Market diversification despite the pandemic, Euroﬁsh webinar, 18 May 2021
Seafood exporters have had to contend with drastic changes in the market brought on by the pandemic. These took the form of new trends in consumer preferences, novel distribution channels, and new legislation in destination countries, among others. At the Euroﬁsh webinar the discussion revolved around the changes seen in four key markets, China, Ukraine, the UK, and Germany.
The covid-19 pandemic affected virtually every aspect of the global fisheries and aquaculture sector in ways that were largely negative although with the occasional silver lining. Fresh fish prices dropped, fishing operations were hampered, distribution was curtailed both within and between countries, and there were changes in fish demand. On the other hand, an FAO policy brief describes how local markets in some cases were strengthened and there was an increase in locally sourced fish and seafood as suppliers turned to online sales and direct delivery to consumers. Another segment that did well was the canned, frozen, and processed seafood, non-perishable items that saw a spike in their popularity particularly in the initial stages of the pandemic. Fish and seafood are among the most highly traded products in the world and are therefore particularly dependent on consumer demand, effective distribution channels, migrant workers, and open markets.
2019 was a bumper year for seafood in China
The impact of the pandemic on seafood markets was examined at a webinar on 18 May organised by Eurofish International Organisation. The event focused on four major markets for seafood, China, Germany, United Kingdom, and Ukraine, the changes the pandemic has wrought, and what they mean for exporters to these countries. China is the world’s top producer of aquatic products, with capture production almost twice that of the second largest producer, and farmed output over four times as much. Yet China is also a major and growing importer of aquatic products sucking in over 6m tonnes in 2019 worth USD19bn/EUR16bn, of which edible products amounted to 2.7m tonnes (USD12bn), prof. Wei Yang from Shanghai Ocean University, reported. Compared with the previous year imports increased by 53% in value and 66% in volume. This increase was spread across all the country’ main trading partners with the exception of USA. Imports from Ecuador and India (shrimp) in particular jumped in value by 260% and 210% respectively, while those from Vietnam (catfish), Indonesia, Australia, and Norway (salmon) increased significantly. In 2019 Russia was the source of the largest fraction of Chinese imports at over 12%.
Imports form, however, only a small proportion of China’s consumption which was estimated at 67m tonnes in 2019. Consumption patterns vary from region to region. In general, marine seafood is preferred in coastal areas, while further inland people eat more freshwater products. There is also a divide between urban and rural areas with annual consumption in the former at over 14 kg/capita compared with half of that in villages. The early stages of the pandemic when China also went through lockdowns disrupted the seafood trade provoking changes in consumer behaviour. The costs of inputs including feed, labour, and logistics, all increased, while consumption shifted from restaurants to the home. Some wholesale markets were closed, which further affected sales and distribution. In a departure from developments seen in the seafood market in other parts of the world, where shelf stable products increased in popularity, Chinese consumers showed a preference for fresh over frozen products. This was probably the result of reports in the press about the coronavirus being transmitted through frozen seafood. The restrictions on travel and the closure of international borders were among the reasons seafood imports into China declined 12% in volume and 18% in value in 2020.
Exporters to China face new legal requirements
The pandemic also contributed to the introduction of new regulations by the Chinese customs authorities. Among others these call for a greater role to be played by the competent authority in the country where the exporting company is located in recommending the company to the Chinese customs authorities. Another regulation (no. 249) will come into force in January 2022 to replace no. 243. According to the USDA, in comparison with the measures currently in effect, decree 249 presents the following major changes:
– Emphasizes that producers and operators are accountable for the safety of the food products they produce and handle;
– Introduces the concept of a conformity assessment, which covers the evaluation of foreign food safety management systems, the registration of overseas food export facilities, and required record filing by importers and exporters;
– Requires food importers to establish a system for review of their suppliers, including overseas exporters and production facilities;
– Elaborates on the on-site inspection procedures conducted by customs authorities at ports of entry;
– Stipulates the potential control measures in response to food-related incidents overseas that may impact food safety in China.
Companies wishing to export aquatic products to China must go through a series of administrative steps before starting their activities. A formal application to the Chinese customs authorities must be sent from the competent authority (CA) in the exporting country. This can lead to a risk assessment being conducted by the customs authorities based on data provided by the CA. The results of the risk assessment can lead to Chinese experts visiting the exporting country to confirm the authenticity and consistency of the information provided and to negotiate the inspection and quarantine requirements for the products to be exported. The exporting company must then register with the Chinese customs authorities while the Chinese importer applies for the appropriate quarantine license.
