Vertical integration enables complete control of quality

Japs is one of Estonia’s leading fish processors specialising in freshwater species.

Japs is among Estonia’s leading companies in the fish processing sector in terms of the quantities of raw material processed and the number of employees. The company is vertically integrated with its own fishing vessels, processing facilities, as well as marketing, sales and distribution.

European perch (Perca fluviatilis) and pike-perch (Sander lucioperca) are two highly valued fish species that are exported from Estonia mainly as fresh and frozen fillets. Catches of European perch are primarily from the Lake Peipsi and the coastal Baltic Sea. The relative abundance of perch has been a mixed blessing for the company. Arved Soovik, the owner and Helle Nuut, the sales manager say that the market is not big enough to absorb all the fish that is being caught, which has pushed prices down a little.

The market for perch is in Europe

Japs exports some 90% of its production, which apart from European perch and pike-perch also includes Baltic herring, eel and pike. Volumes of the latter are, however, much smaller than those of the first two. The company’s markets are in Europe of which Switzerland, Italy, France, and Germany, are the most important. With the appreciation of the dollar against the euro Japs is now also considering exporting to the United States, a market with which it has not been working for a couple of years. Japs tries to supply fish all the year around clients appreciate this. Pike-perch however is a seasonal fish. European perch too is seasonal, however when the winter is mild, as it has been this year (2014/2015) the water in the Pärnu Bay and the Lake Peipsi does not freeze and the fish can be caught all the year around. This has both advantages and disadvantages, says Ms Nuut. On the one hand we can catch more, but on the other there is more fish in the market and demand, particularly for frozen fillets, is stable. But for fresh fillets the market is more buoyant. Fresh fillets amount to roughly two-thirds of the company’s production, while frozen cover the remainder. In either case the fillets can be with skin on or skin off. The company also does limited quantities of whole fish, as well as gutted and scaled fish. Fresh fillets are typically packaged in three and five kg boxes on ice, while the types of packaging for frozen fillets can be vacuum packages or individually quick frozen (IQF) pieces in a polybag.

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The company’s customers are mainly importers in the destination countries who are responsible for the distribution to the final buyer. But increasingly producers are shipping directly to the final customer, says Helle Nuut. This is not the only change that Japs is experiencing. In general the last few years has seen an increase in the number of producers – both fishermen and processing units – partly due to the availability of support from the European Union, which has meant an increase in competition. This development is not restricted to Estonia, but can also be seen in other countries, such as Poland. However, most of these producers cannot offer the same quality and stability that Japs has built up since it was established in 1992. In addition to competition within Estonia, the economic crisis on many of the company’s markets has led consumers to explore cheaper species of fish. Perch and pike-perch are expensive because they are wild-caught and because most of the processing work is still done by hand. Other white fish species that are farmed in other parts of the world are often cheaper alternatives and in the current economic climate the company can feel this. The market for fresh and frozen European perch and pike-perch fish fillets is not a big one and for many years Japs has been working with essentially the same group of clients in the different countries. We do not place all our eggs in the same basket, says Ms Nuut, yet at the same time we have to acknowledge that the international market for these species is a modest one and the number of traders is limited. Japs has seen changes in its partners with some pulling out of the business or selling their companies to other entities.

Fish sourced from other vessels too

Japs is one of the biggest companies dealing with European perch and pike-perch in Estonia. Unlike many other companies it is directly involved in each step of the value chain – catching, processing, and marketing and sales – thanks to its own vessels and quotas, large processing facilities, and network of customers. We can control each step of the production and ensure the quality from the time the fish is caught to the time the fillet arrives at the customer. Because of the volume of fish the company needs to process it cannot depend solely on fish caught by its own vessels, but has investments in other fishing companies, from whom it can buy fish. The resource is strictly managed by the authorities, who have effectively enforced the rules governing the resource with the result that large pike-perch of around 1 kg are not uncommon. The stocks in the Lake Peipsi, and in the coastal waters of the Baltic Sea are managed slightly differently. Lake Peipsi is shared with Russia and each year the annual TAC is decided. In the Lake Peipsi limits are placed on the volume of fish that can be taken as well as on the number of nets that can be used, while in the Baltic Sea the restriction is only on the number of nets and the mesh size, and not on the volume of fish that can be caught. Catches from the Baltic Sea have been increasing over the last couple of years and even in areas which have not seen particularly good catches over the last years, such as the areas off the islands Saaremaa and Hiumaa, are now showing signs of recovery.

Sometimes the company also has to import fish to meet its commitments. In this case the perch typically comes from Sweden or Finland, while pike-perch may be imported from Poland. Japs has built up a reputation for flexibility, but has had to deal with the seasonality of the raw material, which means that the labour force also has to fluctuate with the season. This is sometimes difficult to manage and so the company has settled on a work force of 77 people which should enable a degree of continuity both in the high season and the low. Automation is not really an option as the fish is wild, and so comes in a variety of sizes, which makes it unsuitable for machinery. In addition, in the spring season the fish has roe which is an additional challenge for a mach
ine. Besides manual filleting gives a better yield, says Ms Nuut.

Introducing the Swiss to Baltic herring

Japs also produces Baltic herring which it catches in the spring and processes into frozen fish, gutted fish, or fillets and is also producing canned roll mops through a daughter company. The company is actually trying to sell Baltic herring on the Swiss market, but it is an uphill job, as the product is unknown there and, compared to white fish, has quite a strong taste. Breaking into markets with new products, especially those from a species the target is completely unfamiliar with, is never easy. One can only hope that the Swiss discover a liking for the fish, which will make all the effort worthwhile.