amounts of EDTA. Greek testing found four times the threshold amounts dictated by the World Health Organization. EDTA is used to preserve the color of seafood products. Thai officials say the substance is never used in canned tuna.

Other EEC member-countries continued to import tuna from Thailand, as of the end of August, and Brussels had not yet imposed any bans on the products. Thai producers fear a closing of the European market and are planning accordingly. They have applied for permission to add EDTA to products destined for the EEC, until the opening of the internal market.

Some non-EEC countries sell huge quantities of fish for ECC members, but they may not be too happy about the situation. In the case of Norwegian salmon, the product changes nationality when it is re-exported from Denmark to other countries such as West Germany, Italy and Spain. Norwegian producers are ambivalent about using Denmark as a buffer-zone: on the positive side, they sell over 15% of their tonnage to their Scandinavian neighbor; but the loss of national product identity does not aid marketing efforts by the Norwegians.

According to the fish marketing board, salmon volume to Italy amounted to 1,354 tons, but the figure would be about doubled if Danish re-exports of Norwegian origin were added to it. Denmark imported 6,684 tons of Norwegian salmon in the first seven months of the year. While bulk sales are satisfactory, there is more money to be earned by selling directly to "end-user" foreign markets.

Norwegians have been debating the issue of EEC membership for years, and the question will undoubtedly be put to the citizenry at some point. Denmark has been used, to some extent, as a model since both nations are members of Nordic cooperative organizations. If, as many non-members fear, the EEC becomes a "Fortress Europe," Norway may be facing trade barriers to an excellent single market.

While most replies Quick Frozen Foods International received dealt with markets and changes within them, a spokesman from SCARUS pointed out an essential factor upon which the fishing industry is founded: supply. What will fish stocks look like in one, five or ten years?

SCARUS Marine Nutrition is the trading company of the Soviet Ministry of Fisheries. It handles 130,000 tons of seafood annually, in markets all over the globe, selling production from the Soviet Union and buying for the domestic market.

The concern is quite active in the northern European and African markets, supplying the former with cod and haddock and the latter with sardines. It buys mainly herring and mackerel from northern producers.

"The thing that's worrying us is catches in the areas where our vessels operate," a SCARUS spokesman said. "We more or less buried cod possibilities a year ago, and at the beginning of this year we were convinced cod was out for good. Now we've seen good catches in July and August. Who knows what to look for in a long-term forecast?

"We're worried about the species we catch in the Barents Sea. There are various opinions about what will happen there. We're concerned about long-term availability and careful about the long-run."

While many scientists blame polution for poor catches, it has yet to be proven. In 1985, cold-water shrimp catches amounted to 15,000 tons, but the following year SCARUS realized only about one-fifth the tonnage. Cod catches were satisfactory in 1986-87, while shrimp tonnage fell.

As the SCARUS spokesman, who preferred to remain anonymous, pointed out, nobody has definitely made a correlation between the two stocks. "The effects of pollution affect long-term results," he said. "You can't say there will be a certain percentage of this fish or a certain percentage of that fish--fish move ...In asking a crystal-ball question about the future, the only correct answer is a big question mark."

Whether or not there will be fish for trade, and in which manner they will be processed, is anybody's guess. But one thing is certain: the goods will be traded by more larger companies than we see today."
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Title Annotation:European Economic Community
Author:Ferro, Charles
Publication:Quick Frozen Foods International
Date:Oct 1, 1989
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