Brexit generates several changes for exporters to and from the UK
In contrast to China, where recent changes in import regulations were triggered by the pandemic, in Britain they stem from Brexit. The UK has been a net importer of seafood since 1984, said Dr Francis Murray, starting his presentation with an overview of the UK market. Today, over two thirds of domestic consumption is met from imports, which amounted to 854,000 tonnes in 2019 worth GBP3.6bn/EUR4.2bn. Seafood is imported from several countries of which the most important are China, Germany, and Iceland. The UK’s top 5 species in terms of consumption are salmon, cod, haddock, tuna and warmwater prawns which account for 60%80% of consumption. In 2019 tuna, cod, and salmon accounted for the highest proportion of imports at 13%, 12%, and 11% respectively by weight. In terms of value, shrimps and prawns were the biggest import category (£633 million, 17.4% of all imports), followed by salmon and cod. The level of imports has been largely stable over the last 10 years hovering around 700,000 tonnes. The UK fishing fleet lands some 400,000 tonnes of fish in the UK and about half that abroad. The fleet targets demersal (cod, haddock, plaice, turbot) and pelagic fish (mackerel, herring, sardines) as well as shellfish (scallops, whelks, clams, lobster, clams, prawns). Over the years, fleet reductions, declining fish stocks, and more restrictive fisheries management regimes have contributed to declining landing
s. In 2019 landings were 20% of what they were in 1970, thought since about 2005 they have hovered around 650,000 tonnes. The UK also has a significant aquaculture industry producing mainly salmon and bivalves. Salmon is farmed in marine cages of the west coast of Scotland and, with a production volume of 204,000 tonnes, accounts for over four fifths of UK aquaculture output.
The pandemic led to a series of national and regional lockdowns in the UK causing the collapse of the food service sector. Hotels, restaurants, catering, and pubs either closed or switched to take away and delivery services. Processing plants were reconfigured to conform to new requirements on maintaining distance. Overall, the impact on landings, fish auctions, and processing plants was more severe than that on aquaculture, imports, or transport services. And while the food service sector and exports were badly hit, direct sales and the retail trade, in particular frozen and canned products, experienced an upsurge. The impacts of the pandemic on the seafood sector are likely to be reversed as restrictions are removed and markets reopen. Brexit and the changes it has caused, on the other hand, are likely to be more long-lasting. The EU-UK trade and cooperation agreement provides for tariff and quota-free trade over a 5½ year transition period, but the devil lies in the details. Documents, such as catch certificates or processor statements, must be submitted to the port health authorities in Great Britain a certain number of hours in advance of arrival. Containerised imports must go through a border control post as of January 2022. Other non-tariff barriers such as export health certificates and sanitary and phytosanitary certificates are causes for concern. The link www.gov.uk/guidance/importing-or-moving-fish-to-the-uk provides detailed advice to exporters to the UK. The trade in goods that are imported into the EU for re-export to the UK is also likely to be affected with a potential double duty on reexporting processors, warned Dr Murray.
Ukraine’s imports increase in 2020 despite the pandemic
From an annual production of 400,000 tonnes of fish two decades ago Ukraine has caught and farmed some 80,000 tonnes of fish a year on average the last five years. Four fifths of the current demand for seafood are met through imports, Dmytro Zagumenny, the head of the Ukrainian Fish and Seafood Importers’ Association (UIFSA), informed the audience. Fisheries organisations in the Ukraine tend to be small and local nor are there many of them. UIFSA is bigger than most and the only importers’ association in the country. Ukrainian imports of fish and seafood have increased steadily since 2015 reaching 415,000 tonnes worth USD805m in 2020. Year on year, this was an 8% increase in value and a 5% increase volume in a year when most seafood markets collapsed due to the pandemic. Partly, this increase can be attributed to greater prosperity among Ukrainian consumers who can better afford a wider range of products including more expensive items. Restaurants too are offering diners more upscale seafood including products from new species that were not available some years ago due to the lack of purchasing power. As in other countries where the pandemic gave a boost to online sales, in Ukraine too companies experienced increased demand for products sold through this channel. Mr Zagumenny feels that this in turn increases the demand for greater value addition as some consumers ordering online are probably looking for something ready to eat or at least ready to cook rather than a product which requires lengthy preparation. The development of this new channel he hopes will also increase fish consumption.
Norway, Iceland, and the US are the main sources of imports accounting for just under half the total import value in 2020, with Norway alone accounting for just over a quarter. Both Norway and Iceland supply pelagic fish, mackerel, and herring, while Norway also offers salmon. The main species imported from the US are Alaska pollock, and hake. Imports from seven other countries account for another quarter of the total and imports from the rest of the world constitute the last fourth. Pelagic fish (herring, mackerel, Baltic herring, sprat, capelin, sardines) account for over half the value of imported fish. Seafood exports too have increased, going from USD37m in 2018 to USD52m in 2020 with over half the value coming from four destinations, Germany, Denmark, Japan, and Moldova. Fish consumption in Ukraine at 15 kg/capita/year is below the world average (22.3 kg) signalling that there is scope to increase the rate perhaps by educating consumers on the benefits of eating fish among other measures. Mr Zagumennyy suggested that countries interested in exporting higher volumes of fish to Ukraine could participate in marketing campaigns in the country to increase awareness about fish consumption. Companies exporting fish and seafood to Ukraine usually partner with a Ukrainian importer who is familiar with all the regulations on the domestic market. They also typically have storage facilities and good logistic operations and would facilitate the import and distribution of products. First-time exporters to the Ukraine could contact UIFSA to identify suitable partners.
MA packaging and online sales of seafood took off in Germany in 2020
The German market for seafood is among the biggest in Europe although fish consumption per capita at 14.6 kg is well below the European average. But with over 83m people and a very high standard of living Germany is an attractive destination for seafood exporters. Like the UK, in Germany five species account for about 65% of consumption, said Sabine Wedell, Project Manager, fish international trade fair. These are salmon, Alaska pollock, tuna, herring, and shrimp of which salmon accounts for almost 19% of consumption. Alaska pollock is used in the manufacture of fish fingers and vies with salmon for the title of most popular product. Last year salmon appears to have triumphed though, at 18%, Alaska pollock was not far behind. Frozen seafood is popular in Germany accounting for 32% of seafood purchases in volume by households followed by fresh, canned, marinated and smoked at 19, 17, 15 and 11% respectively. In value terms, expenditure on fresh fish accounts for the largest share at 29% which can partly be attributed to the popularity of salmon, as this is typically sold fresh, but also because discount retailers are supplying more modified atmosphere packaged (MAP) seafood, for example refreshed tuna. MAP is a relatively recent phenomenon in Germany and is now one of the drivers of fresh seafood sales, says Ms Wedell. Expenditure on frozen, and smoked products was 26% and 19%. Last year consumption of seafood at home increased 10% to 85% in contrast to the year before, due to restrictions imposed by the pandemic that both shuttered the restaurant trade and forced people to stay at home. Out of home consumption decreased correspondingly from 25% to 15%. The volume of seafood purchases by households climbed by over 14% during 2020, as consumers cooked more at home. Home cooking together with an increase in online sales and delivery direct to consumers, as well as more MAP packaged products were among the trends characterising the German market last year. E-commerce in food is again a new development in Germany that has been triggered by the pandemic. Some of the changes to work life introduced by the pandemic are expected to continue even after restrictions are lifted. Working from home for example is likely to become the “new normal,” Ms Wedell told the audience. Carefully packaged ready products “to go,” which also expanded during the pandemic as restaurants found alternatives to seated dining, are likely to retain their popularity. Increasing demand for vegetarian and vegan fare must also be noted by the seafood industry and identified as a competitor, a co
mplement, or a bit of both. Alternative protein sources are also a potential competitor to the seafood sector as surveys from the US, UK and Germany show that 11% of consumers are highly interested and 66% are mildly interested, indifferent or mildly uninterested, while only 23% are completely uninterested.
In terms of regulations there have been no new developments concerning the import of seafood products because of the pandemic, however first-time exporters must be aware that it takes a long time to develop relationships with German partners. Products must be of the highest quality and, if targeting the retail chains, then IFS certification of the producer’s facility is obligatory. Demonstrable animal welfare (for fish farmers), social welfare, and sustainable packaging are other important considerations when entering the German market.